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Is Focus on Low-Wage Workers ‘The New Business Strategy’?

target-logoCo.Exist sees a trend and asks: “Can Treating Low-Wage Workers Well Become The Hot New Business Strategy?”

The piece notes that “Aetna is among the latest of many large brand name companies to step up pay and benefits for their low-wage employees. Gap and Starbucks both made headlines when they made similar announcements in 2014. The biggest news came in February when Walmart—a company with a reputation for particularly low pay and poor treatment of workers—announced it would increase wages for 500,000 employees to $9 an hour this year and $10 an hour by 2016.”

wal-mart-logoThe latest to join the wage raise trend is Target, which will increase all workers’ pay to at least $9 an hour beginning in April. The Wall Street Journal reports that “Target’s move is the latest example of a tightening labor market and rising competition for lower paid workers amid declining joblessness and signs that consumer confidence is returning.”

Indeed, Co.Exist notes that “for companies like Walmart, Gap, and Aetna, decisions to improve worker pay, benefits, and hours are as much a benefit to their own bottom line as their employees. In fact, for these large public companies, the ethical arguments are likely besides the point. And in the case of Walmart especially, there’s debate about how much its workers will really benefit from the raise. What’s clear is that more and more businesses are beginning to discover that the economic benefits of better treating their low-wage workers outweigh the savings gleaned from paying them less.”

sponsor-logo-aetnaThe approach has been called “The Good Jobs Strategy,” the title of a book by Zeynep Ton, an adjunct associate professor in the operations management group at MIT Sloan School of Management. The book’s website notes that “even in low-cost settings, leaving employees behind—with bad jobs—is a choice, not a necessity. Drawing on more than a decade of research, Ton shows how operational excellence enables companies to of­fer the lowest prices to customers while ensuring good jobs for their employees and superior results for their investors.”

One question is how tightly this trend is tied solely to the retail sector. Ton wrote about the sector in the Harvard Business Review: “I have studied retail operations for more than 10 years and have found that the presumed trade-off between investment in employees and low prices can be broken. Highly successful retail chains—such as Quik­Trip convenience stores, Mercadona and Trader Joe’s supermarkets, and Costco wholesale clubs—not only invest heavily in store employees but also have the lowest prices in their industries, solid financial performance, and better customer service than their competitors. They have demonstrated that, even in the lowest-price segment of retail, bad jobs are not a cost-driven necessity but a choice. And they have proven that the key to breaking the trade-off is a combination of investment in the workforce and operational practices that benefit employees, customers, and the company.”

Perhaps Tech may be the next sector to see the trend. As Co.Exist writes: “There are signs tech companies are starting to listen. Google, for example, recently dropped a contractor, Security Industry Specialists, known for low-pay and irregular hours and hired 200 security guards as full-time staff instead. Facebook’s bus drivers recently voted to organize with the Teamsters Union.”