Study: Employee Raises More Than Pay for Themselves
Looking back, 1962 was a pretty big year for my family. It was then that my father was promoted to a dairy department manager at a store operated by a large supermarket chain. Thinking in today’s terms, it might not seem like much, but back then it allowed him to give up a second job driving a truck because he was earning enough to support his wife, three young kids and mother-in-law. We weren’t rich, but we never wanted for anything. Things improved as other promotions followed.
A few years back, I met another retail store department manager. The single mother of three was employed full-time by a chain and, similarly to my father, had worked her way up from a stock position. The difference, however, between where she was financially in her career compared to my father at a similar point was stark. I met the woman and her children at a program that helps the homeless find housing, medical services and other programs for families struggling in poverty.
The question of just how much retailers can "afford" to pay their employees has been a matter of debate for years. Some chains such as Costco, The Container Store and Trader Joe’s are lauded for their compensation practices while others are often criticized.
Now comes a new study from Demos, a liberal think tank, which concludes that not only can the nation’s largest retailers (those employing at least 1,000 people) afford to pay workers substantially more, but that the chains, workers and the national economy will benefit greatly as a result.
The study assumes a new wage floor of $25,000 a year for roughly five million retail workers, a substantial increase from the current $21,000 paid to sales associates and $18,000 for cashiers.
The increase, according to Demos, would represent roughly one percent of total sales among large retailers. Passing the cost of increases to consumers would be negligible, adding only about 30 cents to the cost of the average shopping trip.
Demos projects 100,000 new jobs would be created, adding between $11.8 billion and $15.2 billion to the nation’s gross domestic product. Between $4 billion and $5 billion in additional revenues would be spent at retail one year after the pay raises go through.
The research also concludes that wage increases are a more productive investment for publicly traded companies than popular stock repurchase plans.
"Share repurchases do not contribute to the productivity of the industry or add to economic growth," according to the study. "In 2011, the top 10 largest retailers alone spent $24.8 billion on stock repurchases, billions more than the $20.8 billion all large retailers could have productively invested in their workers."
- Retail’s Hidden Potential: How Raising Wages Would Benefit Workers, The Industry and the Overall Economy – Demos
What do you think would be the effect on the retail industry and the economy if wages were raised for full-time workers? Could large retailers afford to pay workers the wages suggested by Demos and still maintain their competitive positions?