Why some companies see their workforce as an investment instead of a cost
Charles Krupa, Associated Press
Being a barista isn't glamorous but it can pay more than similar jobs. Last week, Starbucks announced that it will offer a tuition-assistance program to all of its 135,000 U.S. employees that work at least 20 hours a week.
Companies like Whole Foods and Trader Joe's offer health benefits to part-time employees, and pay better than minimum wage. These companies say that giving perks and fair pay boosts morale and is good for business, so why don't more companies do it?
According to a report by Yahoo Finance, what determines whether a company pays well and offers other benefits depends on whether bosses think of employees as a cost or an investment.
Most companies, it turns out, think of workers as a cost: “When a company like Starbucks invests in its people, the reason it gets so much attention is because it’s such an anomaly," Lee Dyer, professor at Cornell University told Yahoo.
Companies that tend to treat employees like investments are ones that care more about quality and providing a superior experience for a premium good — like Starbucks or Whole Foods. It's also easier to do when it is a centralized company. Corporations with a lot of franchises have less quality control in hiring — like, for example, McDonald's.
But investing in employees can pay off for workers and the employer.
The current minimum wage stands at $7.25 and totals $15,000 a year for someone working a 40-hour week. A report from the Congressional Budget Office says that paying employees $10 an hour could significantly lift people out of poverty.
A much-cited study by Wayne Cascio compared practices of discount volume retailers Costco and Sam's Club, which is owned by Wal-Mart Stores Inc. The research found that Sam's Club's cut-rate philosophies ended up costing the company, while Costco's comparatively higher wages reaped the benefits of keeping good employees and maintaining an upscale shopper base.
At the time of the study, the average hourly wage for a Costco worker, after bonuses, was $17 an hour, compared to just $10 at Walmart.
"It absolutely makes good business sense," Costco co-founder Joe Sinegal said in the report, citing better productivity. "It's axiomatic to our business — you get what you pay for."
Costco takes heat from Wall Street for its high labor costs and critics say that the company has to remain "extremely innovative" to keep up, according to Rick Newman at Yahoo Finance. But its stock remains up 177 percent over the last 10 years, while Sam's Club's parent company Wal-Mart Stores Inc. has risen just 33 percent.
Fast food chains, which have lately been the targets of protests from low-wage workers, compete fiercely on price. That makes them less likely to pay more, Newman said, since wages increases would ultimately be paid for by customers.
If McDonald's raised wages, for example, its prices would go up to cover the cost and bargain-shopping consumers would buy burgers somewhere else, "in effect supporting businesses that pay their workers less," writes Newman.