Businesses have a promising model to follow in implementing $15 wage

Costco's business model: The aim is to prosper by creating happy customers and employees. Credit: Ted Chi/Flickr

The landmark, unanimous decision by the Seattle City Council to approve a $15 minimum wage has set the city’s businesses in motion for implementing what will be the nation’s highest hourly pay. And while activists, workers and supporters applaud the decision, there are those with concerns that an increased minimum wage could have a negative impact, especially on small businesses. Potentially, it might cause businesses to close doors or cut jobs.

But, is there a way that there can be better pay for workers and more profit for businesses? What if it’s approached as part of a larger strategy — a profit-oriented approach that focuses on maximizing workers’ ability to drive sales and improve operational efficiency rather than minimizing their pay and benefits?

Such a strategy exists and it is demonstrated in local companies throughout the Seattle region — companies like hometown favorites Costco, NRG Insurance and Patagonia. We really can do better by doing good.

Zeynep Ton is associate professor at MIT and author of “The Good Jobs Strategy.” Ton’s teaching and her good jobs strategy draw on more than a decade of research. She has found that operational excellence enables companies to offer low prices to customers while ensuring good jobs for their employees and superior results for their investors.

Ton’s research includes Seattle-based business Costco, which is profitable because its business model focuses on the four components of her good jobs strategy: operational excellence; fewer but better choices for customers; investing in and empowering employees; and offering better wages and benefits.

At Costco, Ton’s good jobs strategy is evident: 98 percent of store managers are promoted from within and, not surprisingly, employee turnover is low. Employees are more productive and more innovative, which reflects positively on the business.

Currently, Costco retail staffers earn $11.50 an hour, even in states that have a lower minimum wage than Washington. And, in January, Costco CEO, Craig Jelinek, publically supported the $15 minimum wage increase in Seattle, calling it fair. Costco has even publicly advocated for a bill that would increase the federal minimum wage to $10.10 an hour.

The flip side of the economic model is one in which one in five workers have a “bad” job. In 2010, the Bureau of Labor Statistics found that the mean annual wage for a cashier at a retail job working 40 hours a week was only $19,801 a year with no health benefits. Businesses have long believed that the only way to remain competitive and profitable is to offer workers low wages, limited hours, poor benefits and inconsistent schedules. But there is another way, and Costco has proven that it works.

As Seattle businesses start to phase in the new $15 minimum wage, Zeynep Ton’s strategy is one that should be considered. The four pillars of her good jobs strategy provide a thoughtful and research-based approach for businesses struggling to determine how to implement the minimum wage increase. Businesses truly can do well by doing good.

 

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