The pandemic.
Millions of folks have lost their jobs. At least 7 million have realized (much to their chagrin) a paycut since last March.
But, a few wise firms have done otherwise. They’ve raised wages since the pandemic hit. Wayfair, Chobania are among the big firms to do so. As have a few of our clients.
The crasser thinkers among us may be wondering why a firm would do that. After all, folks are desperate for work and you could pay them less. But, the indications are this concept pays off in profits and productivity.
Let us not forget that this is exactly what Henry Ford did a century ago when he offered pay rates twice what everyone else did- for a shorter shift, to boot. He did expect performance and would drop you if you didn’t measure up to his standards… but the wages provided the impetus.
Natalia Emmanuel and Emma Harrington published a Harvard paper examining the effects of wages on productivity and performance for warehouse workers at an online retailer. (I am not blocking the name of the warehouse- the authors are!)
A $ 1 increase in wages (from $ 16 an hour) led to a marked increase in the number of boxes per hour moved from 4.92 to about 5.2. More importantly, turnover decreased by about 19%. Moreover, the researchers found similar improvements when they examined the customer service area for results.
(Just so you know, this STILL doesn’t mean I am all for raising the minimum wage for everyone. I think many small business -especially during the pandemic- would be stretched to the gills to hire on folks at $ 15 an hour. But, once a firm hits about $ 2.5KK in annual revenue or 50 employees- whichever comes first, then it’s time to for those entities to step up to the plate.)
Not surprisingly, researchers are also studying what happens after the opposite concept- where compensation is to be decreased- is applied. J. Sandvik, R. Saouma, N. Seegert, and C. Stanton (Management Science) found that process was self-defeating- at least among sales agents. Not much different than the results determined by D. Coviello, E. Deserranno and N. Persico who found that cutting phone representatives pay led to deliberate drops in productivity.
Maybe it’s time for enlightened thinking in the Board room.
That’s important research! But it only makes sense. It boosts morale, especially if it is seen as a caring move on the part of the company.
Thanks for adding to the discussion, Jeanine!
Definitely food for thought here.I wonder what happens when wages stay the same.
I thought the same thing- but have found no studies of same during the pandemic, Dr. A.
A well written opening to an interesting discussion. As usual, thanks for an informative read.
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I’m honored by your comments, Barb.
Kudos to the larger firms that are taking care of their employees! But I also agree that many true small businesses wouldn’t be able to do that since they are probably already at their limit.
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I’m with you on both ends, Martha. Except I think we can mandate the larger firms not leave their staff to be subsidized by the American citizenry.
this is certainly heartening to hear.. and yes productivity boosts are bound to happen when people are happier…
Glad that you find the tidings cheerful, Vidya!