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Walmart announced last month that it was raising salaries for some of its lowest-paid workers. Investors responded to their shares with pakora, sending them down more than 6 percent on the day.
It was not too bad like 2015, when the retailer’s stock fell 10 percent after it said wage increases would cut profits.
Walmart was not exceptional. Half of Walmart’s hourly employees, or about 730,00 employees, still make less than $ 15 per hour per week following the latest increase. Retail giant made $ 13.5 billion in profit In its most recent fiscal year.
Chief executives have in recent years publicly pronounced their commitment to “stakeholder capitalism” and “a commitment to do good by doing good work”. But when it comes to paying wages to workers who can support their families, investors send a clear message to the authorities: increasing wages at your own risk.
This is a problem. Workers compensation as a percentage of our national production Decline for decades, And especially steeply since 2000. Companies including Amazon, McDonald’s and Walmart rely on public assistance, such as food stamps, to meet low-paid workers as of October 1 Report from the Government Accountability Office. A shocking 30 percent of Americans Can’t easily come up with $ 400 in an emergency, and Women And People of color Generally earn less than their peers.
But two new books highlight good ideas on how to allocate more and more salaries, some new and others used. They might also help investors accept that realization.
Set salary for posts, not for people
Kim Scott is concerned about how prejudices affect what workers are paid. In her new book, “just work, “Ms. Scott, a former Apple and Google executive, called on managers to identify gaps between gender, racial and ethnic groups. “Unless you believe that white men are superior to others and that is why they are paid more, it is impossible to believe that prejudice is not a factor,” she writes. For example, American women Only about 85 percent What did men earn.
Ms. Scott’s recommendations are not common practices in most organizations, but they make sense. The first is to ensure that a person does not have unilateral power over compensation. Companies should have a fixed salary or salary range for each role. Persons hired for the same job must have the same, if not identical, provide the letter. If necessary, job candidates can avoid signing bonuses, but still only within a range, which the company fixes and discloses.
Another strategy for more properly allocated salaries is to pay transparency to Ms. Scott Endorser, where companies publish compensation for any position. It’s practice On buffer, A social-media equipment company, for example, and Many Government Agencies. Ms. Scott writes, “More companies know that the simplest way to overcome pay inequality is to get the secret out of the process.”
Ms. Scott called on business leaders to look at the compensation of officers and the spread among their lowest-paid employees. Research shows that compensation for low-paid workers is increasing One of the most effective methods To reduce the persistent racial pay gap. “If you are in charge of compensation, you can pay people who are paid less. Excess And those who pay the most atleast, ”Writes Ms. Scott. “I am not talking about communism; I am talking of general human decency. “
Some companies are also thinking the same. Costco recently Raised their starting wages $ 15 to $ 16 per hour. The retailer has Has long been a case study High wages can be a good business strategy for which employees can reduce turnover and theft and improve customer service. best Buy And aim Both raised the minimum wage to $ 15 per hour last year. Adventuress It benefited From high staff morale and retention, and after a significant jump in job applications it increased to start paying $ 15 per hour For all US employees in 2018.
PayPal in recent years Began to focus on Employee financial health, including a metric it calls net disposable income, or what employees have left after taxes and necessary living expenses. This raised salaries and company health-insurance contributions for its lowest-paid workers, resulting in higher employee satisfaction and retention.
Accept that payment is not always linked to performance
Jake Rosenfeld considers myths about how companies give compensation “You are paid you are worth“One of the biggest myths is that what we are paid reflects our performance,” argues Mr. Rosenfeld, a professor of sociology at Washington University in St. Louis.
In theory, workers should be paid on the basis of how much money a business makes for their work, and for some rain that may be evident. But this is not often the case. Mr. Rosenfeld blames a number of structural factors that contribute to his employer’s revenue and his compensation to reduce the tie between value workers, including non-settlement agreements, ambiguity around pay, and the company’s performance and market. Concentration included.
In addition, Mr. Rosenfeld creates the inflammatory contention that it is useless to measure the performance of most individual workers. “For many jobs today, the entire effort to measure marginal productivity is wrong – not because the right tools have not been developed, but because there is no way to disrupt the productivity of one worker from others in the organization,” writes is.
He argues that whenever it is possible to tie personal performance to sales, as with salespeople and attorneys, there are deep flaws in performance-based pay, such as generating jackpot competition among colleagues.
If performance-based compensation is so problematic, what is the alternative? There is a possibility that the payment will be linked to the performance of the entire company. Profit sharing program, Where companies pay a percentage of earnings to employees, were common in the United States before the 1980s, but have mostly disappeared.
Mr. Rosenfeld also suggests that it is unlikely to be a fanbase among young workers: pay on the basis of seniority. This isolates managers of preferred playing ability, minimizing the effects of bias and award experience. “Seniority-based pay ensures that we are paying for our improvement,” argues Mr. Rosenfeld.
What will happen next?
American political leaders have a role here. The $ 15 federal minimum wage proposal was not created as part of recent incentive legislation. But Democratic leaders have vowed to pass it sooner or later. (President Biden has also committed to strengthening unions, whose decline since the 1980s has contributed to the weakening of workers’ compensation)
A significant majority of American voters Historically supported The minimum wage should be increased to $ 15. And that level too falls short Providing workers with sufficient income to cover basic expenses in many parts of the country.
As Walmart was very clearly reminded, investors are not necessarily interested in the general public when it comes to better wages. He is short-sighted. Including researchers Zeynep ton, A professor at MIT Sloan School of Management, has shown that when they pay higher wages, companies thank them for benefits such as better quality goods and services and lower staff turnover. In addition, when workers struggle to make ends meet, it holds the economy back because they consume less.
On top of that, fair pay is an important foundation for a fair society. Now is a good time to reset assumptions about why we are paid and how we are determined to be compensated. New perspectives exist for those who are open to them.
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