How often do you walk into a retail establishment and interact with a salesperson, stock clerk or cashier? How often do you stop and think about what that person’s life is like?
There are about 15 million retail workers in the United States. According to the Bureau of Labor Statistics, the median pay for retail workers is $10.29 an hour or $21,410 a year. The federal poverty level for a family of four is $23,850, and it’s still possible for that family to qualify for food stamps with an income of $30,624.
Most of the people I encounter in these jobs are polite, helpful and amazingly upbeat, given how much they probably struggle just to get by. But how, I find myself wondering, can we justify asking people to work full time yet not pay them enough to buy food for their families, much less live a reasonably comfortable life?
And it gets worse. Forty percent of retail employees work only part time, even though a third of those would prefer to work full time. Nor are they mostly young people without dependents. The median age of retail workers is 38, and some are single parents who provide the sole or primary source of income for their families. Fifty percent have had at least some college education.
It doesn’t have to be this way. That’s the message of a powerful book I just finishing reading called “The Good Jobs Strategy: How the Smartest Companies Invest in Employees to Lower Costs and Boost Profits.†The author is Zeynep Ton, an adjunct associate professor at the MIT Sloan School of Management. The book deserves our attention â€" above all because it makes such a compelling bottom-line case for paying retail employees more and treating them better.
Ms. Ton came to the United States from Turkey, on a college volleyball scholarship, and hers is a classic immigrant success story. However much she struggled in her life, she still describes herself as shocked when she started researching and spending time in retail stores. “I began to meet people â€" a lot of people â€" who worked every bit as hard as I ever had, but were not making it,†she writes. “Their work life did not give them dignity or satisfaction, much less enough money to make ends meet or enough stability to have a sane family life.â€
“Good Jobs†focuses largely on four retail companies that have built their success by investing in employees rather than on their backs: Costco; Trader Joe’s; QuikTrip, a privately owned convenience store and gas station chain; and Mercadona, a grocery store chain in Spain. All of them pay wages significantly above their competitors, and all of them go out of their way to invest their jobs with dignity and meaning.
QuikTrip is an especially inspiring example of the possible. Convenience stores with gas stations are not exactly high-end retailers, and yet QuikTrip has spent more than a decade among Fortune’s 100 best companies to work for. Employees there start with typically low retail salaries, but can quickly win raises. Ms. Ton focuses on one store manager, a woman with a high school diploma, who was earning more than $70,000 after several years, which is about average at QuikTrip for her tenure. “There is no other company,†this woman said, “who will pay you your regular wage, a customer service bonus, a profit bonus and even an attendance bonus.â€
On the one hand, QuikTrip’s formula is a simple one: treat employees with care and respect, and they’ll do the same with customers. In turn, those customers not only become loyal, but also recommend the store to others. Sure enough, QuikTrip’s per square foot sales are 50 percent higher than the industry average, Ms. Ton writes, and its gas sales are twice as high. The employee turnover rate is 13 percent, she says, compared with 59 percent for the top quartile of the convenience story industry.
If a low-cost retailer like QuikTrip can treat its employees well and pay them a reasonable wage, why can’t other retailers? One reason, plainly, is that they simply don’t believe their employees add that much value. But another, Ms.Ton writes, is that, “Doing so isn’t easy. You have to get many things right.†It requires not just taking good care of employees and of customers, but also pursuing excellence in every facet of the operation to maximize efficiency.
Many retailers, for example, seek to save money by understaffing. The result is rushed, overworked and mistake-prone employees and higher turnover, which leads to unhappy, antagonized customers. The counterintuitive solution, Ms. Ton says, is to increase “slack†â€" meaning to have more employees available than are absolutely required at any given time of day.
QuikTrip, in contrast with most of its competitors, purposely overstaffs stores so that they can accommodate employees with emergencies or who are sick or on vacation. The result is happier employees and better-served customers. Ms. Ton cites one study of a 500-store retailer that found that every additional $1 spent on employee salaries resulted in an increase of anywhere from $4 to $28 in sales.
For my money, it’s morally repellent to pay honest and hardworking full-time workers less than they need to live. What Ms. Ton makes so persuasively clear is that it’s also a shortsighted business practice.
