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Livable Jobs

Benefits for Businesses Paying a Livable Wage

1. What are the benefits of providing a livable wage?

2. What are the costs of Non-Livable Jobs?

3. Which critical success factors for my business can be affected by improved employee productivity and commitment?

4. What about the business argument that a free market, increasing worker productivity, and minimal regulation are the best way to a strong economy with livable wages for all?

5. Aren't there some businesses out there that would like to pay living wages, but really can't?

6. What are the Options for Upgrading Pay Levels?

7. How can I help my employee’s economic security?

8. If wages go up, won't businesses just leave Vermont and go elsewhere?

9. If I pay my employees’ more won’t I have to hire less people?

10. Increasing the minimum wage will be good for businesses.

 

Facts

 

 

What are the benefits of providing a livable wage?

Increasing wages, benefits, and workplace practices pays for itself.  Increasing productivity and quality decreases recruitment and training costs resulting from lower turnover.  By providing a livable wage, businesses can create a committed workforce, which can become a powerful source of competitive advantage.  That means they need to attract, keep, and get the most out of their employees.

  

It's also worth noting when businesses do not pay a livable wage because public assistance often makes up the difference. So when Vermonters turn to food stamps or heating assistance, our tax dollars are subsidizing those costs.

 

What are the costs of Non-Livable Jobs?

“We’ve always told customers ‘you get what you pay for.’  We suddenly realized that’s true with our employees too,” said one manufacturer of premium goods.  Employees who cannot afford to meet the basic needs of food, housing, health care, transportation and child care cannot focus on being reliable and productive workers. 

 

To demand superior workmanship and service from those being paid low-wages could lead to a higher turnover rate, as current and prospective employees may be attracted to other more enticing and fair-paying employers. The high cost of recruitment and training new employees, coupled with a high turnover rate, will certainly be a financial detriment to the employer. 

 

A study by William M. Mercer, Inc on the cost of employee turnover found that after factoring in lost productivity, search fees, management interview time, and new-hire training costs, 45% of surveyed companies said it costs more than $10,000 to fill a vacated job (Training, August 1998).

 

Which critical success factors for my business can be affected by improved employee productivity and commitment?

Depending on your industry it can be gross sales per square foot, average dollars a plate, billable hours per employee, error-free widgets per production hour, or customer repeat sales ratios.  Whatever the factor, calculate what a 5%, 10% or 30% increase would mean to your bottom line.

 

What about the business argument that a free market, increasing worker productivity, and minimal regulation are the best way to a strong economy with livable wages for all?

History has shown that as worker productivity and skill level increase with new technology and profits go up, this does not necessarily translate into better wages.  The productivity of American workers increased significantly from 1973 to 1997. However, during the same period, wages fell by 16% (when adjusted for inflation), corporate profits hit record levels, CEO salaries skyrocketed, and the richest 1% of Americans took control 42% of the nation's wealth.

 

So, in this example, increased productivity and profits did not result in increased wages and wealth for all, but only for business owners and management. Arguing for a "free" market really means allowing employers to do whatever they want, regardless of what's right.

 

The free market is hardly free. For example, over $250 billion tax dollars is given out annually as subsidies to United States corporations. U.S. arms merchants alone get $500 million a year to advertise and promote their products. When was the last time you heard a business complaining about this interference with the free market? Raise the Floor notes that “businesses that pay poverty wages indirectly rely on government assistance programs to make up the difference between these wages and what it costs their employees to live.” There are countless examples of how our economy is managed and subsidized through political policies.  The only question is who is going to benefit from these policies? Working people, who constitute the vast majority of Americans, or a wealthy few?

                 

Aren't there some businesses out there that would like to pay living wages, but really can't?

Undoubtedly there are.  Perhaps employers who can't afford to pay livable wages could qualify for tax cuts that would enable them to.  Other ideas and possible solutions exist, and it is up to employers, employees, and elected officials to come up with a fair solution for all parties.  Employers can also try creative solutions to improve the environment of the workplace, such as flexible work arrangements and lax dress codes.  Non-monetary benefits are routinely identified by employees as an important need.  But the days of balancing the books of businesses on the backs’ of employees are over. 

 

See: Options for moving towards a more livable-job workplace

 

What are the Options for Upgrading Pay Levels?

In addition to pay increases, some small Vermont companies have developed creative ways to increase their employees’ take-home pay and personal time, reduce their living expenses, and increase productivity.

 

Group purchases and discounts can reduce employee expenses; increased wages create opportunities for employer tax benefits; giving more personal (vacation) time to employees can create a less stressful and more comfortable work environment, one that will eventually lead to increased productivity; and more equal profit distribution and open book management are a few imaginative ways of improving the workplace.

 

How can I help my employee’s economic security?

Providing benefits that reduce employees’ financial risk, leverage pre-tax dollars, or extend the value of take-home pay are some ways to enhance economic security and help create a worry-free workplace.  The value of these and other benefits to employees varies based on age, lifestyle, and life stages. 

 

Creativity counts.  Employees frequently describe seemingly small things that make a big difference: worksite flue shots, transportation, parking assistance, parent support groups facilitated by the local child care resource and referral agency, and health club or wellness allowances, etc. 

 

Some other options include: company-paid health and dental insurance, company life and disability insurance, hardship fund, flexible spending account plan, dependent care assistance plan, cafeteria plan, retirement savings plan, and education in financial management.

 

If wages go up, won't businesses just leave Vermont and go elsewhere?

In general, this is not a big concern.  More and more businesses begin to recognize that wages must go up. One member of the Central Vermont Chamber of Commerce stated, "From our view point, the economy is not doing well in Central Vermont. We need to raise the wage structure in the area." (Times-Argus, 9/16/99)

 

One reason why businesses simply will not leave is the vast majority of low wage jobs are in industries that are geographically dependent, particularly retail and service.  This means that the food has to be cooked here, and the offices, classrooms, and restrooms cleaned here.  Since a minimum wage increase affects all businesses equally, few jobs or businesses, if any, would be lost.

 

Nationally, 76% of low-wage jobs are in the geographically dependent service industry. 24% are in manufacturing, which is more mobile, but typically manufacturing already pays well above the minimum wage.

 

While the dire predictions of businesses are often exaggerated, a certain amount of concern is deserved, particularly along the border with New Hampshire.  A New Hampshire legislative committee is currently conducting a Job Gap Study, to look at the pros, cons, and in-betweens of livable wage versus the current minimum wage.  In any event, this problem should not be used as an excuse for businesses to not pay livable wages.

 

If I pay my employees’ more won’t I have to hire less people?

If the minimum wage was raised as high as $8.50 an hour, the impact would be modest at best; in the range of 1% to 3% "dis-employment." Dis-employment is a term used to describe company lay offs or reduction in hiring due to higher wages. At lower a level, such as $7.50, there is no expected impact.

 

The same businesses that now hire low-wage workers will still need those jobs done, and the same pool of workers will still apply for those jobs, except now they will be working for livable wages.

 

Oregon's experience in raising the minimum wage shows this.  Between 1997 and 1999 Oregon raised its minimum wage from $4.75 an hour to $6.50 an hour. A study by the Oregon Center for Public Policy found that "Oregon's 'highest in the nation' minimum wage continues to raise wages for former welfare recipients and other low-wage workers without harming their employment opportunities. The increase has reversed years of declining wages for welfare recipients and other low-wage workers."

 

Increasing the minimum wage will be good for businesses.
When we have more money we will spend it.  Higher wages will leave more unrestricted income for people to use once the bills are paid.  Although employers will have to pay that higher wage, they will get their money back in increased business. This money will circulate in the economy and multiply, leading to increased economic growth for everyone.

 

Facts

  • Small businesses employment was better in states with higher minimum wages than other states.  The number of small businesses increased by 3.1% in states with higher minimum wages from 1998-2001 compared to 1.6% for other states.

  • The real minimum wage- the wage adjusted for inflation- reached its highest point in 1968.  Today, the minimum wage has 43% less buying power than it had in 1968-that buying power continues to shrink goes with out a raise.  Businesses are negatively impacted when workers don't have buying power.

  • A study of the impact of the state minimum wage increase in Oregon in 1997 and 1998 found that employment did not decline as a result of the increase, but instead rose by 4 percent in retail trade, the industry most affected by the wage increase. (Raise the Floor, Good Wages are Good Business)


 

 


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