Is the Light Finally Dawning?

An article in the February 9th issue of The New Yorker reported that Aetna, a Fortune 500 company, plans to raise the pay of its lowest-paid workers, and improve employee medical coverage. The proposed increase is substantial—from twelve dollars an hour to sixteen dollars an hour in some cases.

Mark Bertolini, Aetna’s CEO, was quoted as saying it wasn’t fair for employees of a Fortune 500 company to be struggling to make ends meet.

It isn’t only Aetna.

A recent announcement from Ford Motor Company unveiled the carmaker’s plan to raise the pay of 300 to 500 of its entry-level workers by more than $19,000 a year, or nearly 50%. The announcement was heralded as another sign of the rebound of the U.S. auto industry, but its implications go well beyond that rebound. (Henry Ford would have understood; in 1914, he famously raised his workers’ pay to the then-unheard-of rate of five dollars a day. Turnover and absenteeism plummeted, and profits and productivity rose.)

Little by little, American businesses are recognizing that their own long-term interests are inextricably bound up with the welfare of their employees. That’s a lesson retailers like Costco learned long ago. I’ve previously quoted Business Week’s telling comparison between Costco and Walmart–Costco pays hourly workers an average of 20.89 an hour to Walmart’s 12.67.

Despite paying higher wages and offering more generous benefits, Costco not only nets more per square foot than Walmart, its prices are competitive with—and sometimes better than—those of Walmart.

Early last year Consumer Reports ran a very interesting chart comparing prices for the same brand of purchases like flour, coffee, tall kitchen bags, toilet paper and similar items.  Consumers compared the costs of store brands, Costco, Walmart, various regional chains and Walgreens for each item. Store brands, unsurprisingly, were cheapest overall.

Next was Costco.

As the New Yorker article noted, there are solid business reasons to pay workers more—turnover declines, and better-paid employees tend to work harder. There is also the question of fundamental fairness. American corporations pay their executives truly obscene amounts, while wringing every dime possible out of people who can least afford to work for poverty wages. When Bertolini announced Aetna’s decision, he talked about inequality and corporate responsibility, saying “For the good of the social order, these are the kind of investments we should be willing to make.”

When Charlie Wilson was President of General Motors, during the Eisenhower Administration, he supposedly said “What’s good for General Motors is good for America.” What he actually said was “What’s good for America is good for General Motors.”

Wilson was right. Reducing inequality will be good for America, and what’s good for America is good for business.

10 thoughts on “Is the Light Finally Dawning?

  1. I think a lot of people recognized that corporate America was sawing itself off at the knees by starving its employees. It will be interesting to see if this is a broad-based movement or is limited to just a few corporations.

  2. I’ve always been on the lower rung of the corporate ladder and it’s painful to know that no matter how much I worked or how many hours I slaved away, I will never get any of the profit sharing that some companies distributed to their management staff. There were way too many years (before and after 9/11) that a frozen 13 lb. turkey was all you got for the holidays. Nice gesture, thought-less gift. A turkey!

  3. The Costco $20.89 myth lives on.

    Glassdoor is a website where employees report their pay. Here is the link to Costco. (You might need to give them your email and answer a few questions to go beyond the first page. But the first page has a lot of pay information.)

    http://www.glassdoor.com/Salary/Costco-Wholesale-Salaries-E2590_P4.htm

    The only ones at Costco making more than $20.89 an hour plus are supervisors and skilled employees. Lower level jobs are generally paying in the $11 to $14 an hour job. How does Costco get to that $20.89 average? My guess is Costco is averaging salaries of jobs, not averaging salaries of employees. So even though there might be 10 cashiers for every 1 supervisor, the average pay is derived by comparing one cashier salary versus that of a supervisor. Wal-Mart may well not be figuring hourly pay of its employees, not hourly pay of the positions, which explains why it is so much less, $20.89 v. $12.67.

    Costco certainly does pay better than Wal-Mart, but we’re talking a couple dollars better per hour, not over $8 per hour.

  4. Paul K Ogden–they may be factoring in benefits. Plus, they don’t systematically commit wage theft, and I have never seen a headline of Costco locking undocumented workers in their stores overnight.

  5. Several of the costco cashiers I’ve talked to said that they had been employed for over 25 yrs. They love their job and they are comfortable and have benefits. I would work there if I could get hired but really, it’s hard to get in there.

  6. Good news. NOTE: Henry Ford only raised wages because it was good for Henry Ford. Turnover was a huge problem. shorter hours and higher wages helped Henry Ford.

  7. Management unions, also known as the Great Oligarchy Plot, have been peddling lies lately. The truth is that management is overhead and production labor part of the cost of goods sold. Not their opposite claim.

    Their claim was easy to sell to Wall St as management is rewarded by Wall St, while product customers reward workers by buying the results of their labor.

    The good news is that we, the people get to vote for which interpretation of business practice we side with. The Great Oligarchy Plot or Democrats.

    I personally am returning to has worked well for us over time.

    However there is another wrinkle to be considered. Which voice to listen to when buying our stuff. The voice of big media marketing or the voice inside our heads.

    Big media says more, always more, no matter the cost to the future. They also say worship Wall St.

    The voices in my head say leave the table when you’re full, not stuffed, and value the products of labor, not the oligarchs.

    What do yours say?

  8. This is a great development, and I hope it spreads. You’re only as strong as your weakest link. Why can’t the powerful figure this out? When you beat down the workers, it’s going to come back on you. Or maybe they think we will all become so starved for bread and so bamboozled by the circuses, they can keep this Gilded Age going on forever. Good for these companies.

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