You're Paid What You're Worth by Jake Rosenfeld

Author:Jake Rosenfeld
Language: eng
Format: epub
Publisher: Harvard University Press

For Walmart, the equation was simple: higher pay means either hurting shareholders (an increasingly treacherous route to take, as we’ve learned) or hurting consumers through higher prices. But in fact, the empirical literature on the relationship of pay and prices in the retail and restaurant industries presents a mixed set of findings. One study, by Daniel Aaronson, focused on the pricing patterns in the restaurant industry in the United States and Canada. After legislation raised the minimum wage in various states and provinces, the cost of restaurant food did increase. But the increase was quite modest, and limited to the period surrounding the legislative change.15 Sara Lemos’s review of existing research on minimum wages and prices makes no greater case that pay hikes lead to price hikes: many studies find a small effect and some studies find no effect at all.16 Lemos concludes that raising the minimum wage in industries like retail and fast food “increases the wages of the poor, does not destroy too many jobs and does not raise prices by too much.”17 The red-hot economy of the late 1990s helped to produce record-low unemployment and robust wage gains throughout industries, including retail. Prices for retail goods, however, remained essentially flat.18

How come? As Costco has demonstrated, well-paid workers often make happier and more loyal workers, and happier and more loyal workers work more productively. As anyone who has slogged through a lousy job under a lousy boss knows, the combination of low pay and poor management is enervating. Wage increases, meanwhile, don’t just motivate employees. Higher labor costs can also shake employers out of complacency, leading them to innovate more in their search for other ways to beat competitors. As Carré and Tilly conclude, “nothing gets employers thinking harder about ways to increase productivity than blocking the low-wage solution.”19

So far, other retailers have largely eschewed innovative thinking and resorted instead to the copycat approach. As one executive in the late 1990s lamented, “When a competitor comes in, you have to mimic their operations, and you get reduced to the lowest common denominator.”20 Walmart has proven especially tempting to mimic, a fact that the company’s critics have long recognized. In the spring of 2005, five members of Congress and a former Miss America joined with unions and other worker advocates to shame Walmart for the company’s gender pay disparities and general low pay. As part of the “Love Mom, Not Wal-Mart” campaign, the participants signed an eight-by-eight-foot Mother’s Day card addressed to CEO Lee Scott, urging him to remedy sex-based discrimination and raise rock-bottom wages. Congresswomen Rosa DeLauro of Connecticut, one of the giant card’s signees, said Walmart’s massive scale meant it was especially obliged to serve as a positive model for others: “certainly, as the nation’s wealthiest and largest employer and largest company, Wal-Mart has a unique role and responsibility to do the right thing and set the best standard for America.”21 Having industry behemoths set higher standards is important because mimicry often leads to inertia. The pay

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