Increasing the wages of retail workers to $25,000 per year would lift roughly 730,000 workers and their families out of poverty, according to the Demos study. It would also increase the purchasing power of retail workers by $4 to $5 billion, boosting overall GDP by between $11.8 and $15.2 billion. And in doing so, it would generate between 100,000 and 132,000 new jobs as a result of this “stimulus” and its multiplier effects, while having only a small effect on prices, the report finds.
Paying retail workers better also offers substantial benefits to the companies that employ them. While this may seem counterintuitive, detailed academic research backs it up. Zeynep Ton of MIT’s Sloan School of Management argues that seeing keeping wages low as the way to achieve low prices and high profits is badly mistaken: “The problem with this very common view is that it assumes that an employee working at a low-cost retailer can’t be any more productive than he or she currently is. It’s mindless work so it doesn’t matter who does it. If that were true, then it really wouldn’t make any sense to pay retail workers any more than the least you can get away with.”
Like the leading high-tech and manufacturing companies, the best, most high-performing retail companies benefit from having better paid, more skilled and more engaged workers. In a study published in the
Harvard Business Review
, Ton finds that the retail companies that invest the most in their lowest paid workers “also have the lowest prices in their industries, solid financial performance, and better customer service than their competitors.”