Why Companies That Pay Above the Minimum Wage Come Out Ahead

Source: Zeynep Ton, Forbes, July 1, 2014

…The conventional wisdom in business is that bad jobs like this are necessary to keep prices low and profits high. If a low-cost retail chain were to pay its cashiers more, then it would either make less money or have to raise its prices. Implicit in this logic is the seemingly self-evident tradeoff between low prices and good jobs. But that is a false tradeoff. Even in highly competitive industries like low-cost retail, it is possible to pay employees decent wages and treat them well while giving customers the low prices they demand.

I studied four retail chains that manage to do this: Costco, Trader Joe’s, QuikTrip (a U.S. chain of convenience stores with gas stations), and Mercadona (Spain’s largest supermarket chain). They offer their employees much better jobs than their competitors, all the while keeping their prices low and performing well in all the ways that matter to any business. They have high productivity, great customer service, healthy growth, and excellent returns to their investors. They compete head-on with companies that spend far less on their employees, and they win.

When I analyzed these four companies, I found that despite all their differences, they had one element in common: They all make a set of smart choices that allow them to achieve the combination of good jobs, low prices, and great results. These companies all follow what I call the good jobs strategy. It has two components….