Fast Company: Who Benefits From A Minimum Wage Raise? Pretty Much Everyone

By Jessica Leber Fast Company, June 13, 2014

One in five workers would benefit from a higher minimum wage - but businesses could also see a boost

What is it like to live on minimum wage in America? It’s never been fun, but it’s getting harder and harder as costs of living rise around the nation. ... Oxfam’s breakdown by Congressional district show that, on average, one in five workers would benefit from an increased minimum wage, or 25 million people--nearly 14 million of whom are women. ...

RAISING MINIMUM WAGE IS ACTUALLY GOOD FOR BUSINESSES TOO

Raising the minimum wage to keep pace with rising cost of living used to be a bipartisan issue, and increases have been passed 22 times since 1938 ... But today Congress remains at an impasse, as many businesses in the retail and service sector lobby against being required to raise the pay of their workers. Research shows their complaints may not even be in their own best interests.

“Bad jobs cost companies a lot more than they realize, and they find themselves in a vicious cycle,” says Zeynep Ton, an adjunct associate professor at MIT Sloan School of Management and former professor at Harvard Business School. Poor employee retention and commitment, she says, contributes to operational problems and lower sales - a cycle shown by her studies to lead to lower sales and profits, and then a shrinking budget to pay employees fairly.

In contrast, Ton has studied businesses in low-wage retail sectors, such as Costco and the convenience chain QuikTrip, that have succeeded in taking the opposite approach, paying their employees better wages and investing in their development. She says this strategy has allowed them to retain employees that perform better at their jobs, while the companies return money to shareholders and outperform competitors on a wide range of financial metrics. Raising the federal minimum wage, Ton suggests, could nudge more employers to consider what she calls in her book a “good jobs strategy.”

Sherry Stewart Deutschmann, CEO of the Nashville, Tennessee, company LetterLogic, joined Oxfam in calling for a higher federal minimum wage, saying she is tired as a taxpayer of subsidizing other businesses that don’t pay their employees a wage they can live on without food stamps or other social welfare. Since starting the company from her basement as a single mom in 2002, she’s grown it to annual revenues of $30 million while paying employees $14 an hour and redirecting 10% of profits distributed evenly among employees every month. She says her strategy of putting her employees first, including helping them buy their first home and reimbursing tuition, is paying off in a sector where this is relatively rare.

“It really is an investment in our employees that pays off beautifully,” she said on a conference call hosted by Oxfam. “We have very low turnover, our training costs are lower, we have fewer mistakes and [provide] a higher quality to our customers.”