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A Tale of Two Jobs: How Low Wages Are Bad for Business

Companies that pay employees more have higher profits.

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(Editor’s Note: When MIT Sloan School of Management Professor Zeynep Ton faces her students, she tells the future executives that they don’t have to treat employees and customers poorly to make money—especially in service jobs.

Ton knows they have heard all the stereotypes; that cutting costs is the key to profits. But she has found that’s not true, especially in the service sector. Better treatment of workers translates into more sales. Higher pay means less turnover. Better service creates loyalty among consumers. Ton profiles a handful of good and bad employers in a new book, The Good Jobs Strategy: How The Smartest Companies Invest In Employees to Lower Costs and Improve Profits.

In this excerpt, we see contrasting profiles where management has chosen bad and good job strategies. Ton’s insights underscore that America’s business owners do not have to pay workers poorly, treat them and consumers with contempt, to make money. It is a powerful analysis that, if heeded, could transform the workplace.)    

Excerpted from The Good Jobs Strategy by Zeynep Ton , with permission from Amazon Publishing/New Harvest.

The Bad Job: Janet’s Big Box Store

Janet had her own small video rental business, but it wasn’t making enough money. In 2005, she had to close it down. Luckily — or so it seemed — she became a sales associate in the electronics section of a large retail chain. Even better, it was a full-time job. Her job included making sure everything in her section was properly shelved and priced correctly. Her starting wage was only $8.20 per hour. While Janet’s managers recognized her hard work and promoted her several times, her raises were miniscule.

By 2012, Janet was a customer service manager in charge of dozens of employees at the front end of the store, including cart pushers, cashiers, greeters, and employees working in the money centers, in which customers could cash checks, make wire transfers, and buy pre-paid debit cards. She was also responsible for solving customer service problems at the checkout, such as pricing errors or credit cards that didn’t go through. On top of all that, she frequently had to solve equipment problems — or at least try to. “Like the other day,” she said, “the money order machine went down at the money center. I had to crawl around on the floor and get on tech support from National Cash Register and sit there and tinker with the money order machine. Unplugging the cable and plugging it back in as he was directing me from the phone until I got the money order machine back up and working.”

Janet is a problem solver who manages dozens of employees and lots of different equipment, yet after all her merit-based raises she still earns only $11.60 per hour. Supposedly she works full-time, but in fact she’s often scheduled for fewer than forty hours a week, so she never really knows how much money she will make.

Nor does she know when she’ll be working. Every week, her hours are scheduled on different days and at different times. One day she could be scheduled from 2:00 p.m. to 11:00 p.m. and the next from 10:30 a.m. to 7:00 p.m. Some days her work ends around 9:00 p.m., yet she’s scheduled to arrive at 5:00 a.m. the next morning, leaving her only eight hours to drive home, eat dinner, try to sleep, get ready for work the next morning, and then drive in. “My life is always in turmoil because you can’t sleep,” she said. “You can’t just go to sleep on cue.” Sometimes she reports to work without having slept at all.

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