In April 2015 I wrote a post about how higher minimum wages could cause massive unemployment if more employers copied Costco. I noted that “even a casual visitor to [Costco, Target and Walmart] can notice that the work being done per employee per hour is not the same.”
Can you get ahead in academia by studying phenomena that are apparent to consumers? Apparently so! “Why ‘Good Jobs’ Are Good for Retailers” is a 2012 Harvard Business Review article by Zeynep Ton, a business school professor at MIT. She turned this into a The Good Jobs Strategy: How the Smartest Companies Invest in Employees to Lower Costs and Boost Profits in 2014 and now the New York Times is excited about it (article in today’s paper).
Professor Ton says to business people “You can cut your labor cost as a percentage of revenue by hiring higher-quality workers and leaving the low-quality workers to competitors or SSDI.” What the New York Times hears is “Every American can be a high quality worker if paid sufficiently high wages.” Professor Ton quantifies the savings of retailers from not competing with SSDI and TANF: “Sales per employee at Costco are almost double those at Sam’s Club.” As we can be pretty sure that Costco’s per-worker labor costs (wage, health care, taxes, etc.) are not double those of Sam’s Club, this means that Costco spends less on labor than does Sam’s Club. Another way to look at this is “If you don’t have the potential to be twice as productive as a Sam’s Club worker you will not be hired by Costco.”
It is worth looking at the reader comments on the NYT piece. By cutting labor costs as a fraction of sales, Costco and similar companies should be reducing the share of the economic pie enjoyed by labor and enlarging the slide of pie enjoyed by owners of capital (e.g., the Costco shareholders and/or the executives looting from them). But the liberal readers celebrate this move in the direction of less equality because they are dazzled by the headline dollars/hour number paid to the remaining handful of workers.
[Note that the New York Times pays its own journalists less than they could make by having sex with married foreigners and collecting child support. See the discussion of Times reporter Liza Ghorbani in this August 2013 posting.]
- “The Redistribution Recession” (June 2015 book review)
- “The lottery winner who kept his job at Costco” (March 2013)
- “unemployed = 21st century draft horse?” (August 2010 post about how low-skilled workers can be prohibitively costly to a modern enterprise)