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Making Bad Jobs Better: Lessons From Retail

David Callahan

The United States has two problems when it comes to jobs: There aren't enough jobs, as we all know; and a great many jobs are lousy -- a problem we hear about far less. A lousy job is one with low wages, minimal benefits, and few opportunities to move up.

About a fifth of jobs in the U.S. fit this description. And given how many workers that is -- people who work but are barely making it -- turning bad jobs into good jobs is arguably as important as creating more jobs.

That's why new research by the MIT professor Zeynep Ton deserves attention. Ton has spent 10 years studying retail jobs and, in particular, exploring how some retailers are providing much better jobs than others and reaping benefits from treating their workers better.

Ton explains that while retail managers have many short-term incentives for keeping labor costs as low as possible, stores that invest more in employees can achieve long-term gains in sales that more than cover their higher labor costs.

Ton contrasts low-road retailers like Home Depot and Wal-Mart with chains that pay and train their workers better, like Trader Joe's and Costco. What she finds is that low-road employers have much higher turnover, which in turn means their workers are less well-trained:

Stores like Wal-Mart also create havoc in the lives of their employees with just-in-time scheduling, a practice that constantly changes workers' schedules to reflect the ebbs and flows of customers with the aim of keeping labor costs as low as possible. (Demos criticized this practice in a 2011 report.)

All these practices, Ton says, are penny wise but pound foolish for retailers who are filling their stores with workers who hate their jobs, will quit at a moment's notice, and aren't motivated to execute the basic mission of retail: Get customers to buy more stuff.

Most of us know what Ton is talking about, because we've all been to stores where the workers are incredibly unhelpful and radiate unhappiness.

It doesn't have to be this way, says Ton. Stores like Trader Joe's are showing that paying workers more and providing better benefits and training, as well as opportunities for advancement, can make a big difference to the bottom line. While the average turnover rate is 59% in parts of retail, Ton reports that at "Trader Joe’s, turnover among full-time employees is less than 10%. At Mercadona, it’s a mere 4%. Turnover for employees who stay at Costco for more than a year is 5.5%."

These stores build a workforce that knows what it's doing, can perform many different functions in a store, and are good at selling stuff. Sales per employee at Costco, Ton says, are nearly twice that as Sam's Club.

Among other things, these high-road retailers don't engage in the just-in-time scheduling that workers loath. Instead, their workers are well-trained enough to do other things at the store when customer traffic is slow.

As a result of this cross-training, employees have more-predictable schedules and are always busy (that is, more productive), and customers get faster service from more-knowledgeable employees.

What Zeynep Ton is describing here is how work should be for people: reliable, engaging, and fulfilling because you're good at what you do. Oh, and let's not forget about the higher pay: jobs at Trader Joe's, reports Ton, pay between $40,000 and $60,000 a year -- more than twice that of other retailers.

These findings about win-win retail practices show how U.S. workers can do better even if there aren't improvements in labor law or successful union drives -- both of which have been hard to achieve in recent decades. Instead, employers need only pay attention to a maxim that should be obvious: well-treated workers are better workers.