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Higher Wages Help Businesses

Catherine Ruetschlin
The New York Times

Low wages are not just keeping workers in poverty, they are also holding back the economy by weakening consumer demand and keeping employers from realizing the benefits that accompany investments in the work force. Retail and fast food companies that pay poverty wages sabotage their own bottom lines and the health of the American economy, but a raise for the lowest paid would have benefits that extend to workers, consumers, and employers across industries.

At the same time, a large body of evidence shows that investing in the work force leads to lower turnover costs, greater productivity and more customer satisfaction. Experienced, knowledgeable employees drive sales instead of costs: they keep the lines short and shelves stocked, accommodate customer requests and identify priorities. Comparing high-wage retail employer Costco with its rival, low-wage employer Sam’s Club, reveals that sales per employee at Costco are nearly double the average sales per employee at Sam’s Club. By taking the high road, Costco demonstrates that retailers can please all their stakeholders -- customers, employees and shareholders alike.Consumer spending is the engine of the American economy, driving 70 percent of economic activity. But low wages at our nation’s biggest employers mean that working families have little left over in their paychecks to contribute to economic growth. Since low-wage workers spend 100 percent of their incomes just to meet basic needs, they are likely to spend any additional income immediately. That means that an extra dollar in the paychecks of low-wage fast food and retail workers would circulate right back into the economy, becoming someone else’s income and contributing to growth. At a time of weak consumer demand a raise at the bottom would generate billions of dollars in new G.D.P. and hundreds of thousands of jobs – those are benefits that give a boost to retail and fast food employers, and ripple out to the economy overall.

Moreover, a raise is possible. Some of the largest companies in the fast food and retail industries spend billions of dollars each year on share repurchases -- buying back their own stock to boost earnings per share. If they instead directed these funds to invest in their work force they could meet their workers’ call for higher wages without costing customers a dime.

A raise for low wage workers would mean that firms see more money in the register because of new economic activity, a more productive work force and happier customers. That is an investment we can all support.