
Higher wages and employee turnover - besam
https://operationsroom.wordpress.com/2015/03/19/higher-wages-and-turnover/
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ChuckMcM
Summary, "Turnover costs money, raising wages reduces turnover, solve for the
local minimum with respect to costs."

It is useful to understand that this is a 'natural' floor on wages.

~~~
x0x0
My brother started and runs 3 small pizza restaurants. He starts employees at
double minimum wage and gives his employees ok health insurance. It's pure
capitalism: you get an entirely different class of workers when you pay more.
They have cars that work and tend to show up when scheduled able to work, ie
not so hungover, drunk, or stoned they can't do shit. I'd like to think he'd
do it because it's the right thing to do, but it's nice when morality and
financial incentives align.

~~~
mlrtime
How much does he charge for a pie and what is his margins?

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hungariantatto
"How much does he charge for a pie"

It's a pizza business, not a pie business. Pizzas aren't pies.

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Fishkins
"Pizza" is just Italian for "pie".

[http://www.etymonline.com/index.php?term=pizza](http://www.etymonline.com/index.php?term=pizza)
[http://dictionary.reference.com/help/faq/language/e02.html](http://dictionary.reference.com/help/faq/language/e02.html)

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abandonliberty
Costco has known about this for years. They've consistently resisted
shareholder demands to reduce payroll spend while paying nearly double
industry average.

The result? A 5% turnover rate after a year, not to mention happier and better
employees. Pay attention to their name tags next time you visit, they list
their starting year.

This is the first article I could find on Google, there's a lot more out
there.

[http://www.businessinsider.com/costco-pays-retail-
employees-...](http://www.businessinsider.com/costco-pays-retail-
employees-20-an-hour-2014-10)

~~~
scarmig
For point of comparison, from the article:

 _Turnover in the retail sector has been steadily rising and now stands 5
percent a month._

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AjithAntony
I think the costco article is saying 5%/yr, and the original article is saying
saying that walmart's 60% turnover is consistent with retail average of 5%/mo

~~~
mooreds
Here's an interesting article on the right way to measure turnover:
[http://www.ere.net/2003/10/06/the-right-way-to-measure-
turno...](http://www.ere.net/2003/10/06/the-right-way-to-measure-turnover/)

Tl;dr: provide context.

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PaulHoule
The Walmart in my town seems to be irregularly staffed. On some days the store
looks like a dump, nothing is clean, nothing is fronted and faced, I don't
like to be there because it feels like the kind of place where you'd be the
victim of a crime. On other days the store is in pretty good condition.

The Target, on the other hand, seems crowded with workers around 9 in the
morning. It's a much more consistently pleasant to go there.

~~~
Raphmedia
Here in Canada, Walmarts are okay. It's the American experience anyway, so we
take it for granted.

Target, on the other hand, seems very empty these day. My local Target look
like an abandoned building and I can't seem to find any products.

~~~
maxerickson
Target is closing all of its stores in Canada.

[http://www.cbsnews.com/news/target-pulling-out-of-
canada/](http://www.cbsnews.com/news/target-pulling-out-of-canada/)

~~~
Raphmedia
That was the joke, sorry.

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rifung
I wonder how much this relationship also holds in the tech industry. I'd love
to see more companies emphasizing things like work life balance instead of
free food or gym memberships.

I don't even really feel as though working more hours necessarily makes me
more productive.

~~~
anon4
I usually don't even work 8 hours, I just stay in the office.

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raincom
I worked for an electronics/computer retailer for 18 months, making about $8
per hour, in California, in 2001. Miserable job: two days opening at 7 am; two
days closing at 11 pm; one day starting at 9am. I was working Sat-Mon-Tues-
Thurs-Fri. I was off on Sunday and Wed. Look how miserable was it: low pay,
odd timings, odd days off.

Then I found another job that was paying $13 per hour in 2002. It was a
security guard job. I could read books at work, and walk around. Sure, it is a
miserable job compared to a programmar gig; but better than my retail job.

If you are a student, working part time in retail or in any service job, your
experience is not miserable: you are getting pocket money, after all. But
service sector employs more full time adults. If you are an adult working in
these places, you see people without health insurance, working two jobs, lack
of sleep, unhealthy people.

Psychological impact is tremendous. And journalists, researchers don't compute
the cost of psychological impact, as individuals bear the cost.

When I was working as a security guard, one day a colleague did not show up
for work. A week later, we found that he died of cardiac arrest. This guy was
a weightlifting champion in his younger days. He was paying child support,
working two jobs: working 80 hours a week, in odd time schedules.

This working model is exported to other countries, to other industries from
the service sector. Welcome to the new World!!

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xdissent
My best argument so far for the (mostly symbolic) raising of the minimum wage
had been that going from ~$7 to ~$10-15 is approximately _doubling_ the
purchasing power of individuals who need it most (and will use it), at a low
cost to everyone involved. It's an amazingly good return on a relatively tiny
social investment. The best argument _against_ it that I've seen is that
black-teen unemployment goes up dramatically every time the minimum wage
increases. However, it turns out that those scary data points (promoted
usually by libertarian thinktanks) exactly correlate with general economic
recession periods.

Never once did I imagine that employee turn-over would have such a huge
economic impact, but it makes total sense. I've definitely known that happy
employees prefer to keep working, but I never connected the dots to dollars
spent on boarding new employees. And now I have a talking point that the
hardest "show me the money" opponent can wrap her head around without accusing
me of appealing to emotion or morality.

I welcome more talking points (pro and con) since I'm not formally educated in
economics.

~~~
lotharbot
Some thoughts:

1) McDonalds and other large minimum wage employers know what a minimum-
skilled employee is worth to their bottom line, and they set prices
accordingly. They know that after a wage bump they'll have reduced turnover of
their better employees, but they also know that when they do have turnover,
that new unskilled employee is worth 1.6 big macs per hour, so they'll raise
prices as quickly as they can to compensate. The net result is inflation, and
_inflation destroys any purchasing-power increase_ the minimum wage creates.
(My own research suggests this takes about 2 years to fully play out.)

2) Increased unemployment right after minimum wage increases might be one of
the sources of "general economic recession", rather than (as you imply) one of
the consequences. Based on my own research, the unemployment bump actually
tends to start about 3 months prior to a minimum-wage bump (as companies slow
new hiring), peaks 3-6 months after, and then decreases inverse to price
increases/inflation.

3) when people are unemployed, taxpayers pay 100% of their expenses. When they
work for the minimum wage, they earn N% and taxpayers pay 100-NxS% (where S is
the scaling factor for how quickly benefits are lost in relation to outside
income; S should be less than 1.) But in light of points 1 and 2, someone can
only get a job if N < their value to some company. So if the minimum wage N is
set high enough, it forces people out of the economy _long term_ (because if
they're unemployed, they're not gaining work experience, and therefore they're
not increasing their value.)

I'm of the opinion that setting the minimum too low is self-correcting
(because of turnover and the existence of systems like welfare), while setting
the minimum too high is the cause of significant unemployment. So I'd rather
err on the low side, pairing a low minimum wage with strong welfare and
related benefits.

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misterbishop
Maybe turnover partially explains Walmart's willingness to raise wages. But
above all, I think the modest wage hike is a response to worker's demands.

There's a growing nationwide movement for $15/hour and a union in the service
economy. Walmart is making a meager concession today to try to stave off
bigger demands in the future.

~~~
Shivetya
the money behind that push is the unions because government contracts are tied
to minimum wage, hence if they can push the idea that 15 is fair; I think its
excessive in the extreme for unskilled labor; then that in turn boosts what
government contract pay out.

32k for unskilled???

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gosmart4u
I can't but help think the high turnover is caused by more than just the low
wage. If the workplace is miserable, doesn't challenge you and doesn't offer
much opportunity for growth, the turnover is going to be high regardless if
you increase rates by a couple of bucks.

We have turned into a service force where it is easy enough to jump from one
service job to the next. There isn't a lot of loyalty from employees in these
jobs because they are not rewarding.

What can we do to change that? Honest question. I am not concerned about
finding ways to lower the turnover and keep people in dead end jobs. I would
much rather see more jobs being offered that give people opportunities.

Just my 2 cents.

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pjungwir
This sounds like great news for low-wage workers, but the article seems to
punt on the Why. Since so many people have been _under_ -employed the last 8
years, I wonder if the increased turnover is due to over-qualified employees
who were just working a Walmart gig until they could find something better,
e.g. college graduates or folks laid off from a higher-paying job. I wouldn't
be surprised if this were a large part of the effect, and in that case I'd
figure that:

\- raising wages would not help retain these people.

\- the increased turnover will subside as the underemployment problem fixes
itself.

I'm curious what other folks think about that theory?

~~~
Guvante
I would naively assume that the market forces of high unemployment would be
more powerful than over-qualified employees would account for unless they
sought them specifically.

Given all the mechanisms they already have in place to control the impact of
turn-over it doesn't surprise me that they realized it would be cheaper just
to pay people a little more.

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throwaway43
The bosses of Indian IT services companies need to read this.

They have ridiculously high attrition rates of upto 30 - 40 %.

75 % of the people hired leave within 3-4 years.

So basically they're the tech equivalent of Walmart.

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jonny_eh
Would raising the minimum wage reduce turnover too?

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daok
If you raise the minimum wage, people that are earning more will also have a
increase in salary in medium term. This solution only move the bell graph of
salary to the right.

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seanmcdirmid
It can move things to the right, but more so for the rich than the poor. That
is, unless you are assuming minimum wage services are primarily consumed by
minimum wage workers.

