Correlations Betwen Wage and Retention

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Correlations Betwen Wage and Retention

Walmart, IKEA, and General Motors are three examples of companies that have demonstrated the relationship between wage and worker retention, productivity, or happiness among blue-collar workers.

Walmart

  • Walmart is one example of a company that has demonstrated the relationship between hourly wage increases and employee retention.
  • The Walmart Effect author Charles Fishman shared that Walmart began paying higher wages to compete with its rivals in the retail industry, not as a reaction to the tight labor market. According to Fishman, the company also knew that it was not paying its workers enough.
  • As can be seen in its Environmental, Social, and Governance Report for fiscal year 2020, Walmart has increased its minimum hourly starting wage twice in the past five years.
  • In 2015, it increased its minimum hourly starting wage from USD 7.25 to USD 9.00. Then in 2018, it increased its minimum hourly starting wage again to USD 11.00. This latest minimum hourly starting wage is 52% higher than the federal minimum wage of USD 7.25 per hour.
  • This latest minimum hourly starting wage, however, is USD 4.00 lower than the minimum hourly starting wage that its competitors Amazon and Costco are paying its workers.
  • Both Amazon and Costco claim that they are paying their workers no less than USD 15.00 per hour. As of December 2018, Target also had plans to increase its minimum hourly wage to USD 15.00.
  • Walmart claims that as of March 2019, it was paying its full-time, hourly field associates an average of USD 14.26 per hour. The hourly wage of its full-time, hourly field associates ranges from USD 11.00 to USD 24.70.
  • Despite the fact that Walmart is offering a minimum hourly starting wage that is lower than its competitors Amazon and Costco, it appears that the wage increases the company has implemented in the past five years have been effective in reducing employee turnover.
  • Walmart was able to lower employee turnover by 10% in 2018. According to Fishman, this reduction shows that "the wages and the training are working." Fishman had the following to say regarding this reduction in employee turnover: "People are not leaving to make another $1 an hour across the street. They are sticking around."
  • Fishman also had the following to say regarding Walmart's decision to raise wages: "Those wages, and that plan is serving Walmart well as the competition tightens up."

IKEA

  • IKEA is an example of a company that has demonstrated the relationship between hourly wage increases and employee retention and happiness.
  • After a fair wage assessment in 2013 showed that necessary wage adjustments had not been carried out and wages had not caught up with price increases, IKEA implemented a number of wage increases to ensure its workers are paid fairly.
  • The company implemented a living wage in 2014. This move reportedly was a success that the company decided to implement another wage increase in 2016.
  • In 2016, the company raised the average minimum hourly wage to almost USD 12.00, 10.3% higher than the company's average minimum hourly wage in 2015.
  • Since the company uses the living wage calculator of the Massachusetts Institute of Technology, its minimum hourly wage varies from one location to another.
  • IKEA's retail sales workers have an hourly rate that ranges from USD 12.02 to USD 23.94. Their average hourly rate is USD 16.67. For comparison purposes, the industry-wide median pay of retail sales workers is USD 12.23 per hour.
  • Because of the wage increases it has implemented, IKEA was able to reduce staff turnover by 5%. It was able to attract better candidates and save more money as well.
  • Additionally, IKEA was identified as a Great Place to Work and was recognized by Fortune Magazine as one of its Top 100 Employers.

General Motors

  • General Motors is an example of a company that has demonstrated the negative impact of low wages on worker happiness.
  • The company's temporary workers are reportedly fed up with the fact that they are paid 40% less than their permanent co-workers. Their future had been one of the reasons the United Auto Workers union held a lengthy strike against the company in late 2019.
  • It appears General Motors has been increasingly using temporary workers to minimize its labor costs, and paying these workers around USD 15.78 to USD 18.44 per hour when permanent workers doing the same work are paid USD 28.00 to USD 32.00 per hour.
  • Temporary workers "work when asked and can be terminated abruptly."
  • Jaymi Jendon, a temporary worker who assembles parts at a plant in Michigan, has been working for General Motors for over three years, yet she remains a temporary worker. Her hourly wage is USD 18.44, while her co-workers' hourly wage range from USD 28.00 to USD 32.00.
  • The United Auto Workers union believes this arrangement is unjust and is therefore fighting for the full-time employment of these long-time temporary workers.

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