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Being good to workers is also good for the bottom line

By ROBYN E. BLUMNER
Published August 6, 2006

Watching House Republicans vote to increase the minimum wage is like watching Mel Gibson repent - a lot of noise signifying nothing.

By cynically pairing a modest $2.10 per hour raise for the poorest paid Americans with a huge estate tax cut for the country's richest families, the Republican leadership demonstrated once again that their hearts are really just dried-up peach pits.

Republicans like to claim that their antagonism toward the minimum wage is probusiness and proemployee. Their canard is that when the minimum wage is raised, businesses cut back on their work force and people get laid off. But now that 23 states, including Florida, have raised the minimum wage on their own, with no discernible drop in employment for those at the bottom of the wage scale, it is time to put aside that fallacy. Ethically, morally and legally, paying employees decently for their labor should not be optional.

The Chicago City Council is on the leading edge of this idea with its "big box" living wage ordinance. The measure might still be vetoed by Mayor Richard Daley, but if it stands, the law would require retailers with more than $1-billion in annual sales to pay employees a minimum of $10 per hour, plus $3 an hour worth of benefits, by 2010. About 18 retailers would be affected, and many have responded with hypocritical howling. Wal-Mart has made threats regarding the future of up to 20 stores planned in the city, and Target is being similarly bellicose.

One employer, however, is not complaining. Costco Wholesale Corp., the warehouse club giant with 471 stores around the world, already pays its work force well beyond what the city would demand. Its average nonmanagement worker, including those working part-time, makes $17 per hour with a nice benefits package including health care thrown in. Yet Costco still makes a profit and offers its customers low prices.

This company puts the lie to the false choice between wages and prices that Wal-Mart likes to dangle. It is possible to pay decently and keep prices in check. All it takes is a corporate conscience.

Jim Sinegal, the chief executive of Costco, is one of the few leaders in corporate America who refuses to sell out workers in pursuit of short-term gains. Here's a guy who helped found a company that is now in the Fortune 50, and his salary and bonuses last year reportedly totaled only $450,000. And while he's plenty rich through his company stock holdings, he owns less than 1 percent of the company - almost unheard of for a founder. As he has explained it, part of his philosophy is to maintain a reasonable relationship between his compensation and that of average workers.

Famously, Sinegal has refused to succumb to Wall Street's pressure to treat employees less favorably as a way to boost profits. He has said directly to his critics that good wages and benefits translate into a productive and loyal work force, as evidenced by the company's low turnover and employee theft rates, and ultimately long-term shareholder value.

Maybe this respect for his workers comes from his own life experience - his father was a coal miner and steelworker - or maybe Sinegal just has an innate sense of decency. Or it could be that he's just a really smart businessman.

My guess is all three, with an emphasis on the third. Being good to your workers is good for business. Costco's share price is about 20 times expected earnings, compared with Wal-Mart's 14 times earnings. According to Tim Smith, a senior vice president at Walden Asset Management and president of the Social Investment Forum, a consortium of socially responsible finance professionals, there is a growing interest by individual investors in companies that value their employees, respect the environment and practice good governance.

Smith said that while companies will always succeed or fail for a variety of reasons, those that treat their employees fairly and adopt other progressive management practices are, in general, more inclined to perform better over the long term.

He pointed to companies like Timberland and Green Mountain Coffee that believe that paying employees reasonably is the right thing to do and is good for business. Procter & Gamble, according to Smith, has taken the living wage concept one step further and guaranteed it to the company's work force around the globe.

When Congress cares more about Paris Hilton's inheritance than struggling workers, there is something deeply amiss. Three cheers to those companies that have their priorities right, even when our Congress doesn't.

[Last modified August 5, 2006, 19:04:14]