Suzanne Lucas at Inc. is encouraged by the trend of major employers voluntarily raising the minimum wage for their lowest-level employees, including this week’s announcements from JPMorgan Chase and Starbucks:
The reality is, when you raise wages you get a better talent pool. Years ago (1999-2000), I worked for a retail organization that is always on Fortune’s Top 100 Companies to Work for: Wegmans. I focused on making sure we paid our employees more than all our competitors. While former CEO Bob Wegman was a truly good boss (I have nothing but praise for him), he also recognized that he got the best employees when he paid the best wages.
Wages can rise and fall without government intervention. Companies compete with each other for talent. And raising wages at one big company can have a ripple effect on other companies. That’s how the free market works. When Walmart raised wages back in 2015, TJ Maxx and other stores followed suit. Why? It’s not nobility. It’s simple economics.
If Walmart pays $10 an hour and its competitor pays $9, who would want to work at the competitor? Well, some people would because they like the work better, but you’d see people fighting for the higher-paying jobs and the lower-paying companies would have both increased turnover and a limited employment pool–as the only people available would be those who were incapable of obtaining a higher-paying job. Turnover is a lot more expensive than a pay increase.
In the case of JPMorgan Chase, however, Harvard Business Review associate editor Walter Frick argues that CEO Jamie Dimon’s move could actually end up hurting the bank’s image if the public views it as hypocritical:
The thing about values is that people expect you to stick to them. In a 2009 paper, Tillmann Wagner of Texas Tech and Richard Lutz and Barton Weitz from the University of Florida introduced the concept of “corporate hypocrisy” to explain how consumers react to corporate social responsibility (CSR). In the study, participants were given information about a company and its CSR principles, as well as a fake news story describing the company’s behavior. When the company’s behavior conflicted with its principles – for example, Walmart claiming to prioritize environmental sustainability then being fined by the EPA — participants reported worse feelings about the company. …
The study’s most striking finding is that even positive actions by a company can actually damage its reputation, if they create a perception of hypocrisy. In such cases, corporate sustainability may be worse for public opinion than doing nothing at all. Most Americans don’t have a very high opinion of big banks, so it’s possible that Dimon’s announcement will backfire as the public compares his op-ed to its impressions of the company’s past behavior.
This makes me think of some of our work on the employee value proposition and attraction drivers. When it comes to attracting and retaining employees, compensation is an important component of the EVP—but it’s certainly not everything. In CEB’s Global Talent Monitor for the first quarter of 2106, we found that compensation was the top attraction driver cited by employees worldwide, and topped the list of drivers in the world’s largest economies, but in other countries, including the UK, Australia, and India, it fell to second place behind work-life balance. Other EVP attributes like stability, location, and respect were not far behind.
Providing the best compensation, as Lucas points out, is a great way to compete for talent, but it’s important to remember that it isn’t the only thing employees care about. How many organizations have paid their employees well but driven them away nonetheless with disrespect, abusive management, or toxic work cultures? Frick’s point about values is well-taken not only in terms of public relations but also as a matter of employer branding and talent attraction.
(CEB HR Leadership Council members can access the full Global Talent Monitor report here.)