Thursday, January 5, 2012

Radical Wages

Blame it on Henry Ford, who paid his workers more so they could afford to buy one of the vehicles they made.  Blame it on the politicians on both parties who can't stimulate the economy--and I'm not sure it's their responsibility to do it anyway. Blame it on the media who rarely figure out how to report positive economic news. But let's take responsibility for ourselves and get this puppy going!

Pay your employees a living wage! A living wage allows a worker to support themselves and their family to meet basic needs in the community they live.

Take the bottom position--secretary, custodial, whatever--and pay them so they can support 2 adults and 1 child, on the basis of being full-time. (There are calculators that consider cost of living effects.)

In one case, I know this would double the wages for that person.

I would also cap the top pay based on a factor of the bottom pay. In a company of 100 employees or less, the wages for the top person shouldn't be more than 4-6 times the wages for a bottom rung person. In a company up to 250 employees, the cap would be 10x.

You might complain that this is going to dramatically raise your costs. Chances are labor is a small portion of your overall costs. Most of the benefits are fixed costs based on having an employee, regardless of their pay. If you follow my guide, chances are good that the average pay per employee won't change dramatically. Anyway, if employees are your number one asset, don't you want to pay for a top quality asset? Or are you in a habit of buying the cheapest machines and buildings you can, just replacing them when they wear out? The same care you have on capital purchases should be taken with your human resources. Pay good money to get the best all the way through the organization.

One thing is certain. You will have new energy in your organization. You will also attract more candidates to hire, and you can be choosy with a large and talented pool. You'll get publicity buzz through word-of-mouth. (One company had an applicant because everyone he met from that company had only good things to say about the company. It wasn't just the wages.) Employee turnover will shrink, which reduces your other costs of attracting, hiring, training and lower productivity with new employees.

There'll be intangible returns on this move too. It'll put less pressure on two wage-earner families. Kids can be raised in less stressful environment, perhaps doing better in school, developing the right kind of character and turning into the kind of employees you want to hire in 5-15 years.

In my opinion, it's just the right thing to do too: let people live because of their hard work.

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