Why paying the minimum wage is not an act of charity

April 20

One of the companies I admire most is Costco.

They’re not very environmental, but they are extremely dedicated to their employees. Back in 2008 when the economy was in a downward spiral, founder and chief executive Jim Sinegal said that instead of looking for ways to cut costs and reduce compensation like most companies were doing, it was especially important to find ways of supporting the staff in this time of hardship.

He said, “our employees ... deserve our loyalty. They needed it just as much [in 2008] as they ever did, or more.”

Costco’s average pay rate is $21 per hour, while BJ’s average is $11 and Sam’s Club’s $12. However, Costco is the performance leader in the club membership retail sector.

Here at Mom’s, we’ve never paid minimum wage. In June of 2011, Mom’s raised our minimum wage to $10 per hour from $9. This month, we will raise it to $11 per hour.

This is not an act of charity, but rather an investment. Our most valuable asset here at Mom’s is our people. Paying them more is smart business. Any good businessman knows there is no higher return on investment than investing in people. Great people are more efficient, have good ideas and have good judgment. Customers love shopping at places with good employees. I’d rather have one great employee than three decent ones.

Raising the minimum wage would also raise the status of retail jobs, making them more viable as a career choice rather than a short-term solution or a necessity. But raising the minimum wage is the right thing to do for so many other reasons:

There is the issue of fairness. A parent with two kids who works full time at the minimum wage lives below the poverty line. For all of the complaining people do about those who don’t pull their own weight, it is hypocritical of such people to oppose raising full-time workers above the poverty line.

Similar to a child who struggles in school because he has a tough home life, I believe that when people are stressed in their personal lives, it negatively impacts their work performance. Raising the minimum wage will improve worker performance unilaterally, as basic needs are met.

The existing minimum wage leads to corporate welfare. Large retailers such as Wal-Mart and McDonald’s pay minimum wage. Many of their employees, even though they’re working full time, are on government assistance programs. Basically, the entitlement programs that people complain so much about subsidize the low-paid employees of large corporations. If you want to shrink the government, make the corporations pay a fair wage. For example, raising the minimum wage to $10.10 will reduce between 3.3 and 3.8 million people from enrolling in the taxpayer-funded Supplemental Nutrition Assistance Program. Other public programs such as Medicaid, the Earned Income Tax Credit and Temporary Assistance to Needy Families would be similarly affected.

Paying the low and lower-middle class a higher wage will immediately help the economy. If you give more money to rich people, they’re not going to spend it. They’ll hoard it. When money lands in the hands of minimum-wage earners, consumption immediately increases. As they say, “a rising tide lifts all boats.”

I read a great quote recently from a CEO of a company: “For CEOs to take credit for job creation is like a squirrel taking credit for evolution.” I won’t hire anyone unless people buy our product. The consumer is solely responsible for job creation. Contrary to what many CEOs in opposition are claiming, raising the minimum wage will actually create jobs, not cut them.

A wage of $11 an hour is just the next step for us here at Mom’s, and as we continue to improve our workforce, we will continue to raise wages even higher.

When I started Mom’s almost 27 years ago, I used to think that I could do everything the best and that the handful of employees I had were there to simply take instructions and do what I say. This past decade or so, I’ve come realize that not only was I wrong about that, but that I play a rather insignificant part in Mom’s success.

The people here at Mom’s are smart, dedicated, and they move Mom’s forward. They have taught me to have great faith in people and to understand their value.

Scott Nash is the founder of Mom’s Organic Market. This piece is adapted from one that originally ran on his Scott’s Compost Pile blog.

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