Why Well-Paid Employees Are Good for Business

Costco workers pay

It's no secret that the retail sector depends on minimum-wage labor -- when President Obama proposed raising the federal minimum wage in his State of the Union address, the National Retail Federation was one of the first groups to express its opposition.

But as we noted at the time, not every retailer supports paying its employees the legal minimum. Last month Costco came out in favor of a higher minimum wage, noting that it pays its employees at least $11.50 an hour. And Costco (COST) isn't alone in going above and beyond the industry standard when it comes to employee compensation.

Dan Fastenberg at AOL Jobs has an interesting story today that looks at the best jobs in retail. Costco is on the list, as is Trader Joe's, which starts its employees at a salary of $40,000 to $60,000. But as Fastenberg notes, these companies aren't just paying higher wages out of the goodness of their hearts -- there's evidence that paying a higher wage also translates into real benefits for the retailers.

Sponsored Links

Zeynep Ton, a visiting professor at MIT's Sloan School of Business, argued last year in the Harvard Business Review that "the presumed trade-off between investment in employees and low prices can be broken." The likes of Trader Joe's and Costco, she points out, are able to maintain low prices and strong financial performances despite their relatively high wages. While cutting staffing levels and suppressing wages may be a good short-term strategy for maintaining margins, in the long term it may make more sense for some service businesses to treat their employees better.

Indeed, Costco CEO Craig Jelinek made this very point last month when discussing why the company eschews the low-wages strategy employed by the likes of Walmart (WMT).

"We know it's a lot more profitable in the long term to minimize employee turnover and maximize employee productivity, commitment and loyalty," he said last month.

Check out the full story at AOL Jobs.

Matt Brownell is the consumer and retail reporter for DailyFinance. You can reach him at Matt.Brownell@teamaol.com, and follow him on Twitter at @Brownellorama.