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Employees Are Close to the Breaking Point

Money is indeed a great motivator.

May 3, 2004
Related Topics: Total Quality Management, Behavioral Training, Strategic Planning

In their struggle to remain competitive during uncertain economic times, some companies are holding back on hiring additional staff because they are fearful of adding more cost to their bottom line. That means that employees will continue to carry more of the load. To make matters worse, much of corporate America doesn’t appear to be spreading the wealth created on the productive backs of their employees.

   "We’ve reached a breaking point," says Tony Lee, editor in chief of, an executive career site published by the Wall Street Journal, about companies pushing workers to be more productive, especially when they don’t see the extra sweat end up in their paychecks. Corporate profits continue to rise, and workers aren’t getting their fair share, experts say. A study put out in March by Northeastern University’s Center for Labor Market Studies, titled "The Unprecedented Rising Tide of Corporate Profits and the Simultaneous Ebbing of Labor Compensation: Gainers and Losers from the National Economic Recovery in 2002 and 2003," tells the story. It found that corporate profits accounted for nearly 41 percent of the change in national income between the first quarter of 2002 and the fourth quarter of last year. That exceeded the share employees got in their paychecks. "In no other recovery from a post-World War II recession did corporate profits ever account for as much as 20 percent of the growth in national income, and at no time did corporate profits ever increase by a greater amount than labor compensation," the report states.

    Employees won’t forget. "Once the economy turns around a bit more and you start to see the hiring demand that’s inevitable, you are going to see high turnover rates because of the productivity squeeze," Lee says.

    In a study conducted by CareerJournal and the Society for Human Resource Management of 300 managerial and executive employees and 451 human resources professionals, 83 percent of employees polled said it was extremely likely or somewhat likely that they would actively seek new employment once the job market and economy improved. In addition, 56 percent of human resources professionals agreed that it was extremely likely or somewhat likely that voluntary turnover would rise because of the improving economy.

    Money is indeed a great motivator. "The 10 smartest companies in America tend to pay competitive wages, benefits, etc.," says James Underwood, a management professor at Dallas Baptist University and author of the upcoming book What’s Your Corporate IQ: How the Smartest Companies Learn-Transform-Lead, due out in September. While he won’t disclose the names of all the firms he highlights in his book, he did provide one: Costco Wholesale Corp., headquartered in Issaquah, Washington.

    Richard Galanti, a spokesman for the membership warehouse club, says that productivity is a result of high wages and the best benefits among hourly retail workers. Cashiers start at $10.50 an hour plus health, dental and vision coverage, and by the fifth year of full-time employment they earn $20 an hour. With 70 percent of Costco’s expenses going to labor costs, the firm has been chastised by Wall Street. Galanti isn’t fazed. "When you pay well, you get a better person who wants to stay longer."

Workforce Management, May 2004, p. 44 --Subscribe Now!

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