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High Impact for Low-Wage Workers

July 30, 2004
Related Topics: Work/Life Balance, Benefit Design and Communication, Retention, Compensation

Clothing retailer Eddie Bauer Inc. employs 6,200 hourly wage earners at 439 stores nationwide to sell merchandise like khaki slacks, polarized sunglasses and designer diaper bags. Most are young, between 25 and 40 years old, and, like other retail cashiers and clerks throughout the country who make less than $10 an hour, they often occupy the vast economic category known as the working poor. At Eddie Bauer, these frontline employees make up the overwhelming majority of the company’s 7,200-member workforce and serve as the organization’s public face, its ambassadors to customers.

    The store understands that the most effective way to move merchandise is to create a loyal workforce by rewarding lower-wage employees with something extra in their paychecks. In an effort to energize its legions of hourly wage earners and maintain a committed workforce, the store launched a financial-reward program in 1998 that gives workers an additional 6.5 percent of their base pay if store goals are met. That amounts to $74.41 extra a month, or $18.61 per week, for a worker earning the minimum wage. An employee earning $10 an hour could pocket an extra $104 a month. That kind of financial incentive might make an employee think twice about leaving Eddie Bauer.

    Such a financial-incentive plan is one way of rewarding often overlooked low-wage employees. Other large companies offer programs that help pay for child care, assist with education or provide some other form of extra financial support. These programs not only help low-wage workers but also benefit the employer through increased loyalty and savings on hiring and retention. Considering that 62 percent of any company’s workers are actively looking for a new job and "ready to walk" at any time, according to a 2004 Gallup survey, maintaining a stable workforce is a business imperative. In the United States today, one in four workers earns $18,800 a year, or $360 a week, thereby qualifying as "working poor." They have jobs, but inadequate salaries and few if any benefits. The Urban Institute reports that more than half of U.S. workers—52 percent—earn $25,000 or less annually.

    To help its low-paid workers, Eddie Bauer’s human resources unit, together with its retail operation team, launched a program six years ago called the Team Store Initiative. The program rewards employees for their contributions toward helping individual stores achieve established monthly sales goals. Each store has different sales targets, depending on its location, traffic and previous sales receipts. When a store’s sales goals are met, its hourly employees receive bonuses. Hourly wage earners receive an additional 35 cents an hour if their store’s sales hit specified goals. If sales exceed the target by 5 percent, employees are rewarded with a 65-cents-an-hour bonus. Bonuses are calculated and allocated on a monthly basis, using attendance- and time-tracking software. The company’s systematic electronic device avoids any potential human error or employee claims of favoritism. Managers can tell who worked when, and who sold what.

    It is a plan that is working well. In 2003, 95 percent of Eddie Bauer’s stores achieved their monthly sales goals at least once. So far this year, 84 percent of its stores are meeting or exceeding their monthly sales targets. "The thing employees like about this plan is that the reward is tangible. It’s immediate," says Eddie Bauer spokeswoman Lisa Erickson from company headquarters in Redmond, Washington. "It’s a good morale boost. We’re rewarding employees for hard work. It’s not some vague reward you may or may not receive at the end of the year.

    "We wanted a program that rewards all hourly associates, and this is one that can do it," she adds. "This program is an excellent way to recruit energetic and enthusiastic employees who are motivated and who enjoy a bonus at the end of each month." Many of the company’s sales associates are students who work part-time.

    Store managers are on-board with the program and will sometimes establish individual sales goals that contribute to storewide success, Erickson says. Supervisors say they like the plan because it’s easy to manage, creates a team culture and gives employees a chance to make extra money while helping the company sell more merchandise. Eddie Bauer’s field recruiters actively push the Team Store Incentive program as part of the company’s total compensation package.

Supply and demand
    In his book The Working Poor, David Shipler cites several examples of companies that treated their low-wage workers as disposable, altering shifts without regard to the impact on their day-care arrangements or flinging them into assembly-line jobs with no training. But other companies decided it was worth their while to retain their low-wage workers. Shipler writes about Michael Summers, CEO of a small rubber company in Cleveland, who simply wouldn’t let employees think that they didn’t matter to his business. If an employee didn’t show up for work, he’d get a phone call from Summers, asking where he was. If a worker’s car broke down, Summers would send someone to pick her up. His theory was that if the workers felt visible and needed, they would respond in kind.

"What possibility does the guy who comes in stocking shelves at Wal-Mart have to move up into lower- or upper-middle management?"

    Sprint opened a call center in Kansas City in the jazz district, close to a black community that was suffering double-digit unemployment. The company lowered its education requirements, raised its pay and hired as managers two "no-nonsense black women" who understood what a workforce of women emerging from welfare needed to succeed at work. Xerox emerges as something of a hero in the book because it systematically hired unskilled people, welfare moms and former drug addicts through a Washington, D.C., employment-training program and moved them up the salary and responsibility ranks.

    But all those efforts took place in a time of low unemployment, Shipler notes. "In a good economy, employers tend to pay more attention to the hand-holding necessary to assemble a loyal core of workers. In a poor economy, where people are looking for jobs, they don’t have to be quite as attentive. That’s a supply-and-demand fact."

    Now, as the economy turns around and the supply of workers starts to tighten, employers can expect to be back in the position of trying to hang on to the good low-wage workers they’ve found. "As unemployment falls, quality does also," Shipler notes.

    For many companies operating on slim margins, the solution to retaining good low-wage workers cannot be a bigger salary or better (and expensive) benefits. But Shipler thinks there are things that companies can do. Training low-wage employees and moving them up, for example.

    "The private economy relies on low-skills jobs, and that’s not something you can make disappear," he says. "But what possibility does the guy who comes in stocking shelves at Wal-Mart have to move up into lower- or upper-middle management? What possibilities does he have to train in operating a forklift? Opening those pathways to enhancement is important."

    While some companies might look to training and advancement, others, like Marriott International and Bank of America Corp., which employ platoons of low-wage workers, are initiating benefits programs that include English-language instruction and free or subsidized child care. These programs differ widely in specific benefits, but each one addresses a low-wage employee’s work/life situation. Leon Litchfield, one of the authors of a 2004 study by the Boston College Center for Work & Family at the Carroll School of Management, Increasing the Visibility of the Invisible Workforce: Model Programs and Policies for Hourly and Lower Wage Employees, says these programs are helping companies gain productivity and loyalty while saving on recruiting and new-hire costs. The 86-page report is an in-depth look at this often unseen but integral part of the workforce. Litchfield, a former professor at Boston College who is now at the University of Massachusetts, and his group looked at 15 different organizations and compared programs designed to help the low-wage employee and how they benefited the employer.

    "Very little research has been conducted to really examine the work/life needs of the low-wage earner," Litchfield says. "We wanted to focus on what employers may do to bridge the gap between hourly workers and professional people." Some companies, particularly those with high turnover, have taken the stance that hourly employees are easier to replace and cost less to train than other employees in the organization. This attitude works against increasing company loyalty among lower-wage employees.

    The report points out that the hourly-wage employee is often undervalued by companies, and overlooked, underrepresented or ignored by unions. When ideas are discussed about how a company can attract and retain the best employees, it is the technical and professional people who are perceived as being at the core of the business. Litchfield cites an employee-development program at Harvard University as an example of a program that benefits both employer and employee. A woman who worked as a parking monitor, for example, was given time off to attend an ESL class and was given free books. She was excited and grateful that her employer showed a real interest in her and her needs, Litchfield says. And the cost to Harvard was minimal. "She became better and more efficient at her job," he says. "The classes provided Harvard with a better-educated workforce and increased employee loyalty among those in the class." The employees who attended the class also had better prospects for advancement.

Program promotes retention
    Child care is, of course, an area that affects the lives of low-wage workers significantly. Bank of America encountered the issue in the 1980s, when it noticed that many women were not returning to work after having a baby. They just couldn’t afford child care. A study in 2002 by Nicola Dones and Netsy Firestein reports that the typical cost of a year of child care for one child is $7,000, a considerable percentage of a low-wage worker’s annual income. For many minimally paid workers at the bank, paying for child care was simply not an option. In 1989, B of A launched Child Care Plus, a customized, strategically focused child-care cost-reimbursement program. B of A employees who earn $34,000 or less can be reimbursed as much as $175 per month for each child under age five, whether the child goes to a licensed facility or is cared for in an informal setting. Another option offers reimbursement for school-age children. The program is available to full- and part-time employees.

    Jaclyn Miles, benefits analyst at the B of A’s work/life area, says the Child Care Plus program is the primary reason why many employees, both men and women, stay in their present jobs. Before this program was established, one of the parents had to stop working or rely on older children, friends or family to assist with child care. "Now there are fewer problems with absenteeism, attendance and tardiness," Miles says. "This is a work/life product that positively impacts productivity and turnover."

    B of A won’t release Child Care Plus numbers, but the Boston College study reports that among the 15,000 bank employees eligible for the program, 9,000 submitted claims and received monthly reimbursements. The bank found that providing child-care reimbursement was not only a nice thing to do for employees but also the right thing to do from a business standpoint. The bank now spends 75 percent of its work/life budget on the child-care initiative.

    No one believes that employers are solely responsible for solving the enormous and complex problems facing the working poor. Human resources executives constantly struggle to find qualified workers so that their companies can successfully compete. But as research is beginning to show, offering low-wage workers a chance to learn skills, earn a decent wage and gain a promotion makes good business sense. And as Shipler points out in his book, the first step in resuscitating the American dream is to make the needs of the invisible low-wage worker visible.

Workforce Management, August 2004, pp. 47-50 -- Subscribe Now!

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