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Tag Archives: Zeynep Ton

It’s time to rethink wages

For the last year or so, there’s been a significant amount of news coverage around the wages paid to low-income earners, such as those working at fast food outlets and in retail stores. There have been public protests, calls for boycotts, and legislation to raise the minimum wage in some states.

Most recently, the International Monetary Fund (IMF) urged the U.S. to raise the minimum wage. The IMF said “Increasing the minimum wage … would help raise the incomes of millions of poor, working Americans,” and that it “would be helpful from a macroeconomic point of view.”

It would be easy for business owners (or shareholders) to dismiss any discussion of raising wages as being just an altruistic effort, insisting that low wages help companies keep costs down and prices low, resulting in better profits. But that thinking is, in fact, wrong.  Continue reading

Happier employees sell more fries

The signs held by recent striking fast food employees say, “We are worth more.” They are, in fact, right. Retail employees are worth more, and paying them more can result in higher profits.

Those retailers who doubt this should take a close look at Costco, Trader Joe’s, and QuikTrip Corporation (a convenience store chain). Those firms, according to Zeynep Ton, Adjunct Associate Professor of Operations Management at MIT’s Sloan School of Management, pay their employees well—and it shows in the firms’ profits.

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Cutting staff is not a good operations strategy for retail

Retailers often resort to making HR changes in order to lower costs. They simply cut staff, which is only a temporary fix. As Zeynep Ton, Adjunct Associate Professor of Operations Management at MIT’s Sloan School of Management, commented to ABC’s “Good Morning America,” “retailers who cut staff to cut costs are succumbing to a vicious cycle, where the staff reductions result in lower customer satisfaction,” which then negates the financial gains from the initial staff cuts.

The issue of retail staff reductions and its impact on consumers has come to the forefront of consumers’ minds due to recent issues at Walmart. The New York Times detailed the issue in “Walmart Strains to Keep Aisles Stocked Fresh,” April 3, 2013, and states that some employees and industry analysts feel that Walmart “no longer has enough workers to stock its shelves properly.”

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