One hundred and thirty thousand new American jobs. That’s the impact Jeff Bezos and Amazon have had on the American labor market last year alone. Yet a cursory glance of headlines and tweets from politicians and labor progressives would have you believe that there is no greater enemy of the labor cause than the billionaire job-creator himself.
The narrative has attracted strange bedfellows to the same side of an argument where members of opposite parties such as Senator Bernie Sanders and Tucker Carlson are both intent on scoring political points by dunking on Amazon and its founder in the last month. Yet this is totally normal this time of year. Every year around Labor Day, there is a national moment of reflection and labor commentary from across the political spectrum, much like the Bezos villification.
American workers, however, should be disappointed in both political and union leadership and advocacy. Pushing a zero-sum message that has already yielded defensive corporate responses is a losing strategy especially in the current market conditions.
With an incredibly low unemployment rate and over 6.7 million unfilled jobs, it’s easy to conclude that the labor market is incredibly tight, and that it should be a worker’s market where demand for them is sky high and wages are going up. Unfortunately, that’s where the narrative breaks down as wages have remained relatively stagnant over the last few years despite a market-held belief of tightening labor supply, only recently starting to show some upward movement.
Given these facts and a consensus corporate narrative echoing the difficulty of finding qualified workers – it is the best time to make a compelling business case for raising wages for workers across industries impacted by labor shortages like retail, hospitality, medicine, construction, and more.
Yet the advocacy from politicians and labor groups has fallen far short of that, resorting to the tired old tactics of virtue signaling and corporate shaming from a self-erected higher moral platform.
If you step back and evaluate the public arguments in the context of convincing someone to do something – how often does one get what they want by insulting someone or attempting to shame someone by establishing them as morally inferior?
The language of business is money – the arguments should be less pedantic and much more about the dollars and cents, following a very simple message that every politician and labor group can rally behind especially for low paying jobs:
Companies should raise wages because it will save them money
Seemingly counterintuitive, a tight labor market is the best environment in which to prove out this business case. Doing so requires encouraging employers to shift mindset from viewing labor costs as distinct costs of labor acquisition and management to instead viewing their integrated labor costs as a part of a broader Total Cost of Employership.
The argument is simple – higher wages help you acquire and retain better workers. A total cost perspective takes into account a series of costs that are part of the value chain including the cost of acquisition, training, management, staffing company expenditures, over-time spend, and the churn rate percentage which ultimately drives the frequency of all of those costs.
In more competitive labor markets where workers have optionality on open roles and relative wage stagnancy, increasing wages can be transformed into a massive recruiting advantage that will help lower aggregate costs associated with labor that are harder to track and therefore have been easier to accept without pause. Workers that are paid more by an employer than other similar employers in a market will be more loyal to their jobs, less likely to no-show shifts, and generally have a larger incentive to do better work. These efficiencies translate to clear savings by helping reduce costs across the total labor value chain. By increasing wages and retaining more workers, there is downward pressure on the costs of labor management that have high frequency because of how often workers churn out of their role (e.g. cost of acquisition, onboarding, recruiter salaries, etc.)
Outside of hard labor costs – there is a massive operational and customer service advantage to labor continuity driven through higher wages as well. Take a restaurant for example – it is uncontroversial to assert that a longer tenured staff can offer a better front-line customer experience, have a less chaotic back-of-house, and ultimately yield better top-line growth by delivering a better experience for the end customer.
The bottom line is this: advocacy groups and politicians have tried for too long to make a moral or compassion-driven arguments for raising wages. The current labor environment and economy have created a perfect condition to switch the narrative and instead channel the core message to why it will ultimately benefit the employer from a financial standpoint.
Making the message to resonate with the bottom-line of a corporation is the best way to advocate on behalf of the worker – it actually has the possibility to line their wallets with money rather than simply more moral outrage.