Photo: Big Lots
Will a higher minimum wage translate to better service levels?
Through a special arrangement, what follows is a summary of an article from COLLOQUY, provider of loyalty marketing publishing, education and research since 1990.
Nearly six out of 10 American consumers say they are justified in expecting better service to accompany a minimum wage hike to $15 an hour. But an even greater number, seven out of 10, doubt they’ll get it.
A COLLOQUY survey of 1,500 consumers asked if they would expect better customer service and a better overall experience if the minimum wage were raised to $15 an hour. The current federal minimum wage is $7.25 an hour.
Here are some key results:
- 59 percent of all respondents said they are justified in expecting to receive better service and a better overall experience with a $15 an hour minimum wage;
- 69 percent of all respondents said they don’t believe they would receive better service or have a better overall experience;
- 71 percent of men said they don’t believe they would receive better service, versus 66 percent of women;
- 66 percent of young Millennials in the 18-24 age group said they are justified in expecting better service, versus 59 percent in the same age group who said they would not receive it.
- 60 percent of older Millennials in the 25-34 age group said they are justified in expecting better service, versus 69 percent who said they would not receive it.
Raising the minimum wage is a front-burner controversy. President-elect Donald Trump’s choice for labor secretary, restaurant executive Andrew Puzder, is a critic of significantly raising the minimum wage.
“The minimum wage issue is of keen interest to marketers who believe in the power of the front-line employee to engage the customer and create an experience that sets a brand apart from competitors,” COLLOQUY Editor-in-Chief Jeff Berry said. “Brands may see an opportunity to surprise and delight customers based on the skepticism shown by so many in the survey about actually receiving better service.”
Discussion Questions
Discussion questions: Should consumers be skeptical that higher minimum wages will help improve in-store service levels? What other factors are equally as important in supporting service levels?
Poll
BrainTrust
Adrian Weidmann
Managing Director, StoreStream Metrics, LLC
Nikki Baird
VP of Strategy, Aptos
I think Walmart has already demonstrated that raising the base pay of the in-store work force does indeed improve service. So does treating workers like human beings. And actually spending time training them.
Here’s the thing: retailers must do something to improve the in-store experience. Otherwise they’re going to find their stores are ghost towns. Who needs the grief? So it’s time to get on with it — experimenting and tweaking and re-visioning what the experience is supposed to be.
The incoming administration may be opposed to legislating it, but that administration will also not be able to legislate shoppers to enter stores where the help is indifferent or worse.
Paula, I agree with several of your points. Service would indeed improve if only because a more qualified, enthusiastic pool of employees would be attracted to retail. And, many retailers would stand a better chance of long term survival. But, a significant minimum wage hike is DOA with the new administration, for four to eight years.
A higher minimum wage will not guarantee better service, and so consumer skepticism is understandable. However, I believe that an increase in the minimum wage will enable employers to expect more from their employees, including delivering a better in-store experience. Also, with higher wages, employers should be able to attract more engaged and productive employees.
While higher wages help, other factors like benefits, work-life balance and corporate culture play a significant role in employee engagement, which I believe directly impacts service levels.
Associates that interact with consumers will be higher-level associates but many companies will be forced to lay off employees, or at the very least schedule part-timers much less, to recoup their losses. This means that employees on the floor will have too many demands on their time to provide the exemplary customer service so many of us are banking on.
Keeping enough associates on the floor is as important to service levels as the minimum wage hike. Retail stores will retain better employees, but those employees may be doing double the work.
The quality of in-store service has been and will continue to be a function of the individual and not about what they are getting paid. The integrity and personality of the in-store associate are by far the values that make for the best service and the best brand ambassadors. These are the individuals who earn it and deserve to be paid fairly for their efforts and their value to the brand.
Retailers need to identify, reward and empower these individuals as they are priceless to their brand. Retailers should listen to these folks to understand them and provide them with the tools and trust to enhance their service to today’s digitally empowered shoppers.
I kind of agree here … But let me tweak your opening thought to: “The quality of in-store service has been and will continue to be a function of the individual AND WHETHER THE RETAILER DOES A GOOD JOB OF RECOGNIZING THEIR GOOD WORK and not about what they are getting paid.”
Feeling appreciated for doing the right things is quite often most critical. What concerns me in that statement is it isolates the employee from how they exist within the retailer. How they exist within the retailer is far and away what’s most critical — and many retailers fail badly these days with constant metric ranking, allowing consumer dissatisfaction to filter too quickly to the employee, etc.
Raising the minimum wage will not automatically raise customer service. Customer service depends upon employee knowledge, training and feeling valued. The increase in the minimum wage may help but not if employers were forced and grumble about it. It will also not help if employers cut back on training.
Increasing the joy of having a job, and therefore protecting it, is indeed a performance motivator. But as research shows, people resign primarily when they don’t see themselves as fitting well into the team. A sense of community in the workplace can go further than payroll in inspiring employees to better service … it is, after all, a team effort.
Yes, they should be skeptical. I’m not expecting any improvement in service at my McDonald’s because they are making more money. I might get better service when employees have to start competing for jobs. There are only two ways to absorb a doubling of wages — hike your product prices or cut staff. In many places, cutting staff will be the first option. Smart employers will come up with mechanisms for customers to give applause to great employees, who will move up the food chain.
Happy workers make for happier stores, which should make customers happier. Whether or not people want better service, employees deserve a living wage. As the article says, retailers have a great opportunity to surprise consumers with better customer service. And better customer service begins with happier employees.
The goal of the minimum wage increase is to provide higher wages, not better service. So it seems unrealistic to expect better store service if the only variable that has changed is the minimum wage. Employees, training, technology, etc. all remain the same. In fact, given that each store has a labor budget, I would expect a reduction in staffing levels would be required in order to meet the budget with the outcome being potentially worse customer service.
A minimum wage is just that, a minimum wage. You can’t go below it. That means that everyone who applies for the job knows that is where they will start. It’s expected. Now tell me, how does that equate to better service? OK, wait a minute before you ding me. On day one, this wage will be a lot higher than the current minimum wage so perhaps we will see some gratitude and improved service levels. But let’s not get stuck on day one. That day will come and go and we will be back to that being just the starting day wage. The better service levels are more likely to be seen when people are rewarded and respected.
Let’s also not put all our eggs in the basket of the service level of staff. It’s time for retail to be seriously looking at improving the customer experience all around. Finding more and better ways to serve before (and after) you sell.
For my 2 cents.
Last Saturday, on what is expected to be the highest in-store traffic day of the season outside of December 26th, I stood in a line 20-people long at a retailer who had six cash registers and only three of them staffed. And then I went to a department store that had only one of the three registers in the men’s department staffed, and a line eight-people long. I actually abandoned my intended purchases at the department store because number two in line ended up in a “Who’s on First?” exchange about making a payment on their store-brand credit account that had me about ready to commit physical violence. I stood in that line for 20 minutes, and the beleaguered cashier didn’t have anyone to call, and no one came to help him out.
So I look at that experience — where the labor is relatively cheap since a higher minimum wage has not kicked in yet in a lot of states and on a day when you would think retailers would want to capture as many sales as humanly possible — and yet, retailers were still not staffing at a level that makes any kind of sense, given the day and the season.
It makes me ask myself: when labor is even more expensive, will that really incent retailers to use it wisely? Or will they just become even more irrational about labor and cut it back even more? Why bother being open at all, if you’re not going to staff? Just shut your doors and let Amazon win …
The minimum wage is not about service. It is simply a minimum wage. Its objective does not include “better service.” But as it pushes wages at the low end up, it may make for greater retention and happier workers. Those two elements do translate into “better service.”
Gene, I couldn’t agree more on the purpose of the minimum wage. It is not about service or anything else to do with the business. It is about the employees. What I’m not so sure about is the idea that ” … those two elements do translate into ‘better service’.” That sounds more like a rationalization of a social change decision.
You are correct. I should have said, “better pay leads to greater retention and happier workers. Those two elements do translate into ‘better service.’”
The answer is pretty simple, which is NO. We can discuss all we want what the minimum wage should be, and say that retailers need to provide a living wage, unpaid leave, safe zones and bonuses, but in the end there are only so many top quality employees in every company, and they always rise to the top.
If all of these benefits are mandated to provide for all your employees, there will be job losses, and a strain on many small businesses that simply can not stay in business. The reasons for this are obvious — a stagnating economy where growth is about zero, healthcare costs, e-commerce and a throng of unskilled employees who also lack a work ethic.
You can mandate all of these wonderful perks, but there will always be employees who won’t bust their butt for $30 hour and that is simply the truth.
Customer service is a problem everywhere, it is going to get worse for some stores that can not find the right workers to fill the positions needed to actually improve service, because they have moved on to bigger things. I specifically hire workers that can smile and engage with my customers, but if I have to start them at $15 an hour, even I will have to cut hours in order to stay in business, as there is simply a bad economy in my area.
Just staying in business will become a huge challenge for many, and the big boys along with e-commerce will take over. I hope I am wrong, but we’ll see how this all shakes out.
I totally agree with Jasmine Glasheen’s assessment of this situation. Doubling the base wages for typically a majority of employees will crush the profit potential of many retailers, large and small. While this aspect is conveniently ignored by the media, and with labor being a retailer’s largest controllable expense beyond the COGS, I believe it is unreasonable to expect much positive sentiment at the staff level from which shoppers will get any benefit.
Retailers will end up with fewer employees but better ones. From what I see the real minimum wage has been set by the market someplace in the $10 to $13 range. A higher minimum wage would mean retailers need to take a serious look at who they will keep and who will be sent home. No business can afford to pay an $8 an hour worker $15. Fewer workers but better workers would probably be a zero sum game. The “keepers” might get overworked.
No.
Why do we keep asking this same question? Abraham Maslow taught us in Business Psych 101 that money is a motivator only as a means to an end. The more important that end to the individual (e.g., for a fundamental need like food and shelter) the more money motivates — but only until that end is achieved. In today’s U.S. we have removed the need for money to achieve basic (hey, I said BASIC) food, shelter and medical care. So we move to the higher levels — where money becomes a motivator again when we have a higher need which will be, by definition, less “pressing” than food and shelter. And then it isn’t again.
The important distinction in this theory for the purposes of this discussion is that the “motivator” in money is all about filling one’s own needs. Not in making other people feel happy with their retail experience. If one of my motivators is to make customers happy with their time in my store I don’t need more money to do that. And if it isn’t, more money WON’T make me do that.
Treating people as human beings always helps raise service levels but, that said, there is no reason to expect that a raise in the minimum wage will automatically result in dramatically higher service levels. And if costs rise along with wages, we are all back where we started.
I agree. If we started paying minor league baseball players a million dollars a year would they suddenly improve? I doubt it.
As a hiring manager, if you pretty much have to take anyone who applies because the wage does not attract many candidates then your customer service with suffer. If you have a larger pool of applicants you will have better options to choose from. Employees are likely to be more engaged and willing to grow in their positions. It will also empower managers to enforce standards, knowing that if an employee won’t or can’t meet them there are others who can be hired to replace them. Desperation in hiring leads to poor customer service.
While I generally favor upping the minimum wage (and paid sick leave) on moral grounds to keep pace with costs of living, the present round of increases seems to present a shock to the system. Small businesses, in particular, are bracing for the worst.
Yesterday I attended a briefing for members of the Arizona Restaurant Association where nearly every operator in the room was anticipating staff reductions and price increases in response.
Large companies will likely make similar moves. Headcount reductions (even if accomplished stealthily by attrition) will ultimately reduce service levels in stores. I’d anticipate cuts in hours and shifts for many of the workers who are retained. Not likely to leave them more motivated.
So, no. I don’t think customer service experiences will improve by causing wages rise to a more dignified level. Retailers who set service quality as a goal will have to do it the old-fashioned ways: train, enable, empower, monitor.
When it comes to customer service, it’s the practice that counts, not the pay.
Better service will only come with better qualified and better trained employees at the higher wage. Maintain the status quo and you will get higher prices and less satisfied customers.
I don’t think that consumers care one way or the other what people are paid when it comes to service. They just want good service. However, if you make a big deal about employees getting paid more and consumers getting better service, I would imagine there would be skepticism. Furthermore, as the old saying goes, you can put lipstick on a pig, but it’s still a pig. Just paying someone more, especially if its a mandated minimum, doesn’t guarantee good service. It takes hiring the right people and training them.
I believe that raising the minimum wage to $15 an hour will increase in-store service levels by the employees getting the raise. However, in-store service overall will deteriorate because there will be fewer employees. Retailers, as well as all other employers, will reduce the labor force or install robots to defray the increased pay per hour. Sadly, that is just the way it is.
Consumers might expect improved customer service from higher paid associates, but they will never get it. They expect it because they will be paying higher prices in order to pay for the associates’ pay increase. Hiring the right people (associates that like people for instance), motivating them, training them, and then supporting associates are the keys, not just pay. Retail was the first job for many people. You learn the fundamentals, arrive on time, take direction, etc.
Paying $15 for retail associates is like paying $35 for a factory worker. The problem is that the skill set is not there. So there will be no customer service improvement, only higher prices which will drive consumers more to online shopping.
Raising wages will not guarantee better service. What will guarantee improved service is better associate selection and training.
Offering better wages along with a well structured selection and training program will definitely help attract people who will look at retail as a career rather than a stepping stone or side job.
I am late to comment on this and I am wondering if any one will read the 26 other comments before they even get to mine. PS: I think this item has gotten more comments than almost any other post in the last year.
Now here is my take:
service loop.
I read your comment, Mel!
I agree with the surveys. There’s a difference between an increase given voluntarily, and one given by fiat. The former usually comes from a company that understands the connection between pay and performance, while the latter is given out to people who can’t get other jobs by companies who can’t get other employees. It’s hardly surprising that if the increases are mostly in the second group, not much will come from them.
Great discussion here. And I thoroughly agree that wages are only a portion of what’s critical. In fact, I hear from employees incredible frustration with how bureaucratically they are managed — punished with irresponsible surveys, etc.
Retailers should take care, though, in how they respond to a minimum wage increase. They have the opportunity to thoroughly enrage their workers if they make a major “sour grapes” public issue of opposing any change. Because what’s critical to service is having motivated employees. And, regardless of opinion about laws, companies choosing to oppose laws (ones that might not be right) often quite publicly tell employees that they aren’t valued. And that will backfire far more than they might expect.
Hi Doug. For me it isn’t about the sour grapes, rather it is about the mandates that act as if small business is supposed to pay much higher starting wages, along with a host of other mandates, that will leave us with little or worse, negative profits at the end of the year.
I have run the numbers on $12 hour minimum, and called many store owners on their thoughts. Results of this unscientific survey were not good, and many said it could put them into zero profitability or worse. The main reason is not the $12 hour, but the spiraling effect of your higher paid people who are going to demand increases to keep that separation between the new minimum, and what they now expect. That’s the profit killer.
Government never uses common sense, and this is the most burdensome problem for all of us. Add in more payroll, and fica taxes, and there will be suffering in the small business community for sure. I will no longer hire any young kids at these wages, as senior citizens will be looking for work, and would gladly take the $12 hour to supplement their incomes, and I will hire them instead, as they have actual work experience.
Do I sound old, and bitter? I am not. Finding ways to stay profitable are already difficult, with razor thin margins as they are now in my industry. You simply cannot raise prices to off set this, as the big box stores will wait it out and see some store closures, before they increase their prices, which they will.
Let’s see what our new leaders think about this, and hopefully we can make changes that actually help business, not cripple them.
Raising the minimum wage will change nothing. Retail workers are like baseball players or race horses. They are all divided up into different classes. Companies that routinely pay over $20 an hour get the best workers. The rest are looking for warm bodies to cycle through their system.
The market should set wages based on supply and demand. Not the government mandating a minimum wage. I was in Seattle recently at a grocery store. Their minimum wage was significantly higher than the norm. At the same time homeless go begging out in front of the store. The grocery store would love to hire people at a high wage but only if they have enough class to be worth it. When I see someone at Costco making $20 a hour I see someone who is underpaid. When I see someone at Walmart making $10 a hour I see someone who is overpaid.