Paying a Living Wage Can Help Companies Survive This Pandemic

With the news out that the U.S. economy contracted by almost a third in the last quarter — marking the worst GDP report ever — at first, now does not seem to be the right time to talk about paying what labor activists call a living wage. Companies have responded to such assumptions in kind by either keep wages flat or rolling back temporary wage increases for essential workers.

But at a point when many of us are tired of being stuck at home yet fearful of returning to the shopping mall or local bar, evidence suggests that rewarding workers who are showing up to do their jobs during this emotionally taxing period could actually pay off in several ways.

A new report from Just Capital confirms what other studies have indicated all along: Paying workers a living wage can result in less absenteeism, lower turnover, and more capable and motivated workers.

Just Capital researchers recently crunched data they have on companies and separated them by comparing a batch for firms that pay a living wage versus another batch that does not.

At a basic level, a living wage is defined as pay rate that allows a worker to meet the minimum standard of living where he or she lives. A living wage for a single person with no kids in Los Angeles County, for example, is just under $31,000 a year, versus a little over $24,000 in St. Louis.

The results showed that even though countless companies in the U.S. saw their performance crater during the first several weeks of the pandemic, companies that did pay a living wage tended to perform better than those who payed lower hourly wages. The discrepancy was most notable in early April when the media was rife with stories of countless small and large companies teetering toward bankruptcy.

But as more of the U.S. reopened later in the spring, those firms committed to a living wage still outpaced their lower-paying peers. The companies in the 25 percent who paid the highest wages gained more than a 12 percent return versus those in the lower quartile, which gained an average return on that labor of just over 1 percent.

“With many workers now facing increased economic insecurity in face of the COVID pandemic, responsible companies should consider paying their workers more,” the report reads. “This would allow them to focus on their jobs, which in turn can have a positive impact on the company’s bottom line.”

Discussions about employee engagement, a hot topic just a few months ago, have largely evaporated as companies have shed large parts of their workforce, save for the countless articles suggesting how companies can keep remote workers happy.

But as Congress continues to struggle with its passage of another version of a coronavirus stimulus bill, companies — especially the large retailers that have emerged stronger over the last several months — are now in the lead position to do what they can to ensure essential workers feel protected. Part of that challenge is standing up for your employees. But at a time when many are worried about how they can pay for food and rent, a living wage offers security while providing workers with the motivation to perform well while they are on the clock. In the end, looking out for your employees now can help secure resilience for the long term.

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