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Minimum wages = maximum profits? Zeynep Ton says no.

Almost one in four working adults in America has a job that pays less than a living wage.

In large part, the situation persists because the corporate marketplace has long labored under the conventional wisdom that paying the lowest echelon of workers minimum wages is a bottom-line necessity. But is that economic truth or myth? Are low wages, minimal benefits, and inhumane schedules the most prudent way to keep costs down and prices low?

ZeynepTon.mitsloan.mit.eduAbsolutely not, says MIT Sloan associate professor Zeynep Ton. In her influential book The Good Jobs Strategy Ton contends that stranding employees in low-paying dead-end jobs is an organization’s choice, not a necessity—even in low-revenue settings. She has dubbed it “the bad jobs strategy.”

Ton draws on more than a decade of research to show how operational excellence makes it possible for companies to of­fer low prices to customers and superior results to their investors while still paying their employees a living wage. She points to four model retailers—Costco, Merca­dona, Trader Joe’s, and QuikTrip—to illustrate how investing in workers has a positive impact on the bottom line. All four companies have parlayed a generous investment in personnel into lower costs, higher profits, and greater customer sat­isfaction.

The “bad jobs strategy” fails us all

Ton notes that in service industries, succeeding at the expense of employees turns out to be success at the expense of customers. “If employees can’t do their work properly, they can’t provide good customer service. That’s why our experiences with restaurants, airlines, hotels, hospitals, call centers, and retail stores are often disappointing, frustrating, and needlessly time-consuming. Many people in the business world assume that bad jobs are necessary to keep costs down and prices low.”

zton_bookThe Good Jobs Strategy asks tough and sometimes counter-intuitive questions. How can offering fewer products increase customer satisfaction? Why would having more employees than you need reduce costs and boost profits? How can employees simultaneously standardize work and empower employees? By helping business leaders sort through such issues, Ton provides an invaluable blueprint for any organization aiming for a sustainable competitive strategy in which everyone—employees, customers, and investors—wins.

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