March 26th, 2013
This Atlantic piece on Trader Joe’s and the importance of paying high wages to retail employees isn’t the dumbest thing ever written on the subject. But it’s not the smartest, either. Sample analysis:
Keeping shelves stocked and helping customers find merchandise are key to maximizing sales, and it takes human judgment and people skills to execute those tasks effectively. To see what happens when workers are devalued, look no further than Borders or Circuit City. Both big-box retailers saw sales plummet after staff cutbacks, and both ultimately went bankrupt.
Yup, Borders and Circuit City went bankrupt because they didn’t pay Costco-level wages. There wasn’t anything else happening in their space AMAZONAMAZONAMAZON which disrupted their business models. Come to think of it, low wages are probably what killed Blockbuster, too.
You may recall that Megan McArdle wrote about employee wages and the Costco vs. Wal-Mart question last year. It’s so smart, actually, that it makes you wonder how the Atlantic could even run its piece.
Why Dorothy, you’ve had the power to solve inequality all along, just click your heels three times and say “Efficiency wage, efficiency wage, efficiency wage.”*
* It helps if you don’t actually understand the micro-mechanisms of efficiency wage models, almost all of which are premised on a wage differential and so only work if the efficiency wage is a relatively rare strategy.
JVL wrote, “It’s so smart, actually, that it makes you wonder how the Atlantic could even run its piece.”
Unfortunately, because some readers can read McArdle’s smart piece and then write in the comments:
“This piece – determined to create a smoke screen for Walmart – misses the point. Costco chooses, yes, chooses to pay its employees much better than Walmart. They could easily pay far less and have no problem finding hungry employees. Walmart is destoying the middle-class.”
One of the big problems with dumb is that it reads smart & doesn’t see smart, it sees, “mean meanies.”
Jonathan you are one of my favorite columnists (Your take on the marriage wars now currently before us has not been bettered.). That said I think that Atlantic article was on to something. She’s talking about placing value on employees as a way to help some businesses. I take her point. And she does glance at the Amazon phenomenon:
“As global competition increases and cheap, convenient commerce finds a natural home online, the most successful companies may be those that focus on delivering a better customer experience.”
If this is working for TJ’s and Costco, more power to them.
I agree… power to TJ and Costco. My experience in the working world has lead me to the conclusion that employers often overlook the benefits of investing in their employees.
That said, what works for TJ’s and Costco works in part because it allows Costco to (a) recruit the best employees and (b) not have to worry about them leaving for a higher paying job elsewhere. Which then allows them to invest in the employees.
The more employers emulate this model, the less effective it becomes. In short, it’s effective in part because so few companies are doing it.
Trader Joe’s is for people who have more money than sense. Much like Whole Foods. Exploiting the rich for being stupid.
It works wonderfully.
I’m certainly not rich, and probably not stupid, and I shop at Trader Joe’s for certain items. They have some pretty good items (frozen foods, nuts, cookies) and the prices are pretty comparable to grocery stores.
Whole Foods, on the other hand, I’ve never really understood – unlike TJ’s, which sells mostly their own brand of products, most of the stuff at Whole Paycheck is brands I could get elsewhere, only at higher prices.
The Atlantic does not even pay its writers.
writing for exposure does not pay my rent.
Since Megan McArdle left I rarely check out the Atlantic (maybe Jeff Goldberg occasionally). All the other writers seem to be just liberals who hold conventional elite opinions.
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