Increasing company wage actually led to an increase in profits in the long run and decreased employee turnover.
By raising wages to the unheard of levels of $5 a day in 1914, they were able to bring employee turnover down 90%. Just previously, in earlier years, it had been close to over 300% turnover a year.
One reason why increasing the wage helped decrease employee turnover was that they had over 15,000 people apply within 2 weeks for the new wages.
Management had their pick of the best workers because of the labor pool. Also because workers knew that an able-bodied person was waiting outside the gates for their job, they didn’t complain as much, and worked hard lest they get fired and replaced.
In the end, by increasing the wage, the company actually decreased their overall cost per unit of car made because the workers were more productive and stayed in their jobs longer which helped lessen costs related to teaching new workers.
It’s just a mind blowing example of how increasing the wages can help increase profits as well. It might seem unintuitive but it works.
This might also help explain why Walmart stock just hit new record highs in November 2017 about a year after they said they were increasing their wage for all store employees.
Higher wages = Less employee turnover = reduced costs from training new employees = higher profits.
Thanks for reading,
Jack The Dreamer, over and out!
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