The Return of Fair Pay? – The New Yorker
If you pay people better, they are more likely to stay, which saves money; job turnover was costing Aetna a hundred and twenty million dollars a year. Better-paid employees tend to work harder, too. The most famous example in business history is Henry Ford’s decision, in 1914, to start paying his workers the then handsome sum of five dollars a day. … Once Ford started paying better, job turnover and absenteeism plummeted, and productivity and profits rose.
What likely isn’t figured into Aetna’s $1.2M annual losses in turnover is this: when one worker trains another, between the two, you don’t get the full benefit of a single, already-trained worker able to perform his or her tasks without interruption.
In essence, you’re paying two people to do the work of less than one.
Many people have heard this and more about the hidden turnover costs from me back in the 80’s, when they called me in to consult. I had had great teachers on such matters, including a no nonsense guy at SCORE that knew what’s what: Greed is not good; it’s gauche and it’s stupid. Very stupid.
Proof? Another of Ford’s motivators in raising wages was to ensure that his workers could afford to buy his autos. He recovered every last dime of the hikes: Win/win and smart. Very smart.