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HR Practices Benefit Both Low-Wage Workers and Their Employers

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Chapter 7 - Training (HRM: Gaining a Competitive Advantage)

Chapter 7 – Training Employees (Fundamentals of HRM)

Many companies fail to recognize the importance of low-wage workers. Overall, it is estimated that low wage workers represent twenty-five percent of the labor force. Due to the shortage of workers in low paying service occupations in retail, hospitality, health care companies have tended to rely on wage increases to attract and retain these employees. Low-wage workers in these occupations hold jobs such as food service, housekeeping, nursing assistants, and cashiers. Despite their low-wages these workers are the face of the company to the customer - products and services cannot be provided without them.

Although there is a lack of consensus on the actually dollar amount that identifies a low wage worker in the US, one estimate is two-thirds or less of the median wage of workers in their prime working years or approximately $17. 00 per hour or $35,000 per year. Keep in mind that many of the workers who receive the federal minimum wage or state minimum wages would be considered low wage workers. The federal minimum wage is $7.25 per hour ($2.13 per hour for employees who can receive tips) but many states have established higher minimum wages. In many major US cities an annual wage of $35,000 is likely insufficient for workers to cover rent, food, and other living expenses.

Paying higher than minimum wage has not been able to solve labor shortages or stem the high level of turnover of employees in low-paying service occupations. Typically, companies have failed to provide these employees with the full range of HR practices that could engage them, improve their productivity, motivate them to stay rather than leave to seek a job that pays a few cents more. Rather, training, opportunities for career growth, and feedback tend to be provided for salaried workers rather than front-line employees.

Some companies are realizing that low wage workers cannot be easily replaced, are strategically important for success, and want to improve their lives. Disney has invested in upgrading the skills of their low-wage workforce. Once they have worked for Disney for 90 days hourly workers can enroll in an education program which allows them to either earn a degree, a high school diploma, or a vocational skill. Disney pays all of their tuition costs and reimburses them for fees and books. Disney’s educational partners include North Carolina Agricultural and Technical State University (a historical black college), Johnson & Wales University which focuses on culinary skills, and several colleges and universities in California (e.g., California State University, Fullerton). Over ten thousand Disney employees are participating in the educational program and over 3500 have graduated. Disney has promoted over 2500 students internally due to the skills they have acquired from these educational opportunities. The educational opportunities are also helping Disney attract talent: Twenty-five percent of job applicants for hourly positions were motivated to do so because of the availability of education, training, and career development. After the vice president of Avanzar Interior Technologies, an auto supplier, found one of his employees homeless and sleeping in the factory parking lot so he would not be late for work, he decided to take action. A survey he conducted showed that in the previous three months sixteen percent had experienced food insecurity, housing insecurity, and were unable to pay their bills. To help these employees the company has invested in mentors who are available to all employees. The mentors can coach employees on possible training options and promotion opportunities within the company.

Questions for Students

  1. Why do you think companies have not traditionally provided low-wage workers with training and growth opportunities beyond what they need to successfully perform their current job?
  2. What other training and development opportunities should Disney and Avanzar offer their employees?
  3. Should companies encourage and prepare managers to have career discussions with low-wage employees? Explain your answer.

Sources: J. Fuller & M. Raman, “The High Cost of Neglecting Low-Wage Workers”, Harvard Business Review (May-June 2023): 40-48; C. Behrens, “Ohio’s Minimum Wage to Rise in 2024”, The Columbus Dispatch (December 24, 2023): 2B; US Department of Labor, “Minimum Wage” from www.dol.gov, accessed December 24, 2023; A. Omeokwe, “Leverage Fades for Low-Wage Workers”, The Wall Street Journal (November 15, 2023): A2; “Who is the Low Wage Workforce?” (October 2, 2023) from www.workrisenetwork.org.

Note for Instructors

The 3 minute video “What low wage workers actually want” at https://www.youtube.com/watch?v=TqQnq5T1ZG8 discusses the disconnect between what managers believe about frontline low-wage workers and what these workers actually want at work.