Correlations Betwen Wage and Retention

Goals

The goal is to determine how the retention, happiness, and productivity of blue-collar or skilled employees in trade industries each relate to average industry wages and above-average industry wages. The information, which ideally would include case studies and graphs or charts, will be used to educate clients on the importance of team retention.

Early Findings

  • Industrial staffing company EmployBridge studied 200 logistics and manufacturing companies and found that increases in hourly wage were "very likely to significantly reduce turnover, improve attendance and enhance productivity."
  • EmployBridge also found that results were most pronounced when the hourly wage was increased by at least $1.
  • According to the Center for American Progress, the cost of losing a skilled or blue-collar worker who earns $14 per hour is $4,569, an amount that could be used to give this same employee an hourly wage increase of $2.24 for a whole year.
  • Gusto, a human resources and benefits specialist, also found that turnover rate is strongly linked to hourly wage thresholds. Based on a study conducted by this company, the rate of employee turnover at small businesses decreases sharply as the hourly wage increases, and plateaus once the hourly wage reaches $15.
  • Gusto found that small businesses with employees earning a minimum hourly wage of $7.25 have a 70% turnover rate, a rate that is more than twice the average employee turnover rate of 32%.
  • As can be seen in this chart, the turnover rate drops to 41% when the hourly wage is $15, to 31% when the hourly wage is $25, and to 22% when the hourly wage is $60.
  • It appears, however, that above-average industry wages do not necessarily translate to high employee retention. Amazon still suffers a very high turnover rate despite paying its employees a minimum hourly wage of at least $15, which is far higher than the minimum hourly wage offered in several parts of the country.
  • Amazon's turnover rate during this COVID-19 crisis reportedly reached 111%.
  • According to Steve Banker, the vice president of ARC Advisory Group for supply chain management, this rate is alarmingly high. Only 4% of over 100 supply chain executives surveyed by ARC Advisory Group reported a turnover rate of more than 50%.
  • Banker shared that "in addition to paying at least 50% above minimum wage and operating clean, well-lit warehouses, companies with the lowest turnover tended to have the best management practices."
  • According to an article published by The New York Times, modest wage increases have a significant impact on the well-being and happiness of hourly employees.

Learnings from Early Findings

  • While there appears to be adequate information on the relationship between wages and employee retention, productivity, and happiness, the amount of information available in the public domain does not warrant separate investigations into the following relationships: average wage vs. employee retention, average wage vs. employee productivity, average wage vs. employee happiness, above-average wage vs. employee retention, above-average wage vs. employee productivity, and above-average wage vs. employee happiness.
  • We believe the best path forward is to look at how the following variables change as the hourly wage of blue-collar, skilled, or hourly employees increases: employee retention, employee productivity, and employee happiness.
  • Case studies could not be easily located in the public domain, but we believe 2-3 case studies could be provided if we are given more time to look for them.

Proposed next steps:

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