Why investing in workers makes companies richer

Even if workers received a living wage, many would still be dissatisfied with their jobs.

Such would be the case with jobs that are hard, such as construction work; jobs that are dangerous, such as mining; and jobs that are boring, such as cashiering or “shelving” in a supermarket or putting a walnut on each piece of chocolate coming down the production line.

Even in the professions, such as law and teaching, there is much boring work.

The challenge facing companies is whether they can do anything to make work more interesting and “happify” their employees. Everyone has had the experience of shopping in a big-box store such as Wal-Mart or a fast-food chain like McDonald’s and seeing them staffed with many unhappy and unhelpful people.

These organisations view workers largely as a cost that must be contained. IKEA manages its 130,000 global workers using workforce management software to assign and train them in the most efficient way to keep costs down. Yet customers might experience too few people on the floor to answer questions or willing to go out of their way to help the customer.

The view is growing, however, that companies would be more profitable if they would pay their employees more and treat them better. Employees who have more job satisfaction would engage with the customers to find out what they really want.

They might even be empowered to show off merchandise and improve displays and would end up selling more goods and services, which would feed back into more employee job satisfaction. Companies such as Costco, Trader Joe’s, Nordstrom, Zappos, Lego, and others have higher employee satisfaction and outperform their competitors even though they pay more to their employees.

Consider Tony Hsieh, CEO of Zappos, whose organisation is highly successful in selling shoes online. He wants Zappos to be a happy place for his employees. Other companies have studied his methods. His consultancy, called “Delivering Happiness at Work,” consists of a three-day boot camp to teach companies to become more successful through the science of happiness.

Paul Zak, a neuroscience researcher, has proposed that employees who have trust in their organisation and see a higher purpose to their work will experience more joy (Trust × Purpose = Joy). His research team has found evidence that confirms happy employees are more productive, are more innovative, and contribute more to the bottom line of companies.

Tony hsieh zappos ceoGetty Images/Ethan MillerZappos CEO Tony Hsieh.

Similar findings have been reported by Zeynep Ton, an MIT business professor, who said that “contrary to conventional corporate thinking, treating retail workers much better may make everyone (including their employers) much richer.”

Some progressive companies go even further and want to invest in enhancing their employees’ healthful living. In the United States, workplace wellness is a $US6 billion industry. Companies offer programs to improve the health and well-being of their employees in the hope that it will increase their productivity, reduce their risk of costly chronic -diseases, and improve their control of chronic conditions.

Company wellness programs have two parts: lifestyle management and disease management. The lifestyle management program tries to help employees eat healthier foods, give up smoking, and exercise regularly to avoid obesity, diabetes, cancer, hypertension, and other health problems.

The disease management program helps employees with a chronic disease take better care of themselves by reminding them to take their prescribed medications and not miss lab tests or doctor’s appointments. Many of these programs have yielded a better life to employees and a financially sound return to the companies.

One additional factor in job satisfaction is paid vacations and holidays. “All work and no play” is a prescription for disaster. A report about working hours in China carried the headline that Chinese workers are dying on the job from overwork.

Workers deserve and need vacation time to renew their energy and outlook. The United States is the only wealthy economy that does not require employers to provide paid vacation time or paid holidays. One in four Americans do not receive any paid vacation or paid holidays. In contrast, most advanced countries provide both paid holidays in addition to paid vacation days.

For example, the European Union legally guarantees workers at least twenty paid vacation days per year, and workers also get between five and thirteen paid holidays a year. The lack of paid vacation and paid holidays in the United States falls especially hard on low-wage workers, part-time workers, and employees of small businesses.


Under capitalism, businesses operate to make a profit that will yield a good return to the owners or investors. Businesses need to keep their costs down, especially their labour costs. If there is an oversupply of labour, businesses will take advantage by setting the lowest wages possible, whether or not they constitute a living wage.

This leads workers in many cases to organise into unions to press for better pay and enlist government support to legislate a minimum wage. Businesses originally fought against these unions and blocked unions from organising, sometimes even with police support and violence. But unions and collective bargaining began to prevail in many countries.

Unfortunately, there is a suspicion on the part of some workers that unions have become self-serving and have not effectively raised workers’ incomes. In the United States, unions are weak today, which raises the question of why so many workers in manufacturing and service industries refuse to unionize.

One test of workers’ willingness to unionize occurred in early 2014, with a workers’ vote at a Volkswagen factory in Tennessee. The workers voted 712 to 626 against joining the United Auto Workers (UAW), marking another defeat for the union movement.

There is little doubt that the union movement helped workers earn higher wages and benefits and raise their standard of living. Worker exploitation is at a lower level today than in the past in most advanced economies. Raising minimum wages is one tool for increasing the pay of the most unskilled workers.

Some economists have also talked about other alternatives such as a guaranteed minimum income, refundable tax credits, or co-determination solutions between management and labour.

Excerpted from Confronting Capitalism: Real Solutions for a Troubled Economic System by Philip Kotler. All rights reserved. Published by AMACOM Books.

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