This article proposes the idea that consumers will prefer to purchase products where the workers are paid more than competing products where workers are paid less. Companies are incentivized to advertise the lowest paid employee’s wages on the product to inform the consumer by the prospect of an increased share of the market. Wage increases can be realized and a greater share of the market achieved without compromising profit margins by passing a small cost to the consumer. The presumption is the consumer is willing to pay more for a product if they know the extra they are paying is helping people support their families. Companies can either promote their brand by paying higher wages and make more money, or they can continue on their present trajectory making less money than they could be making.
The current labor market depends on how much people are being paid for a particular position in a certain area. Regardless of how much money a company makes it is not going to pay employees more if the people are willing to work for the amount presently paid for that position. In some areas McDonalds employees start at 13 dollars per hour and at other locations Mc Donald’s employees start at 9.50 an hour. In one area people are willing to work for 9.50 and in another area typically where the cost of living is higher people are not. Of course in the two locations the tasks are the same, the prices are the same, and the volume of customers is the same; which means the profits at the location where employees are earning less is enough to sustain a crew making more money.
Using the same example, why doesn’t a company like Mc Donald’s who often advertises its starting wages on location through its recruitment effort benefit from consumer choice?
The first reason is because the advertisement is for recruitment purposes and the consumer makes no association with how their patronage contributes to the livelihoods of the employees of the establishment. The consumer also recognizes that the wages offered at these locations are probably comparable to other fast food establishments which eliminates any incentive to support living wages through consumer choice. A banner advertisement that our lowest paid employee earns a living wage of x amount of dollars per hour creates the connection if it is perceived as a wage that is both adequate and different from what is being offered at other similar service establishments.
The second reason is the wages they pay are not high enough for the consumer to be proud of themselves for purchasing a product that provides people with a substantial amount of time or money.
Another reason is the consumer isn’t putting forth any effort. Suppose the McDonald’s advertised they were paying their employees 18 dollars per hour and applied a 5% price increase to cover that cost. A consumer who lived near this Mcdonald’s may pass other locations on their way home to pay higher prices at this location, because they know their choice is supporting higher incomes and a better quality of life.
Of course no one feels like eating Mcdonalds all the time so while the impact should still be substantial, the fast food industry is not as great as the potential for other industries and products. Fast food service employees would probably benefit more from a round up or gratuity option than an advertised LPE.
Other products have much a greater potential. For example, if a person is purchasing laundry detergent and each container of detergent contains a Lowest Paid Employee rating, if the consumer finds the quality of many of the products is similar can choose to purchase the product that best compensates its employees. The consumer will suspect that those manufacturers who do not include the LPE on the packaging do so to not disadvantage themselves in the market.
A company whose manufacturing plant is located in an area with a lower cost of living will tend to have lower paid employees, since people in such an area are willing to work for less than in other areas. Companies who are taking advantage of low wage markets should be able to compete against companies in higher wage markets since the higher wage market companies are presently competing. This is why a company’s manufacturing location and the associated cost of living is not relevant. The goal is to raise people’s quality of life by ensuring people are properly compensated for their productive efforts.
An individual’s quality of life is typically determined by their opportunities to have money and time.
Proper compensation is an income that comfortably exceeds an individual’s expenses including emotional upkeep and allows for accumulation.
One theoretical consequence of promoting products by advertising the LPE wage is the seeming inevitability of companies increasing wages competitively to sell their products.
The benefit versus the cost of increasing wages will be learned fairly rapidly. Companies will know the value of increasing wages as a tool to win over the consumer. One company in an industry may advertise an LPE of 15 dollars an hour. They’ll probably see an increase in sales before their competitors advertise an LPE of 15 dollars per hour. There will be an advantage, followed by a leveling, not a tit for tat, where my competitor advertises an LPE of 15 so we increase our price to maintain profit and advertise an LPE of 16. Depending on the benefit there could be some of this which benefits the workers, but eventually there will be a leveling, when the cost exceeds the price the consumer is willing to pay even for the good feeling they get from supporting higher wages.
LPE wage disclosure promotion can be regulated by the Federal Trade Commission to ensure the wages companies are using to promote their products are actually being paid to workers.
LPE wage disclosure will begin with a single company creating a marketing campaign around disclosing the wages of their lowest paid employee. If we’re really concerned with people’s quality of life, we’re concerned about their opportunities to make money and this effort can contribute to higher incomes for workers, greater profits for companies, and become a catalyst for economic growth as a consumer who is empowered through higher wages will consume more, and the market will produce a greater amount of goods and services,
The lowest paid employee should be the standard because averages, medians and income ranking percentiles do not illustrate the quality of life that the company guarantees its employees. Averages can be inflated by the high wages of a few which can suggest employees are well compensated while hiding trapping wages. A median wage can hide low wages even more effectively since we don’t know how steep and how deep the drop off is from the middle. Income ranking percentiles would have to rely on an average, and most people do not know what percentile earns how much and whether or not the wage is livable. LPE should be the standard.
I do have a strategy for a campaign to begin the promotion of the idea. Unfortunately I do not have the time, resources, or personnel to begin it.