Living Wage: Key to maximizing morale and driving financial value

Conventional wisdom holds that businesses need to keep wages low to increase profits, but the world’s most innovative companies know that this wisdom is flawed. Transformational and innovative companies understand that their workforce is not a cost to be minimized but a strategic asset that can be leveraged to drive business value. These companies realize that their financial health depends on the health of the communities where they operate. Supporting vibrant, healthy and resilient communities enables them to build their future workforces and improve productivity, reducing production costs and increasing revenues and profits. In so doing they contribute materially to many of the Global Goals for Sustainable Development - a universal, integrated and transformative vision for a sustainable world - unanimously adopted by the 193 member countries of the UN last month.

A job does not always enable people to escape financial hardship. Low-income earners need a living wage to lift their families out of poverty, reduce their financial stress and foster healthy child development. A living wage is higher than the legal minimum wage, allowing earners in a family to meet their basic needs such as food, clothing, shelter, transportation and childcare – the actual costs of living and working in their community. People who earn a living wage have greater financial security, which enables them to invest in their family’s future, and reduces the need for parents to work long hours at multiple part-time jobs away from their children. Families supported by a living wage are therefore able to spend more time together and participate more often in community activities – benefits that promote social inclusion and directly profit local businesses.

Increasing the income of low-wage earners helps stabilize the economy and stimulate consumer spending, enabling companies to hire the skilled and reliable workers needed to make and purchase their products. Living-wage employers not only benefit from higher brand recognition and increased customer satisfaction, but also report superior work performance. Research shows that living-wage employers enjoy lower staff turnovers and lower hiring and training costs, as well as reduced absenteeism, increased employee engagement and morale, fewer disciplinary issues, and higher productivity levels.

The world’s most innovative and transformational businesses understand that their role in society has evolved. I encourage Chief People Officers seeking to create and sustain a dynamic workforce to read my Living Wage Guide which outlines the steps necessary to design and implement an effective and profitable Living Wage strategy that benefits employers and the workers and customers who live in their local communities.

Interested in more ideas on how business can contribute to the Global Goals and advance social sustainability? Check out this Guide to Business Social Value Creation to learn more about Community Hiring, Social Sourcing and Corporate Social Innovation.