For me, a living wage has nothing to do with government mandates or research regarding minimum wages, fair wages, the poverty line, or even the economic needs of the region.

Instead, as small business owners, I believe that we are obligated to pay an employee what they need to provide for their family.  And further, if I am unable to pay this living wage, I have a similar obligation NOT to hire them.
I know that many small businesses struggle to retain employees in a competitive market, yet I believe that minimum wages or even fair wages have no place in the discussion. I recommend that instead, my clients pay this living wage to their employees.  In my opinion, this compensation strategy should be part of a successful long-term business strategy.

I can hear the collective gasp (I know that this approach is not necessarily popular opinion), but bear with me.  Many of you are thinking it is the employees’ responsibility to manage their household budget, and to a large extent, that is true.  Yet, if I offer to pay someone less than what it takes to provide for their family, I likely invite one of the following scenarios, none of which are good for business:

  1. Short term employment:  employees who cannot afford to work for you will only work for you while they find a better job.  You have rented them instead of hired them.
  2. Employee takes a second job:  to make ends meet, the employee takes on a second job, and often productivity and efficiency suffer.  Those additional hours spent in the employee of someone else could mean tardiness, absenteeism, and mistakes.
  3. Attitude problems:  because the employee might feel resentful or taken advantage of, he or she might produce less than desirable work, or worse, stir up negative sentiment within your entire workforce.

If you are ready to implement this approach to compensation in your own organization, consider the following tips:

  • Determining a living wage is not an exact science and varies from employee to employee.  Ask questions during the interview process that will give you some clues as to need.  For example, you can’t necessarily ask if an employee has children, but often, a question about how he prefers to spend his free time will give you some clues.
  • Be forthright about your philosophy.  Candidates will appreciate your willingness to pay a living wage instead of the lowest rate you can get away with.  In fact, this approach breeds a tremendous amount of loyalty within your workforce.  Ask your final candidates what they “need” with the understanding that you likely can’t afford what they “want.”  Explain why you want to know and listen to what they have to say.
  • Understand that a living wage only establishes a base.  While the living wage establishes the base pay, expertise and experience should cause the final number to increase appropriately.
  • Know the benefits of this approach.  Not only will your employees be more loyal, but you will likely benefit from more committed and conscientious employees as well as lower turnover rates.

Time and again, I’ve seen the payoff for clients that implement this philosophy within their own organizations.  Easy?  No.  Effective?  Yes.  I’d love to help you navigate the process.  Look for more information on this topic in the upcoming months.


By Steven Schlagel