Paying living wage is good business

Posted Monday, Oct. 21, 2013  comments  Print Reprints

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More than 20 years ago, when Bob Simpson and I were running Cross Timbers Oil Co., now XTO Energy, he shared with me his idea that federal entitlements are actually a form of business subsidy.

Bob is an insightful abstract thinker.

All humans have certain minimal needs. What company salaries don’t cover gets picked up by entitlement programs.

This is precisely the point made in the Oct. 16 news story, “Study: Most fast-food workers receive welfare assistance.”

When we looked at our company’s lower-tier salary scales, we saw that we paid our janitors, lower-level clerks and field employees at the top of the market-determined salary ranges. Still, their salaries were below the federal poverty level for a family of four, which qualified them for the full range of federal entitlements.

Given our multimillion-dollar salaries, we felt a bit “Scrooge-ish” to continue current practices knowing our Bob Cratchits were using food stamps to feed their Tiny Tims. We therefore raised the salaries to living-wage levels, which put them way beyond market salaries for these employee categories.

We also noticed that no employees in these categories were participating in our voluntary 401(k) plan. Saving is nothing more than an abstract concept for people who struggle to have enough cash to put food on the table.

We made participation in the 401(k) plan mandatory at the new salary scale, and Bob insisted that a third of the company’s contribution be company stock.

Since ours was a rapid-growth company with a big future, we felt this might facilitate things like paying for Tiny Tim to attend college. This was an important value to Bob and me, because we both began life as Tiny Tims who could not have afforded college had we not received big scholarships.

Did any of this trouble shareholders or board members? No. Bob and I could come up with a new business idea in less than two minutes to cover the added cost. That’s why they paid us the big bucks. I have never met an oil or gas well I couldn’t improve.

What we got from employees as a result of these changes was gratitude, loyalty and a zero attrition rate. Increased productivity more than paid for the added costs incurred.

I had to constantly remind employees to please book their overtime so that we would not be in violation of federal law.

Can what we did be considered magnanimous or saintly? No! It was simply doing what was fair.

Unfortunately, the studies cited in the Star-Telegram article are not likely to have much impact. They will get lost in the Democrat-versus-Republican ideological debates and rhetoric about free markets versus government intervention in our current can’t-agree-on-anything Congress.

It will be forgotten that we are talking about real workers with real needs.

In frustration, to every CEO who hides behind the philosophy of Adam Smith and doesn’t feel compelled to pay employees a living wage, I can only say: “May the ghosts of Christmas past, present and future plug the carburetor of your Benz.”

Steffen Palko, co-founder and former president of Cross Timbers Oil/XTO Energy, is an assistant professor at Texas Christian University.

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