Wage War

Dec. 11, 2006
For many companies that feel they pay a market rate to workers in their logistics departments, at their distribution centers and on their docks, get ready

For many companies that feel they pay a market rate to workers in their logistics departments, at their distribution centers and on their docks, get ready to revise your budgets or start recruiting.

Initiatives to raise the minimum wage were on the ballot and in the campaign rhetoric across the country during the 2006 elections and the newly elected Congress will bring to Washington, DC a goal of raising the federal minimum about 40% to $7.25 per hour. (Six states approved statewide increases of $1 to $1.70 in the 2006 election.)

At the end of November, Illinois lawmakers proposed a compromise bill that raises the state minimum wage to $7.50 per hour by July 2007. The increases don't stop there. The Illinois proposal would bump the wage by 25 cents in each of three successive periods until it reaches $8.25 by 2010. States got the right to set a statewide minimum wage above the federal level during Bill Clinton's presidency, so in addition to the six states that passed increases and the pending Illinois increase, others could be passed in coming months.

The argument isn't just whether or not the 10-year-old federal minimum wage level is out of tune with current costs of living or whether low-wage workers are seriously underpaid at current wage levels. The issue for logistics is the impact a minimum wage increase could have on other pay levels.

One East Coast plant manager noted recently on a Logistics Today forum (http://forums.logisticstoday.com), "The biggest problem with an increase in the minimum wage is compression." The core of his argument is that, when the lower end of the wage scale rises, others further up the line start to feel they are making less money because their wage didn't rise by a corresponding amount.

Another aspect of the same problem, he continues, is "the comparison of skilled workers' salaries to unskilled worker's salaries—even when the work-ers are employed in different plants. After a large minimum wage increase, the skilled workers often feel like they are underpaid."

While academics and economists draw their own battle lines over the pros and cons of a minimum wage increase, those who are on the front lines managing warehouse and distribution center operations will have to start developing strategies to cope with wage, productivity and benefits issues. Clearly, workers who feel they did not benefit from the wage increase will apply their own productivity compression factor to compensate.

On the other side of the pay issue is benefits, and there are some equally bloody battle lines being drawn here. Frozen pensions, increased medical deductibles, reduced coverage and other benefits adjustments over the last couple of years may have been grudgingly accepted when the economy was perceived as flat, but all of the talk of prosperity and the fat bottom lines of many corporations (along with union rhetoric about improving benefits packages) suggest the matter won't end with wages.

While the pool of people who will work for a warehouse wage could shrink through attrition as workers pursue higher wages elsewhere, the number of people entering the work force is also on the decline in the United States. In the next few years, more workers will retire than are entering the workforce, leading not only to a skill gap but possibly to a shortage of people who can work in your warehouse.

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