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We need good retail jobs

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Benito L. Teehankee

The View From Taft

Last week, a Facebook post with several pictures of the terrible conditions in the employee locker and rest rooms at a well-known Makati City department store went viral. I haven’t seen a response from the department store yet, but I hope those pictures aren’t accurate because they made my stomach turn.

I’ve long advocated decent work for Filipino employees, and having clean rest rooms is the least that they deserve. Decent work includes other important things. The International Labor Organization (ILO) explains that decent work involves: 1) opportunities for work that is productive and delivers a fair income; 2) security in the workplace and social protection for families; 3) better prospects for personal development and social integration; 4) freedom for people to express their concerns, organize, and participate in the decisions that affect their lives; and 5) equality of opportunity and treatment for all women and men.

The 2017 ILO Decent Work Country Diagnostics report for the Philippines reveals problems that go beyond dirty rest rooms. Formal sector employment is expanding, but precarious work among those formally employed is also increasing. Precarious work is defined as short-term or seasonal or casual jobs including some forms of fixed term or project employment contracts, seasonal employment, and employment through contracting or subcontracting arrangements.

Sadly, the report indicates that across all establishments regardless of size, the number of employees in precarious employment almost doubled from 3.9 to 7 million between 2000 and 2015. Over 30% of total employees or wage and salary workers are now in precarious work.

The viral Facebook post above reminded me of the particular importance of employees in the retail sector. This sector is one of the largest employers in the country, but it also has one of the worst reputations in terms of employee working conditions and security of tenure.

It’s not much better in the US.

Zeynep Ton, adjunct associate professor at the Massachusetts Institute of Technology’s Sloan School of Management and author of The Good Jobs Strategy: How the Smartest Companies Invest in Employees to Lower Costs and Boost Profits, reports that the retail industry provided a lot of the new jobs during the US recovery from the recession. However, wages in the retail industry are low compared with wages in other industries. Also, many retail workers are not offered benefits, and almost half of retail employees are part time while many would prefer full-time work.

The conventional view in the US and in the Philippines is that in a low-margin sector like retail, companies cannot afford to pay workers better or to give them more secure jobs. Doing so would make the prices of goods too high for customers. Furthermore, it would make retailers lose the flexibility they need to deal with fluctuating demand.

This mind-set results in what Ton calls “retailing’s vicious cycle.” Low wages, part-time and seasonal work, and unpredictable schedules lead to high turnover, unmotivated employees, high absenteeism and tardiness rates, and low morale. High turnover and unmotivated employees lead to low profits and further cuts in investments in employees (wages, benefits, and training), resulting in even higher turnover and lower morale.

But it doesn’t have to be this way.

Ton showcases low-cost retailers such as Costco, Trader Joe’s, and QuikTrip that invest in labor while competing with peers with low-wage jobs on the price of goods. These highly profitable retailers offer higher wages and extensive training to their employees.

Store employees earn about 40% more at Costco than at Walmart’s Sam’s Club. At Trader Joe’s, the starting wage for a full-time employee is more than twice what some competitors offer. The wages and benefits at QuikTrip are so good that Fortune has named it among the “100 Best Companies to Work For” every year since 2003.

These retailers cross-train their employees so they can perform a variety of tasks and thereby improve their productivity. Cross-trained employees can perform customer-facing tasks when store traffic is high and address back-office, restocking, and other needs when customer traffic is low. By more efficiently managing staff through cross-training, retailers are able to offer employees more predictable schedules, more hours, and longer shifts.

I think that the Good Jobs Strategy can work in the Philippines. The supposed trade-off in retail between giving good jobs and being profitable is wrong.

I hope our retail leaders can have the heart and the courage to give their fellow Filipinos good jobs.

 

Benito L. Teehankee is a full professor in management and organization at the Ramon V. Del Rosario College of Business of De La Salle University. He is the vice-chair of the corporate social responsibility committee at the Management Association of the Philippines (MAP) and chair for research at the Shareholders Association of the Philippines (SharePHIL).

benito.teehankee@dlsu.edu.ph