It’s Much Easier to Be Socially Responsible In Some Businesses Than Others

by Reihan Salam

This weekend, Ross Douthat wrote on Hobby Lobby as “a company liberals could love” in light of its insistence on paying full-time workers no less than $15 an hour, among other policies that tend to reduce turnover. Elsewhere in the New York Times, Jennifer Conlin profiles the Zingerman’s Community of Businesses (ZCoB), a network of for-profit firms in and around Ann Arbor, Michigan, that has pioneered a more collaborative approach to management, in which employees are encouraged to think of themselves as entrepreneurs invested in the health and growth of the larger enterprise. Zingerman’s is also committed to paying relatively high entry-level wages, and one of the founders of the business, has lobbied for an increase in the minimum wage. 

Far be it from me to criticize Hobby Lobby or the ZCoB, both of which strike me as creative, innovative businesses that deserve to be admired and emulated. But I was struck by one passage in Conlin’s profile that strikes me as relevant to the larger debate over wage floors:

“We get price questions a lot,” said Maddie LaKind, a recent University of Michigan graduate who worked part time in the deli during college and is now working and training full time at the deli, hoping for a career in food. “Customers might want to know, for instance, why our Italian submarine sandwich costs $15.50. I explain to them the value of the product. It has 11 different high-end ingredients. But we also happen to be paid and treated well.”

The ZCoB is devoted to selling premium products to customers who are willing to pay for them. This demands a level of commitment that at least some employees find less than suitable, as Conlin reports:

Former staff members talk about the frustrations of having to placate difficult customers, as well as the stress of being “Zingy” throughout a long shift. “It is exhausting to work somewhere where you feel like you have to improve what you do constantly,” said one former worker at Zingerman’s Roadhouse.

Essentially, the Zingerman’s business model relies on identifying conscientious employees, making them more conscientious through its rigorous, and expensive, training programs, and then retaining them by offering them opportunities for upward mobility within the organization, which requires that the organization grow steadily. It should be obvious that not all businesses can mimic this approach, as there are only so many workers who would choose to devote themselves so wholeheartedly to a corporate mission, and other employers will respond by crafting terms of employment that are a better fit for their needs (e.g., I might find it demoralizing to be constantly cheerful, and I’d be willing to accept a somewhat lower wage to avoid what I perceive to be this indignity); and not all business, particularly in retail, are capable of growing at such a rapid clip, for a variety of reasons, including the nature of the market being served. 

Yet in lobbying for an increase in the federal minimum wage, Zingerman’s co-founders have implicitly decided that other businesses, e.g., in which quick-service restaurants aim to serve low-income or cost-conscious consumers, who might need to outsource meal preparation in order to work longer hours, must either sharply increase their labor productivity, i.e., employ fewer workers, or pivot to serving a different kind of customer, a kind that doesn’t necessarily exist in every part of the country. 

And as for Hobby Lobby, a company that I’m inclined to think well of, like Douthat, I’m reminded of Megan McArdle excellent analysis of why Wal-Mart will never pay like Costco: while Costco is a place where relatively affluent consumers go to stock up on a small number of products in bulk, Wal-Mart serves virtually all of the shopping needs of a less affluent clientele; its business model is intrinsically more labor-intensive than Costco’s, and spending more to raise the quality of service would tend to raise prices, thus encouraging its price-sensitive customers to look elsewhere. Hobby Lobby is a specialty retailer that can carry a relatively limited array of products, and as such its business model lends itself to labor productivity. 

I absolutely agree with Douthat’s basic point about Hobby Lobby: the fact that its corporate leadership is influenced by an ethical and religious commitment contributes to the fact that its a great place to work. Something similar seems to hold for Zingerman’s. But it is no accident that both companies have flourished in niches that make it possible to avoid heavy reliance on low-wage, less-skilled labor. And given that low-wage, less-skilled jobs can, at their best, serve as the first rungs on the ladder to high-wage, skilled jobs, it’s not entirely clear to me that eschewing them entirely is such a good thing. 

The Agenda

NRO’s domestic-policy blog, by Reihan Salam.