Invest in workers? Not in retail

In many businesses, companies either understand, or at least give lip services to the saying that "our employees are our most valuable asset." The big exception apparently is retail. This has become clear as the retailers (in the form of the National Retailers Federation) have ganged up on one of their own -- Wal-Mart -- for supporting mandatory health insurance coverage. A story in today's Wall Street Journal explains why:

Health-care expenses are a sensitive topic in the labor-intensive retail sector, where low-paid workers and high employee turnover are a standard feature. Many companies have typically offered minimal benefits, partly because their workers don't earn enough to share much of the cost of premiums, and because employers haven't seen much advantage in extending coverage to workers who were unlikely to stay long, benefits experts said.

Only 45% of retail sector workers are covered by employer health care -- as compared to 63% in "service" industries and 79% in manufacturing.

So the model in retail is pay low wages -- and expect high turnover. But that may be changing, according to the story:

While retailers have typically opted for the bare minimum in health benefits, firms including Wal-Mart, Toys R Us Inc. and Home Depot Inc. have begun tinkering with more expansive programs in hopes of reducing employee turnover, said Shub Debgupta, who conducts benefits research for more than 300 large companies as part of Corporate Executive Board Co.
. . .
Costco Wholesale Corp. for years has enjoyed a reputation for generous health benefits -- more than 90% of its workers have coverage with the company -- and executives have defended their strategy as a boon to productivity.

It seems to me that I remember stories of a similar issue 100 years ago in mass production manufacturing. Wages were ok - especially compared to life on farm. But turnover was high. Then a young entrepreneur who had built a hugely successful company came up with a way to solve his turnover problem. Henry Ford started paying his workers the unheard of sum of $5 a day. The turnover rate dropped dramatically to a point where Ford said he was no longer measuring it.

I realized that the retail sector is not suffering from the same magnitude of a turnover problem facing Ford (where he had to hire 52,000 maintain a 14,000 man workforce). But I think the retail industry might learn something from him. And health care may be the place to start.