Beyond Competitive: Why a Living Wage Can Be Your Competitive Business Strategy

By Becky Doemland, Good Works Indy

Imagine this scenario: You’re watching the local news on TV, and they’re talking about the rise in food insecurity in your area. As the story is told, the camera focuses on a family as they enter a food pantry to receive groceries. You notice that the woman is wearing a shirt with your company’s logo on it. Instantly, you recognize her: She’s a full-time employee for your business. 

Why would someone with a full-time job need to visit a food pantry? There are many reasons, but the contributing factor for most individuals and families is non-livable wages. 

When businesses build compensation strategies, they’re usually centered on matching or improving on the market wage − meaning that payrates are measured against industry rivals. But market wages or competitive wages often have no direct relationship to the actual cost of living for an employee, meaning that it’s not enough for a worker to meet their basic needs. 

The Math Isn’t Mathing

Since 2009, the minimum wage in Indiana has been $7.25 per hour. That’s the minimum amount required by law for businesses to pay their employees. Because this wage hasn’t changed in more than fifteen years, it hasn’t kept pace with inflation and rising costs of living, making it almost impossible to support a modern family with a minimum-wage job. 

Then, let’s look at the true cost of living in Indianapolis. Using MIT’s Living Wage Calculator – widely regarded as the gold standard for defining necessary income or “livable wages” – we can discern the local wage rate that a full-time worker requires to cover the costs of their family’s basic needs where they live. These calculations are based on local costs for food, housing, transportation, healthcare, childcare and more. Some examples of what it takes to live in Indianapolis (Marion County) today: 

• A single adult with no children needs $20.48 per hour ($42,593 annually).
• A single adult with one child needs $38.31 per hour ($79,691 annually). 

When a worker isn’t earning a livable wage, they experience financial instability, often requiring multiple jobs to make ends meet. That’s also when individuals and families are forced to make decisions about sacrificing essential expenses or seeking public assistance. Employees who live in near-poverty conditions and struggle with food insecurity will carry those stresses into the workplace, affecting their focus and productivity, which negatively impacts the business. 

Paying a Living Wage

What happens to the business though if wages are increased? Understandably, everything in the business plan shifts: operating costs, profitability, retail pricing, etc. But what if, instead of focusing on the reasons NOT to do it, business leaders focused on evolving their companies into people-centric organizations that succeed BECAUSE of their commitment to their workers? Forward-thinking leaders approach the investment in a living wage not just as a cost, but as a strategic investment that yields returns in productivity and retention. 

In Indianapolis, there’s a local program to support exactly that. In April 2022, EmployIndy (the workforce development board for Marion County, Indiana) launched the Good Wages Initiative to showcase and support employers that are paying good wages that sustain workers. Good Wages is a certification program for businesses that commit to paying full-time employees a minimum of $18 per hour and providing access to health insurance benefits. Companies apply for certification or make a commitment to work toward this goal for their employees. 

“Raising wages by just $1/hour over a competitor can help attract up to 30% more well-qualified applicants.” – Good Wages Initiative

Research indicates that businesses that provide living wages for their workers reap tangible benefits that positively affect their bottom line. First, there’s improvement in employee retention and productivity, reducing the costs of turnover (recruiting, training, lost productivity) and retaining employees with less financial stress. And the effects on the employer brand means that the company enjoys positive sentiment from the community and attracts values-driven customers for their commitment to paying well.

Say Yes to Living Wages

It’s time to shift from paying workers based on what the market allows to what they require to thrive. Moving away from market wages and making the commitment to pay a living wage is not just a significant step toward corporate social responsibility, but also a competitive advantage for businesses. For resources and support, contact the Good Wages Initiative in Indianapolis or visit Living Wage For Us for similar certification options beyond Central Indiana. 

Becky Doemland is a social impact consultant based in Indianapolis, helping businesses throughout Central Indiana develop and implement their philanthropic and community involvement strategies. Learn more about partnering with Becky at www.GoodWorksIndy.com.