A Full Staff Pay Hike!
Written by Jaqlyn Feldstein
Most small business owners in the central Shenandoah would love to pay their workers enough to keep them coming to work every day with a big smile on their face. It’s just good business. But how do you afford that when profit margins for most small to medium shops in the Valley are not exactly Fortune 500 territory? Finding and retaining good employees is hard enough. When faced with the choice between losing valuable workers or losing profit in a competitive market, what is the right move?
One business in Harrisonburg, the Friendly City Food Co-Op, decided to take the risk and bump the starting wage of all 36 employees from $9.50 to $11 per hour. New employees get bumped to $11.50/hr after 90 days. To avoid wage compression and the tensions it can cause, existing employees will have their wages adjusted upwards so pay ranges stay consistent. When existing employees come up for performance reviews, their raises will be hiked even higher to account for increased cost of living.
The announcement was not only big news to the staff but to the entire Harrisonburg community.
What exactly is a living wage?
A living wage is defined as one high enough to maintain a normal standard of living. In Harrisonburg and Rockingham County, the current living wage for one adult with no children is $11.44 an hour, according to the Massachusetts Institute of Technology’s Living Wage Calculator.
Since opening its doors in 2011, “a living wage has been the goal,” says Steve Cooke, the Co-Op’s general manager.
The Friendly City Food Co-Op is a locally owned grocery store that is funded entirely by shares purchased from member-owners. At the end of each fiscal year that the Co-Op makes a profit, member-owners enjoy a small share. In effect, the Co-Op not only has to answer to the demands of its staff but its 2,000 member-owners who expect financial stability from their investment.
The decision to raise pay now was set into motion after questions from team members as well as member-owners over how the Co-Op would continue to meet its salary goals as living wage continued to climb. A petition was even started online by one member-owner that acquired 193 signatures. Concern from staff and the community, coupled with the Co-Op’s challenge of finding and retaining good employees in a tightening job market, called for imminent change.
Roughly $1.50 in extra pay per hour may not seem like much, but to employees working multiple jobs and struggling to make ends meet, those few extra bucks can make all the difference in the world. One extra dollar per hour, for a full time employee, can amount to as much as $2,000 a year in extra income. To put it into perspective, JMU students pay on average $1,038 for textbooks every year, according to its website. For a single person, $2,000 in extra income is nearly enough to cover grocery bills for an entire year. It’s enough to tuck away into an emergency fund that most Americans don’t have.
How to afford the pay hike
On the flipside, a pay raise for 36 employees is roughly $50,000 in lost revenue annually for the store. To figure out if they could afford it, Cooke and an in-house bookkeeper gamed out several scenarios using spreadsheets to get a full picture of differing financial impacts. No big surprise, but the Co-Op has budgeted for a smaller net income in the next fiscal year. So far, shareholders and management haven’t expressed much concern over the narrowed bottom line.
Adding a wrinkle to the tightened budget is a pending store expansion—it’s slated to grow from 4,600 square feet to 6,400 by early 2020, which may squeeze net income further. To fund it, the Co-Op has reached out to member-owners for loans totaling $1,000,000. As of November 2018, member-owners have loaned nearly $300,000 for the expansion.
Foregoing profit demonstrates money isn’t the only marker of success for a business. “Without good employees, there is no Friendly City Food Co-Op,” says Cooke.
If valuable, engaged employees are lost because they are being underpaid, Cooke and his team understand the harm that can follow. “It’s getting harder to recruit skilled workers,” he says. “Especially those with food service backgrounds. Local businesses need to figure out the best way to develop and create opportunities for citizens to grow their careers and be able to stay in the area.”
Haley Springer, a longtime employee who was actively involved in the living wage discussions, reminds those concerned about profitability that “It’s Co-Op workers who generate the profits. We deserve to be compensated fairly for doing so and we have a vested interest in making sure the business stays profitable.”
Cooke and his team have made a point to cultivate a culture of openness with their employees and give them a space to voice their concerns over issues like wages.
According to three-year employee Levi Fuller, the outreach hasn’t gone unnoticed. “Within the Co-Op’s DNA is a deep concern for fair and friendly relationships, and for taking the treatment of workers very seriously. Friendly City is setting an example of how employers can do good business in the financial and social sense.”
Since making the announcement, team members say they’ve heard words of support from regular shoppers nearly every day at the registers. Sales have continued to grow every year and the warm reception from the community projects many years of profitability to come.
In supporting the Co-Op, the community is supporting a larger push to pay their fellow community members a living wage. This move gives hope to workers and small businesses alike that a higher standard of living is within reach for many residents.