September 22, 2020
Stagnate wages are the bane of all workers. Mitigating this is ultimately the stretch goal for all of Advantage Capital’s investments. At Advantage, we track a concept we have coined as; wage progression.
Simply put, wage progression occurs when a worker has the opportunity to grow their wages in a company, and the company makes the matter equally as important to it—that is, ensuring employees are able to avoid stagnating wages. Alternatively, wage progression is when a company is intentional on the matter of enhancing its workers’ opportunities to grow their wages.
The reason why we focus so much attention on wage progression as the stretch goal for Advantage Capital is because it positively impacts both the business and the worker alike, rendering it an effective tool to sustain healthy business growth.
What’s good for workers is good for business
The positive impact of wage progression on the worker is clear. Good wages offer workers increased opportunities to provide for themselves and their families, leading to not only economic stability, but mobility as well. At its core, wage progression is a key indicator of a good, quality job. And for both the individual and the household, this means more choice in every aspect of life—from what to eat, what to wear or where a person’s children are educated. Wage progression also paves the path to debt management and greater wealth accumulation, which helps households plan for the future. Additionally, as we continue to address the current economic fallout attributed to COVID-19, wage progression and quality jobs will be an important pillar of economic recovery.
Workers are, and will continue, facing tremendous setbacks in getting back to work in a way that enables them to achieve the kind of household stability described above. Stabilizing the workforce is a major factor at play in stabilizing the over all business climate. As businesses reopen and the workforce begins to expand once again, it will be absolutely critical for employers to be able to offer growing wages with broad-based benefits. When these kinds of jobs are available, households are better off, communities are able to prosper and the economy grows.
While the impact of wage progression on workers may be relatively straightforward–as anyone who has experienced a pay raise can understand how more cashflow leads to one’s ability to adjust their lifestyle–what is also important to examine is how this is equally beneficial for businesses.
As the old adage goes, workers are a business’s most valuable asset. When workers fail to see continued opportunity in the workplace, they seek out other options. Often, the consequence of workers feeling trapped inside a business with no windows of opportunity is a business killer. Studies have shown that the average replacement cost of a salaried employee can be anywhere from six to nine months of the lost employee’s salary. Even for hourly workers, hiring costs are significant. From recruitment to onboarding, training and lost productivity, the price of losing a worker and bringing on a new employee can strike a blow to a business’s profit margin. Hence, hitting a basic metric like intentionality around growing wages is beneficial to a business’s bottom line.
Moreover, businesses that are intentional about growing wages are necessarily intentional about pathways of opportunity inside their company. If businesses are intentional about growing wages, then it follows that they are also looking at how to move current employees up in the company. Business growth is thought about in conjunction with supporting good wages and extended profitability. This is the kind of behavior that shows up in overall business success. We’ve seen it across Advantage Capital’s portfolio, and it’s been seen in the general economy as well.
Intentionality behind wage progression at play
A great example of a business backed by intentionality in a wage-centered, employee-centered model, is QuikTrip. The gas station/convenient store mega-chain offers employees above-average wages, job security, health insurance, performance bonuses and paid vacation. QuikTrip has continuously and intentionally made operating decisions that are good for employees and customers, which in turn, yields profits that are good for the company. The bottom line is QuikTrip invests in its employees—through wages, benefits, and training opportunities—which leads to high business growth. We at Advantage Capital see similar success in many of our portfolio companies.
From high-tech drug discovery companies, to manufacturing businesses, intentionality around wage progression and opportunity to grow inside the company, our portfolio continuously reaches our stretch goal of wage progression.
A Utah-based drug discovery firm grew from seven full-time employees to 148 in just four years. This kind of rapid growth is in part due to the company’s intentionality on providing good wages, benefits, and training to its employees. In fact, the company goes beyond the typical benefits you might expect to see from similar companies—retirement, health insurance, etc.—and offers employees world-class benefits such as stock options, legal assistance and public transit passes. These types of benefits create an environment that attracts and retains top talent and helps individuals and families plan for the future.
In rural Ohio, a container manufacturer nurtures the growth of its employees through robust training programs allowing individuals to gain valuable skills, which leads to career mobility and wage progression. All of this leads to high job retention and business growth. In fact, the Ohio business, which is one of the largest employers in its area, recently added a third shift to support new growth opportunities and anticipates dozens of new hires of highly motivated workers over the coming years.
By making employee growth a focal point of the business model, businesses are able to sustain a strong workforce that works for them. And in return, employees benefit from greater household stability. The Advantage Capital stretch goal is to continue seeing a wave of quality jobs that offer wage progression across all of our past, present and future portfolio. It’s about making work work for the business and the employee alike.
The investments, portfolio companies and recommendations listed on this website represent only a sample of companies that have received investment capital from Advantage Capital-related entities. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities highlighted herein or contained in any other information provided by Advantage Capital. Past performance is no guarantee of future results. For a full list of companies, please click here.
