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Do Wages Paid Give Weight to Esteem Earned?

Do Wages Paid Give Weight to Esteem Earned?
08/8/13
by Julia Feldmeier
This summer, from Washington to Chicago, thousands of fast-food workers have been holding one-day strikes, picketing their employers and drawing national attention to their ambitious agenda: pay of $15 an hour, twice what many now earn.

The demands for higher wages that began last winter in Manhattan have now taken a grip on political discourse with President Obama advocating a federal minimum wage of $9 hour—up from $7.25 today. In Washington, the City Council recently passed a bill requiring big box chain stores to raise the minimum to $12.50.

A minimum wage change could have considerable impact on companies’ staffing, operations and pricing, but there’s another factor at play as brands take a stand: Corporate image. Though less directly correlated to the bottom line impact of a wage hike, our BAV model has shown it can have a strong impact on brand equity. (Case in point: After the Gulf oil spill, our data showed that BP’s Esteem and Trust dropped more than 50%.)

Our BAV model has shown that Esteem and Trust are highly indicative of brand loyalty and are critical for brands to uphold. Why? Because these are the metrics that often enable companies to weather corporate reputation damage.

So far, brands are lining up on both sides of the debate.

McDonalds, Walmart, Subway, Papa John’s and many others in the fast-food and retail industries have spoken out against the proposed increase, with well-supported arguments about the impact of a wage hike on their ability to sustain employment levels.

Meanwhile, the CEO of Costco has emerged as an ardent supporter of the minimum wage hike, and even Starbucks’ Howard Schultz, who has referred to a minimum wage hike as a “double-edged sword,” has turned the corner in favor of a federal increase.

But for Costco and Starbucks, the decision to take a public position in support of an increase is as much clever branding strategy as it is economic policy. After all, both companies already pay above minimum wage—so while federal increase likely won’t impact their employment or their operations, it could disadvantage their competitors while making Costco and Starbucks look heroic in the eyes of consumers. (71% of Americans support a minimum wage increase, according to a March Gallup poll.)

For a brand like Costco, which is in the top 10% of BAV’s Brandscape on both Esteem and Trust, the minimum wage issue is an opportunistic one—by supporting it publically, Costco can reinforce its competitive advantages. Already, the company has grown its emotional commitment by 19% since 2010, according to BAV data.

But for the brand behemoths involved in this political fire drill, there’s not necessarily a downside to disagreeing with popular opinion. Walmart, for instance, consistently falls within the top 5% on Esteem and the top 10% on Trust in our data. This could signal enough strength to override a short-lived ‘bout of political antagonism—but if the issue persists, our historic modeling suggests that its Esteem could take a hit.

And as for whether federal minimum wage will actually increase? Only time and politics will tell, but we’ll be watching to see what happens next.

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