SYLVIE DOUGLIS, BYLINE: NPR.
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ADRIAN MA, HOST:
This is THE INDICATOR FROM PLANET MONEY. I'm Adrian Ma.
WAILIN WONG, HOST:
I'm Wailin Wong, and it is Jobs Friday. The U.S. economy added 209,000 jobs in June. The unemployment rate ticked down slightly to 3.6%.
MA: So according to the Bureau of Labor Statistics, the economy added 209,000 jobs last month. But, you know, all jobs are not created equal. Erica Groshen is former commissioner at the BLS, which meant she was swimming in tons of data about jobs all the time.
ERICA GROSHEN: We had a count of the number of jobs created any month or in any region or any industry. Then the next question was always, but are they good jobs?
WONG: Erica says this question came from people at all levels of government as well as employers and job seekers.
GROSHEN: This question has been around, I think, since the time jobs were created, right? As long as there have been jobs, people have been saying, is this a good job or a bad job, right?
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MA: Today on the show, we look at some ways to answer that question and what it takes to transform a bad job into a good job. It's an extreme makeover labor market edition, and it's coming up after the break.
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WONG: In economics, there is no formal definition of what makes a good job. But Zeynep Ton has some ideas based on years of studying how companies operate. She's a professor at the MIT Sloan School of Management. She also runs a nonprofit called the Good Jobs Institute, which works with low-wage employers to improve the quality of jobs.
MA: This low-wage distinction is important because Zeynep says pay is a starting point for evaluating the quality of a job.
ZEYNEP TON: We think about pay as being the minimum condition for a good job - right? - because absence of sufficient pay guarantees financial stress for workers and guarantees high employee turnover.
WONG: You can think about the Good Jobs Institute as the salon where the makeovers happen. Company executives sit down in Zeynep's metaphorical spinny (ph) chair, and they look into the mirror together to figure out what the transformation should be.
MA: And a few years ago, Zeynep did a workshop with a retail company called Mud Bay. It operates a chain of pet stores in the northwestern part of the U.S. Mud Bay's co-CEO at the time, Lars Wulff, had read one of Zeynep's books about good jobs. He'd even organized a company-wide reading group to discuss how to put some of her ideas into practice.
LARS WULFF: I read four chapters and said this book was written for us.
WONG: One of the big challenges for Mud Bay was high turnover, meaning a big percentage of employees was leaving every year. Mud Bay's rate was almost 50%. And this is not uncommon in retail, but it was too high for Lars and other company leaders.
MA: Turnover was important for Mud Bay because the pet store employees were trained to know all about the inventory and to answer detailed questions from customers. This kind of customer service was not possible if the workers didn't stick around. Marisa Wulff is the co-CEO of Mud Bay and Lars' sister.
MARISA WULFF: We wanted to increase retention because that's good for both staff and for customers. And seeing how difficult it is for employees in retail and service businesses to make ends meet - and once you create those fulfilling jobs at a living wage, you're addressing your turnover problem.
WONG: At the time, Mud Bay was paying wages that were at or below market rates. Zeynep says a good job should pay full-time employees a living wage, meaning enough to cover a family's minimum basic needs where they live. Zeynep uses MIT's living-wage calculator, which goes down to the county level and includes expenses like childcare and broadband.
TON: We use that when we work with companies all the time to see what percentage of their full-time employees are not making a living wage. And when we present those data to companies, they're quite disturbed.
MA: So good pay helps make a good job. But there's definitely more to it than that.
TON: Just because you have good pay doesn't mean you have a good job, right? Once pay is met, then career path so that you can move on to a higher-paid job, respect for your time, respect for your abilities, being treated like a human versus a pair of hands is super important.
WONG: Labor economists also talk about the importance of scheduling when it comes to evaluating job quality because insufficient or unpredictable work hours keep wages low. Other criteria for a good job are things like - is this job physically safe to perform? Is there a path for career advancement? Then there are more subjective measures like whether a job provides meaning or a sense of belonging.
MA: And at Mud Bay, there were positive aspects of the worker experience. For example, managers tried to give employees predictable hours by scheduling them two weeks in advance, most of the chain's managers had been promoted from within, and there was even a profit-sharing program.
WONG: Still, turnover was unacceptably high. Mud Bay executives knew they had to raise wages to bring down turnover. But there was a problem, and this is an issue that Zeynep runs into all the time with low-wage employers.
TON: Companies - for example, retail, restaurants, nursing homes - the profit margins are quite low. In retail, it could be single digits. And the front-line employees, the low-wage employees, represent the biggest cost when it comes to labor, then you can't just pay more. It could wipe out your bottom line.
MA: Mud Bay's profit margin was a razor-thin 2%, so it could not just raise wages across the board. It had to overhaul other parts of the operations and find ways to reduce costs.
TON: Raising pay without changing their system will mean they're just paying more for the same job, so their turnover won't improve. Their productivity won't improve. Their costs will just increase.
WONG: So let's look at the Mud Bay makeover. One change the company came up with was adjusting store hours. They decided to open later and close earlier on most days of the week. Another change was carrying fewer items in the stores.
MA: And these changes saved money. But Zeynep said they also made employees' jobs better. Take the shorter business hours, for example - workers no longer had to deal with the dreaded clopening (ph). That is when there would be less than 10 hours between the ending of one shift and the starting of the next.
WONG: And then, with the simplified inventory, employees had fewer products to keep track of. Then they could be better at answering customer questions about, you know, comparing different types of cat food or doggie raincoats. Mud Bay hoped that would translate to higher sales.
MA: So by reducing costs and growing sales, Mud Bay was able to create some wiggle room that it needed to raise hourly wages, which it did gradually over a period of several years. The job's makeover required patience, and it came with trade-offs. Lars Wulff was co-CEO at the time the process started. Today, he's chairman.
L WULFF: There's this idea that you're defined by what you are willing to suffer for. We were willing to suffer for higher wages and improving outcomes for staff, and we'll find a way to pay for it.
WONG: It took Mud Bay years, but eventually it was able to pay every worker an hourly living wage according to the MIT calculator. And turnover fell from almost 50% to about 30%. Zeynep says Mud Bay was able to avoid a vicious cycle that she has observed in other companies.
TON: Low pay means high turnover. High turnover means lost sales due to bad service. High turnover also means higher costs - waste, overtime and low productivity. So low pay and high turnover costs companies a lot more than they may think.
MA: In other words, bad jobs are not just bad for workers. They're also bad for employers and the broader economy. That's one reason why government agencies like the BLS want to capture whether the labor market is producing enough good jobs.
WONG: Erica Groshen, the former BLS commissioner, says there are different efforts underway to collect and share even more granular data on job quality.
GROSHEN: With the importance that we place on individual decisions by workers, by firms, by state and local governments, we want people to be making decisions for themselves. And they can do that if they have good data on which to base those decisions. Otherwise, they're going to make what's technically known as lousy decisions.
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MA: Maybe that should be a new model for the BLS. We use statistics to prevent lousy decisions.
WONG: (Laughter) It's like, don't schedule meetings on Friday afternoons.
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WONG: This episode was produced by Corey Bridges with engineering by Katherine Silva. It was fact-checked by Sierra Juarez and edited by Paddy Hirsch. Viet Le is our senior producer. Kate Concannon is our editor, and THE INDICATOR is a production of NPR.
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