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Profit at the Bottom of the Ladder: Creating Value by Investing in Your Workforce by Jody Heymann

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1

Providing All Employees with More Than a Living Wage

IT HAS BECOME CONVENTIONAL WISDOM that firms can obtain an important competitive advantage by paying the lowest wages they can get away with, thereby reducing their labor costs. This is particularly the case when it comes to so-called low-skilled labor, which is seen as easily and inexpensively replaceable. In contrast, when it comes to high-skilled labor, companies have always used high wages and financial incentives to attract the best talent.

As a result, earnings inequality has tended to increase since the 1970s, rising on average 15 percent between 1970 and 2000 in the Organisation for Economic Cooperation and Development (OECD) member countries.1 In fact, from 1995 to 2005, earnings ...

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