Living Wage and Its Impact on Customer Service Quality

The minimum wage is a hot topic and a much debated topic in politics. Many politicians believe the U.S. minimum wage is too low and no longer covers the basic needs of most workers. Many states agree that the federal minimum wage is too low and have taken it upon themselves to raise the minimum wage to be more suitable to the rising costs in their local region.

According to the U.S. Bureau of Labor Statistics, in 2019, nearly 2% of hourly paid workers in the U.S. were paid at or below the federal minimum wage of $7.25 per hour. A much larger percentage of U.S. workers fall below the acceptable living wage for their location making it difficult to manage and pay for day-to-day necessities. You may be wondering, what is the difference between a minimum wage and a living wage?

Difference Between Minimum Wage and Living Wage

If   you ask corporations and lawyers what constitutes a “living wage”, you will get a variety of differing answers. A living wage is highly dependent on location and takes into consideration the estimated cost of food, child care, healthcare costs, housing, transportation, and other necessities. Providing for a family in San Francisco requires quite a bit more money than providing for a family in rural Kansas. But where does the term come from? How do we calculate it? And is it even accurate?

A living wage is defined as the minimum income necessary for a worker to meet their basic needs. A living wage is often higher than the minimum wage indicating that a minimum wage fails to cover the most basic needs of employees. But what are basic needs? Do employers and employees always agree on what basic needs are? Due to the flexible nature of the term “needs”, there is no widely accepted measure or number when it comes to a living wage.

Amy Glasmeier, a professor of economic geography and regional planning at the Massachusetts Institute of Technology, developed a living wage calculator that calculates a more realistic view of American family’s cost of living by region. She says this provides a clear “start point” for what employees should be paid.

Supporters of minimum wage and paying a fair living wage believe it increases the standard of living of workers, reduces poverty, boosts morale, and reduces inequity. In the world of customer care, this can directly contribute to agents providing a better customer experience.

But on the flip side, an increased minimum wage rises the cost of labor, which can be very expensive, especially for customer support centers. Contact centers require a large labor force, so even a slight wage increase can eat away at profits, which is why many companies and BPOs try to avoid minimum wage laws by hiring gig workers, outsourcing customer support work offshore, or automating job functions.

Happy Agents = Happy Customers

At VIPdesk we believe in paying our team members a fair living wage. Not only, do we want our team members to be able to take care of their basic needs, but we also believe that happy and cared for Brand Ambassadors (VIPdesk’s customer service representatives) are the key to happy customers. Brand Ambassadors are often a company's first point of contact for consumers. This means the experience an agent provides to customers can make or break a brand.

In previous decades, companies could compete on price or product, often thinking of the contact center as just a “cost center”. But in our new customer-centric and digital world, there are many competitive offerings available making it difficult to compete on price and product alone. In order to keep loyal customers, companies MUST provide personalized and effortless customer experiences. And how do we do this? It starts (and ends) with our Brand Ambassadors!

Providing customer support is no longer a “cost” but an opportunity to connect with customers, gather critical data on customer needs and frustrations, and even upsell current customers. As soon as companies start thinking of their customer support as a powerful tool to increase revenue, paying employees a fair living wage becomes a no brainer.

Need more proof? Let’s take a look at a Harvard Business Review study that researched the statistical link between employee well-being and the companies’ ability to deliver better customer satisfaction. The study looked at Glassdoor employee reviews and customer satisfaction ratings from the American Customer Satisfaction Index (ACSI). The research indicated that each one-star improvement in a company’s Glassdoor rating corresponded to a 1.3-point improvement in CSAT scores. They also found that industry matters. Retail, food service, and healthcare were among the top industries where a higher Glassdoor rating led to an increase in CSAT.

How does this impact the bottom line? According to a 2006 study published in the Journal of Marketing, each 1% improvement in a company's ACSI customer satisfaction score is associated with a 4.6% boost in stock market value. According to Harvard Business Review, this means with each one-star rating improvement on Glassdoor a company could see a long-term market valuation increase of 7.8% to 18.9%.

The VIPdesk Difference

Here at VIPdesk, we believe that every client conversation can substantially impact the health and profitability of a brand. This is why we treat our Brand Ambassadors like family. Our Brand Ambassadors truly become the face of the brand they represent. Because of this belief, we have raised the compensation of our Brand Ambassadors and commit to pay living wages for all U.S team members.

VIPdesk has always been a disruptive force in the Customer Service industry and we are again leading the way in the contact center space in an effort to close the gap between minimum and living wage and we hope others will follow. We will be closely tracking the correlation between Brand Ambassador compensation to employee retention and quality of customer support delivered.

As a certified B-Corp, we enthusiastically embraces the philosophies of this purpose-driven community which works toward reducing inequality, lowering the levels of poverty, contributing to a healthier environment, building stronger communities, and creating more high-quality jobs with dignity and purpose.

If you would like to read more on VIPdesk’s increase in living wage check out our latest press release!