If demand increases, either price goes up or quality deteriorates: the quality of workers in service areas
"Tired of Smile-Free Service?" Newsweek, March 6, 2000
In the booming economy of the year 2000, there was a great demand for workers in service areas, such as fast food restaurants, groceries, or gas stations. In large cities, the minimum legal wage of $5.15 an hour was totally irrelevant, because even workers at entry level earned around $10 an hour. In fact, one store, Slurpees, offered $12 an hour for their new workers. Wal-Mart began providing medical and retirement benefits even to part-timers. Even at these high wages and benefits, there was a serious shortage of available workers in large cities. Lack of workers, especially those who serve customers directly, costs a huge loss to a company. Home Depot, for example, realized that it lost tens of millions of dollars of revenue due to an insufficient number of sales persons, and launched a nation-wide television ad to recruit more workers.
To increase the supply of available workers, there are two alternatives. One is to offer higher wage and benefits, so that those who otherwise prefer to stay home, such as house wives and husbands, or retirees, may be induced to enter into the job market. At the present, wage and benefits for service workers have reached their highest level in terms of required training and education of the workers. Any further increase may have a seriously detrimental long-term effect. Wage tends to move only upward. Once workers are accustomed to a certain level of wage, they, as well as management, are very reluctant to lower their wages. Yet, the economy is subject to a constant business cycle. An economic boom is always followed by a recession. During recession, either because of the goodwill of the management or pressure from a labor union, it is very hard to lower wages to a level commensurate with the sluggish economy.
Instead, more common practice to an increase in the supply of labor is the second alternative of lowering the quality of the work force, so that those workers who would normally be not considered for employment are now hired. Or workers whose behavior made them subject to dismissal under a normal situation are now retained. For example, 7-Eleven convenience stores started to accept applicants from welfare recipients. At Sunset Foods store, late arrival of an employee for three consecutive days was an offense punishable by dismissal in the past, but now the management is willing to give another chance to the delinquent worker. In fact, general attitudes of the management during a booming economy are a reversal from "the customer is always right" to "the customer is never right," and often management tends to side with workers against customers. In fact, there is a website called "customerssuck.com" to which irate workers are encouraged to vent anonymously their frustrations with customers. The site receives 1,200 entries a day. An extreme case of this is a $100 million lawsuit filed by a couple against a national fast food chain, in which the couple claimed to be beaten by three workers of the chain when the couple tried to return an unsatisfactory milkshake. The management, instead of dismissing the three workers, refuses to discuss the case on the ground that it is being investigated.