University of Southern California

O'Toole, Lawler Say Low Wages Have High Costs of Their Own
Forbes Op-ed Sites Research That Contradicts Conventional Cost-Saving Wisdom
April 30, 2007 • by News at Marshall

FORBES: James O'Toole and Edward Lawler of the USC Marshall School wrote an op-ed about their recent research that questions the supposed trade-off between high wages and profitability.

Circuit City is one of many companies that have recently sought to lower labor costs to gain competitive advantage, the column stated. "Although offering minimal wages and benefits is the most common way companies try to lower their costs, our recent study of American management practices reveals that such bottom feeding may not be the most effective strategy,"

O'Toole and Lawler wrote. "In fact, low wages paradoxically generate a variety of negative employee behaviors that add to the overall cost of doing business," they added.

Companies should adopt "high-involvement" management practices that invest more into employee growth and welfare, a strategy that has proved successful for companies like Costco, they wrote.

Read the Forbes article

Read about James O'Toole and Edward Lawler's book, The New American Workplace

About the USC Marshall School of Business
Consistently ranked among the nation's premier schools, USC Marshall is internationally recognized for its emphasis on entrepreneurship and innovation, social responsibility and path-breaking research. Located in the heart of Los Angeles, one of the world's leading business centers and the U.S. gateway to the Pacific Rim, Marshall offers its 5,700-plus undergraduate and graduate students a unique world view and impressive global experiential opportunities. With an alumni community spanning 123 countries, USC Marshall students join a worldwide community of thought leaders who are redefining the way business works.