Chart of the Week: Companies Paying a Fair Wage Outperform Peers in the Downturn

In last week’s Chart of the Week, we evaluated company performance against the estimated percentage of employees making a living wage. This week, we’re again considering the relationship between workers’ financial stability and their company’s performance, this time based on our “Pays a Fair Wage” metric. This offers some insight into how companies’ wages differ across various job titles when compared to industry peers. 

Whether or not a corporation pays a fair wage to their employees based on job level, qualifications, and experience is the most important issue to the American public according to JUST Capital’s polling on just business behaviors – and that makes it the highest weighted issue when compiling our Rankings. 

When we consider the fair pay scores for the companies in our Rankings during the current economic downturn, those that scored in the top quintile on this metric returned 6.5% relative to their industry peers. Those that scored in the bottom quintile saw a -3.0% return relative to their industry peers.

The Fair Pay Score metric that we used in the chart above is a comparison of a company’s wages to industry peers’ wages by job title. This means that companies that pay a high wage to all their workers relative to their industry receive a higher score than those that don’t. Unlike the concept of a living wage, this metric is relative.  

As the Financial Times reported this month, raising pay for your employees during a crisis can provide long-term benefits, further substantiating our results above. While firms continue to cut costs on office space, travel, sponsorship, and advertising, they are presented with a unique opportunity to reset the way their employees are incentivized and strengthen the relationship with their workforce. As we show above, there’s evidence this is yet another case of a win-win for both employers and employees.

If you are interested in supporting our mission, we are happy to discuss data needs, index licensing, and other ways we can partner. Please reach out to our Director of Business Development, Charlie Mahoney, at cmahoney@justcapital.com to discuss how we can create a more JUST economy together.

If you have questions concerning the underlying analysis, please reach out to our Senior Manager for Quantitative Research, Steffen Bixby, PhD, at sbixby@justcapital.com.