Higher Employee Wages Linked to Improved Customer Satisfaction

A happy worker can mean a happy customer.

Discussions in the media and politics about minimum wage have taken a major space in the public consciousness for the last several years. Between the “fight for $15” and the arguments that many businesses would have to close if minimum wages were raised, it may be difficult to know where to land on this issue. Many businesses choose to pay minimum or low wages to keep their costs low; however, this choice may ultimately be harming them.

A recent study conducted by the Cornell South Carolina Johnson College of Business conducted a study to determine the link between higher wages and customer satisfaction. According to RestoBiz, the study “compared restaurant reviews where the minimum wage has increased versus those where pay was stagnant and found an improvement in the perceived quality of service with higher wages. Higher wages also led to a reduction in negative reviews about workers’ friendliness and courtesy.” Although this study was only conducted in the restaurant industry, it stands to reason that this finding would likely be true in other industries.

Perhaps this correlation is because higher wages lead to happier employees, and happier employees provide better customer service. According to a study by Princeton, financial security plays a key role in determining an individual’s happiness.

Of course, this makes sense, and everyone can relate: employees who aren’t constantly stressed about rent, paying for food, and affording their living expenses will be much happier than those who are. Besides the moral imperative to keep your employees stable and happy, this happiness may be good for your business.

According to Harvard Business Review, “a happier workforce is clearly associated with companies’ ability to deliver better customer satisfaction — particularly in industries with the closest contact between workers and customers, including retail, tourism, restaurants, health care, and financial services.”

Forbes agrees, writing that “the key to achieving customer happiness, as in customers who want to do business with you again and again, is to focus on employee happiness first.” A happy employee will be able to provide an upbeat, helpful experience to a customer, whereas a stressed, depressed employee may struggle to connect in a meaningful way.

Let’s consider two popular businesses that are known for having exceptional customer service: Chick-Fil-A and Trader Joe’s. Both of these businesses pay wages that are higher than their respective industry standards.

For example, according to Zippia, the average Chick-Fil-A employee makes $13.10 hourly, compared to $12.10 at McDonald’s and $12.17 at KFC. The average Trader Joe’s employee is paid $17.18 hourly, compared to $15.72 at Whole Foods, $15.14 at Publix, and $14.29 at Winn Dixie.

As a consumer, I choose these two businesses over their competitors every time because I know I’m guaranteed to have a good experience. If I’m having a bad day, I don’t need to worry about encountering rude or unhelpful employees at these establishments, and that goes a long way.

According to Forbes, “one in four customers is willing to pay up to 10% more in almost every industry if they know they will receive excellent customer service,” with specific impact on the hospitality industry in which “31% of customers will pay up to 10% more and 10% of customers are willing to spend over 30% more.”

According to RestaurantDive, most consumers have even higher customer service expectations than they did prior to the pandemic. Now, more than ever, keeping your customers happy is a necessary component to business success. Paying your employees a competitive, livable wage may play an integral role in achieving those goals.