Big Data Reveals How Wage Really Impacts Employee Tenure and Performance

Citation: Housman M & West N. Big Data Reveals How Wage Really Impacts Employee Tenure and Performance, San Francisco, CA: Evolv, Inc., 2014.

Abstract: In the wake of President Obama’s announcement around raising the minimum wage for federal contractors, the topic of wages has gained steam in the press. What’s absent from this conversation, however, is an objective analysis of the specific impact that this change will likely have on the tenure and performance of the affected employees. Big data and analytics can shed some light on this debate.

In order to answer this question, we analyzed a dataset that consisted of over 600,000 performance observations and weekly timesheet information (that included wages) from 10,000 frontline, entry-level sales and service workers. We found that wages do have a relationship with quitting behavior and workplace performance. But the size of these effects isn’t nearly as strong as one would expect. Employers would be well-advised to focus their attention on other drivers of workforce profitability that are: (1) within the control of employers; (2) much less costly than wage increases; and (3) have an even bigger impact on workforce outcomes than wages do.