Dollar General will spend more money on its workforce this year by increasing their hours, the company said in its earnings report this week.
The company, like its peers Dollar Tree and Family Dollar, has always relied on a few workers in each store to keep labor costs and therefore prices down. But now it’s hoping that increasing hours will help improve quality at many of its stores and keep shelves stocked while reducing turnover among staff managers, which is about 30 percent. It’s already tested the model in some locations and will expand it this year.
The changes will cost money. It expects its sales to rise 9 percent this year but that its operating margin will be flat because of the increases.
The company isn’t planning to raise wages for its more than 105,000 workers, however. “In terms of what we’re paying, we feel pretty comfortable,” CEO Richard Dreiling said. “We’re going to continue to monitor the landscape and we’ll assess or make any adjustments that we need to make.” All of its full-time employees make more than the federal $7.25 minimum wage, and while just 12 percent of its part-time workforce makes that much, after five months they can move up to about $9.
But the increase in hours is still meant to help it compete with some rivals that have increased pay. It’s expecting more competition from Dollar Tree and Family Dollar, which finalized a deal to merge earlier this year. But it’s also competing with Walmart, which last month announced that it would raise all employees’ wages to at least $9 by April and $10 next year. Walmart also said it would give employees, who have been demanding more hours and more predictable ones, more control over their schedules. Shortly after Walmart’s announcement, the owner of T.J. Maxx and Marshalls said it would pay all employees $9 an hour starting in June.
Another retailer, Target, has decided to sit out the trend of investing more in workers, however. CFO John Mulligan has said it “just isn’t reasonable” to set a specific increase for all workers in all of its stores. It’s now being targeted by an activist group urging it to commit to a higher wage floor.
There’s reason to think that higher wages can benefit companies. They’ve been found to reduce turnover, attract better candidates, increase customer service, and boost employees’ productivity and performance.