Best columns: Business
Seattle’s wage warning
Ben Casselman and Kathryn Casteel
As cities hike their minimum wages to unprecedented heights, economists are asking: “How high is too high?” said Ben Casselman and Kathryn Casteel. Seattle, it appears, “may have gone too far.” In January 2016, the city hiked its minimum wage from $11 an hour to $13 for large employers. Preliminary research by the University of Washington now suggests this increase “may have come at a significant cost,” resulting in lost jobs and fewer hours for lowwage workers. Even worse, the losses have offset the benefit of higher wages for those who’ve kept their jobs, with low-wage workers on average earning $125 less per month. The finding is significant, because past research found that increases to the minimum wage “have little impact on employment.” But those studies were typically based on more modest wage hikes. Seattle’s efforts to boost pay have been some of the most aggressive in the nation, and the minimum wage there will eventually be raised to $15 and affect a much bigger part of the workforce. This study “is far from the last word” on how such pay increases affect workers. But if a place like Seattle can’t absorb the impact of higher wages, “that could signal trouble” for cities across the country.
Better to build or buy a CEO?
For General Electric, training a CEO is “a process as meticulous and intensive as the manufacture of a composite fan blade for one of its aircraft engines,” said Andrew Hill. John Flannery, who will succeed Jeff Immelt as GE’s CEO this summer, has been methodically groomed over a 30-year career with the company, with “carefully selected assignments in the U.S. and abroad” to prepare him for a top role. But in the rest of the corporate world, GE’s painstaking approach to developing leaders “is starting to look like an expensive, even anachronistic, exception.” Large companies increasingly prefer to bid on “ready-made senior executives,” which drives up executive pay in an unending “war for talent.” Companies appear hesitant to spend money training promising employees who might bolt for the competition, or leave to start their own company. Today’s boards of directors also prefer choosing leaders from a more diverse and international pool of candidates, which may not be available internally, and are often drawn to the idea of injecting new thinking from outside the firm. But even if companies prefer to buy rather than build a CEO, they should consider whether the firm will always be able to attract the best talent. In times of crisis, the lack of a leadership pipeline can leave a company rudderless.