Column: Prepare for a Minimum Wage Increase

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There is regular talk in Washington about raising the minimum wage. This year is no exception, and though actions unlikely will match the rhetoric, change is inevitable.

In the past year, 21 states have had 166 proposed pieces of legislation targeting varying rates of minimum wage increase. Changing the minimum wage has many potential impacts and unintended consequences for the teleservices channel. Here are some:

No difference. Employees in teleservices already enjoy competitive wages, which on average well exceed the minimum wage and proposed increases. Though increased wages in industries that compete for labor causes obvious concerns, it is always possible that the 5.219 million people employed in the channel will see little direct effect. This scenario is unlikely based on historical trends when contact centers enter into wage wars in challenging labor markets.

Companies may decrease live operator use. When labor costs rise, a natural outcome is more automation. The U.S. consumer already has shown frustration with an inability to reach qualified, quickly available live operators. Increased labor costs will exacerbate this problem as companies try to maintain their cost structures by increasing interactive voice recognition and Internet self-service. Many companies will feel they have little choice amid rising investor expectations but to shift technology use to manage costs.

Renewed energy to send work offshore. Labor in emerging markets can be 15 percent to 20 percent of the costs in the United States. Though firms seek the best balance for onshore and offshore customer handling, the balance is tipped to offshore with every cost increase regardless of size.

Live operator service levels decline. Pressure already exists to improve customer service training, speed and effectiveness for consumers. But if costs rise and companies still want to provide live operator service, we can anticipate longer hold queues and greater dissatisfaction as a result. Companies may cut back on training budgets as well.

If any of the options outlined above are used, the need for personnel decreases, so we will experience job losses. An unintended consequence of decreased live operator use or increased offshoring is the potential for more regulation and legislation. Consumer outcries concerning poor service, long wait times or offshore issues will be met with legislator and regulator focus. In essence, the same people who would create the problem by raising wages would try to solve the problem by placing more demands on business.

Efforts to thwart the legislative impetus for the wage increase will not hold it off forever. Firms need to consider what balanced approach of technology, right shoring and service provision will best serve their customers and their business. n

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