Stable work hours for U.S. workers are a hidden source of profits

For many part-time and low-wage workers in the U.S. retail and hospitality industries, constantly shifting schedules or requirements to be “on call” are increasingly the norm. Aided by computer scheduling software, these kinds of schedules are based on hour-by-hour predictions of consumer demand and are intended to help minimize labor costs. In doing so, however, they can wreak havoc on workers who are prevented from planning other aspects of their life—arranging childcare, scheduling a doctor’s appointment—and often are not given enough hours to make ends meet.

It’s unsurprising that these scheduling practices have attracted widespread criticism, from media outlets to lawmakers alike. But while some companies have reformed their scheduling policy models, most have continued to use fluctuating schedules due to the assumed profitability of doing so. A new study (funded in part by Equitable Growth) takes aim at this notion. While these scheduling systems may appear to save companies money through reduced labor expenses, the new study finds that there are major hidden costs in terms of profits down the line, and that providing employees with stable schedules isn’t only good for workers but boosts profits as well.

The new research was done in cooperation with the retailing industry’s The Gap, Inc. and was conducted by Joan Williams at the University of California Hastings College of the Law, Susan Lambert at the University of Chicago, and Saravanan Kesavan at the University of North Carolina’s Kenan-Flagler School of Business. The three researchers started by taking baseline measurements within Gap stores before the announcement of a national policy change in 2015, in which the company required its managers to give workers two-week advance notices of schedules and eliminate on-call shifts. The full experiment followed, looking at how this policy change played out in 28 stores in the San Francisco and Chicago areas over the course of 10 months. In addition, 19 stores, the “treatment group,” were randomly assigned additional practices designed to give workers more consistency in their working time. Managers, for example, were asked to guarantee a minimum number of hours for a group of workers, increase the consistency of shift hours day to day and week to week, and allow workers to swap shifts with each other over an app.

What Williams, Lambert, and Kesavan found challenges the idea that investing more in low-wage workers harms profits. They found a 5 percent increase in labor productivity in treatment stores, and a 7 percent rise in profits—a remarkable feat in an industry in which 1 percent to 2 percent growth is seen as a major success. The rise in sales was largely due to a higher percentage of customers spending money when entering the store and spending more per visit. The authors say that “shifting to more stable schedules, over a 35-week period, yielded $2.9 million in increased revenues for Gap in 19 treatment stores.”

The authors note the surprising finding that the biggest source of worker instability comes not from shifts in daily and hourly consumer demand, but rather senior staff at the headquarters scheduling last-minute promotions or shipment changes, which leave management scrambling to secure enough workers during certain times. This makes it hard for managers to guarantee two-week notice of schedules to their workers. The three researchers suggest that retailers should investigate these internal issues, which could allow for additional sources of schedule stability.

Other research also documents the harm that erratic schedules impose on workers who are concentrated in the very industries in which a lack of benefits, poor working conditions, and insufficient pay are the norm. While estimates vary in terms of how many workers experience large fluctuations in work hours, it is clear that it is a growing problem causing hardship for millions of Americans. One case in point: 87 percent of early-career retail workers in a national survey reported fluctuations in almost half of their working hours.

What researchers, policymakers, and business leaders did not know until Williams, Lambert, and Kesavan completed their research is that schedule consistency increases profits—at least at one major U.S. retailer. Investing in employee well-being isn’t actually a zero-sum situation in terms of companies’ bottom line, but instead could be a hidden source of profits.