Thursday, May 22, 2008

Economic Naturalist: Uniform Edition

When I was in High School, I worked first at Arby's and then at Pizza Hut (they were also next door to each other). To work at Arby's, I had to purchase the uniform I was to wear (about $25), but when I quit and went to Pizza Hut they gave me the uniform to wear.

Why did Arby's charge me for the uniform, while Pizza Hut did not?

Arby's paid a higher wage, but they were not exactly the same type of food service so it is hard to determine if that means anything. Let's rule out "worker exploitation" because it is ridiculous, it was a competitive labor market and I could have gone other places, I went to Arby's because the wage was higher, I quit shortly thereafter because it was a disgusting place to work (at that particular franchise store, I still ate other Arby's).

My guess is that Arby's had (has?) higher turnover, so they use the uniform cost to discourage workers who do not expect to work long enough to recoup the cost of the uniform in higher wages. It would not be a useful deterrent afterwards as it would be a sunk cost, but it may have helped with the self-selection. Thoughts?

3 comments:

Matt E. Ryan said...

I suspect it might be something particular to the franchise of all Arby's vs. all Pizza Huts. Here's a question: Which one do you think cares more about how their employees look? I'd think Arby's, the interaction is greater since you spend more time at the counter and there's no delivery. Perhaps making the employees buy the outfit gives a psychological hint that the uniform is important?

Matt M said...

Interesting question. I don't know about these firms in general, but I'm not sure that quality control is the issue. The firm can still supply the uniforms even if it makes employees purchase them.

Self-selection sounds good. This topic in general sounds like it could make a good paper on "rational" behavior of teenagers. Get some data for some firms that switched from firm provided vs. employee purchased and look at turnover rate response or something.

If you can somehow work the minimum wage into it then you can really wow people! (on that note, maybe this is one possible response to minimum wage laws, although that explanation seems dubious.)

Admiral said...

I suspect the main issue involves taxes. The uniforms would be deductions for whoever pays for them. It's possible that Pizza Hut values that. Corporations have been known to be even more desperate seeking such write-offs... I believe there are some facts in the famous Van Gorkom case to that effect for instance (http://en.wikipedia.org/wiki/Smith_v._Van_Gorkom).