Raising wages can actually save money. Here’s why

In 1914, Henry Ford made a historic announcement. Amidst widespread unemployment, he was doubling his workers’ wages from $2.34/day up to $5/day.

Competitors – as well as The New York Times’  financial editor – scratched their heads.

The company needed to combat high turnover and productivity struggles somehow. The year prior, Ford hired more than 52,000 people, yet his company only required 14,000. Productivity crashed, and Ford’s assembly line would often bottleneck as workers walked off the job.

The results of Ford’s doubling wages? The company produced nearly 19% more cars than the year before and sold 308,000 Model Ts, more vehicles than all other carmakers combined.

Ford said it best: “The payment of five dollars a day for an eight-hour day was one of the finest cost-cutting moves we ever made.”

More than a century later, the basic truth remains the same: When wages are higher, workers feel valued, and workers who feel valued tend to stick around longer and are more committed to their employer.

Not only do employers save on turnover costs, but they also foster a more engaged and productive workforce.

Why?

It comes down to inspiring employees to improve their work quality and output. In turn, you can reduce the challenges that hold your operations back.

Six reasons why increasing wages can increase productivity

We’ve identified the six factors directly tied to higher pay that also contribute to improved workforce productivity.

1. Employees stay longer, and a more tenured workforce is often more productive

When you pay higher wages, your employees tend to stick around. This not only reduces the cost of turnover related to hiring and training replacements, but it also means you spend less time onboarding and getting new workers up to speed.

In other words: A greater portion of your employee population can perform the jobs they were hired to do at full capacity, and tenured workers retain and grow institutional knowledge within your organization.

In fact, a Gallup study found that one factor all high-performing employees have in common is long tenures with their companies.

2. Happy, engaged workers are 12% more productive

Despite any suggestions that it leads to additional problems, more money can help lower stress and, as a result, make people more content and productive. Unsurprising, pay has been documented as one of the top five drivers of employee happiness.

Don’t forget that employee engagement programs can be key to improving worker satisfaction. At Adecco, we’ve been intentional to create community atmospheres, even in difficult work environments.

3. Better paid employees tend to work harder

Several studies have shown when you pay people more, they put in more effort at work. The general consensus is that employees have a stronger desire to keep their well-compensated job – and are less likely to slack off at work if they have more to lose.

Those benefitting from unexpected raises are often inspired to step it up at work as well.

4. Higher-paying companies attract quality talent

One study showed that when job descriptions advertised higher salaries, applicants who responded to those ads not only had higher IQs but also proved to be better suited for the position based on personality and motivation scores.

It’s also important to create opportunities for high-performing workers to earn more. Adecco offers our associates access to free upskilling and reskilling, including free online coursework, forklift operator training, and leadership development programs, which can lead to a salary bump.

5. Higher pay reduces absenteeism and disciplinary distractions

Several studies and surveys have shown that when you pay more, you may have less workplace strife on your hands. In fact, manufacturing plants that offered higher pay than similar employers in their area experienced fewer required disciplinary actions.

Another study showed when employers raised their wages, they enjoyed a decrease in disciplinary issues.

6. Better paid workers exhibit improved focus at work

People who earn higher wages are often healthier and less concerned about covering their expenses.

Work performance can slip when people consistently worry about their finances. One study found when low-income people were asked to consider an unexpected expense, their performance on several cognitive tests suffered.

Of course, boosting wages can’t fix every challenge, whether its productivity, culture, or turnover. However, in many cases, it’s easy to connect the dots and see the value better wages brings to the table.

Are your wages competitive? More than competitive? And what effect are they having on your company’s productivity? The time to ask yourself these questions is now.

You can start with the 2026 Salary Guide from Adecco. Download it for free and gain industry-specific insights and salary benchmarks for today’s most in-demand jobs.

Learn more by downloading Adecco Insights, our monthly magazine covering the top issues of 2026.