Editor’s Note: Aetna CEO Mark Bertolini stunned corporate America when in January he announced that Aetna would raise its minimum wage to $16 an hour. Economics correspondent Paul Solman sat down with Bertolini to talk about the decision and his motivation to increase not only the minimum wage, but also benefits. We showed a portion of the earlier this month as part of a larger discussion about whether better-paid workers equal better business. This week, we look more at the CEO himself and the way he runs Aetna. The text of Bertolini’s extended conversation with Paul below has been edited and condensed for clarity and length.
Mark Bertolini: Every time I went to an office, walked around, and said hello to everybody, I heard time and time again, “It’s really hard for me to afford the insurance we offer; I don’t have my kids on it anymore because I can’t afford dependent coverage; I’m on food stamps, my family and I, is there something we can do about wages?” So I said to my HR team, “Tell me who these people are. Give me a profile of who the front-line employees.” That took a long time because we didn’t really know.
Paul Solman: What do you mean? Don’t know their ethnicity? Don’t know their…?
Mark Bertolini: Well, we know some things about their demographics, but we don’t know a lot. Are they single mothers? How many kids do they have, because they’re not on our benefit coverage? If they’re not on our benefits are they on their father’s or are they on Medicaid?
Paul Solman interviewed Mark Bertolini on the PBS NewsHour earlier this month about changes for his company’s lowest-paid employees. The transcript here represents an extended version of that interview.
Paul Solman: This is about the 50,000 employees you have?
Mark Bertolini: Yeah, about 49,000 employees. So who are these people? We had to go dig for that. And so if you think about it, if the people that run the human resources function have to go dig the information out, how much do you think the CEO knows? Even less!
Finding this information was troublesome, but we finally got it. What we found was 81 percent of these folks were women, and a lot of them were single mothers. Some of them had their kids on Medicaid, because they couldn’t afford our dependent coverage, and some of them were on food stamps.
I said, “Here we are, a Fortune 100 Company. We’re record stock price, record earnings, record revenue, and all the executives are doing really well, but we have these people at our organization that are suffering. What do we do about that?”
Paul Solman: And what are their jobs in the company?
Mark Bertolini: They’re claims processors, they’re customer service representatives. They’re people that actually take care of our customers on the front lines every day.
Paul Solman: And once you found out what dire straits they were in then there was this
epiphany, ‘Oh my goodness, we have to do something for these people?’
Mark Bertolini: Well, no, actually, the epiphany had been going on for a few years, this income inequality issue was rattling around in my head. I mean, I came from a family that sometimes didn’t have insurance. My dad worked half time, my mother was a part-time nurse. I grew up in a family like those families.
Paul Solman: There’s long been this concept of the ‘efficiency wage.’ You get more out of people if you pay them more. Is that the basis on which you simply said, “Hey, we’re raising everybody’s wage here”?
Mark Bertolini: No, in the past, businesses said that financial capital is the scarce resource and that people are plentiful. If you look at the jobs people used to do, an employer could always train a new employee to do the work. But it’s not just retraining somebody for a job anymore. It’s about the knowledge worker, and for Aetna, someone who has a level of empathy attention present. In that case, people are not a commodity, and now, we have a lot of financial capital in the system. So, we’ve flipped the paradigm and said, “Let’s invest in husband or scarce resource, which is talent — a motivated, engaged, present worker. And let’s put at risk some of our capital to do it.” Because, if people can’t make ends meet at home with food, benefits, health, and health care in particular, how can they be present, engaged, knowledge workers when they come to work?
Paul Solman: And, the answer to that is pay them more? Treat them better? And therefore, you’ll retain them and draw people like them?
Mark Bertolini: It’s not just about paying them more. It’s about creating a higher level of personal disposable income that allows them to engage in the economy, be a part of their communities and feel good about the place they work. In order to do that, we didn’t only increase wages, but we also impacted benefits, which together creates the highest level of personal disposable income.
Paul Solman: So, is there any data to suggest that your vision for a good life and a good worker and a good company actually is justified?
Mark Bertolini: Well, is what we’re doing now working? No. Engagement in companies is going down. People are struggling with talent in their organizations. Should we make our employees work harder? Or should we actually say, “You know what? Here’s a different deal. If you take care of us, we’ll take care of you. If you take care of our customers, we’ll make sure that you earn a fair living, so that you can engage in your communities and can take care of your families.” Is that a good deal for us? I think it has got to be a good deal.
Paul Solman: Is there any evidence that it works?
Mark Bertolini: Well, we just started, right? Last Monday was their first paycheck. A lot of happy people were running around the office today.