David Rohde

ROCHESTER, N.Y. – Cashiers are barred from interacting with customers until they have completed 40 hours of training. Hundreds of staffers are sent on trips around the U.S. and world to become experts in their products. The company has no mandatory retirement age and has never laid off workers. All profits are reinvested in the company or shared with employees.

A doomed Internet startup? Occupy Wall Street fantasy? Bankrupt retailer recently purchased by Walmart?

No, a $6.2 billion-a-year, 79-store-supermarket chain with cult-like loyalty among its customers. Wegmans, which operates its 79 stores in New York, Pennsylvania and four other East Coast states, shows that a business can generously train its workforce and profit handsomely.

Privately owned by the Wegman family, the chain employs 42,000 people – 20 times the number who work for Facebook – and defies quarterly-driven Wall Street wisdom. Executives say their most important resource is their workers.

“Our employees are our number one asset, period,” said Kevin Stickles, the company’s vice-president for human resources. “The first question you ask is: ‘Is this the best thing for the employee?’ That’s a totally different model.”

Yet the company is profitable. Its prices are low. And it is lauded for exemplary customer service.

“When you think about employees first, the bottom line is better,” Stickles argued. “We want our employees to extend the brand to our customers.”

The Wegmans model is simple. A happy, knowledgeable and superbly trained employee creates a better experience for customers. Extraordinary service builds tremendous loyalty. Where, though, is the profit?

High volume, according to company executives. The chain’s stores are enormous – usually 80,000 to 120,000 square feet – larger than a typical Whole Foods and roughly double the size of a traditional supermarket. And they feature a dizzying array of 70,000 products, nearly twice the number available in a standard grocery store. Across the East Coast, Wegmans supermarkets have the highest average daily sales volumes in the industry.

Employees are omnipresent in stores and do seem knowledgeable. With little prompting, they launch into exhaustive but friendly accounts of where the meat, fish or produce they sell hails from, what each item tastes like and how best to prepare it.

A fish salesman raved about the exhausting standards of the company’s distributor in Alaska. A butcher said he had visited the ranch where a steak came from in Montana. And Maria Benjamin, a 38-year Wegmans veteran, started running a store bakery after managers loved her homemade Italian cookies.

“They let me bake whatever I want,” said Benjamin, one of 1,015 people employed at the company’s 135,000-foot flagship store in Pittsford, New York. “They’re really down-to-earth, wonderful people.”

Executives say the company is also able to invest in its employees and focus on steady, strategic growth because it is not publicly traded. They said cutting jobs or shipping them overseas was, in part, the product of having to relentlessly please the stock market.

“Some of that is that public mentality,” said Stickles, who has an MBA and once planned to be a stock broker. “The first thing they think about is the quarter. The first thing is that you cut labor.”

The Wegman family, which grants few interviews, has owned and run the company since 1916. Robert Wegman, whose father and uncle opened the first store, dramatically expanded the business in the 1970s by being one of the first chains to vastly expand store size, include pharmacies and use bar codes.

Today, the chain is run by Robert’s son, Danny, 65, and his two daughters, Colleen, 41, and Nicole, 38. Mary Ellen Burris, a 78-year-old senior vice-president and family confidant, said the owners refuse to open more than three stores a year because “we cannot continue to be the best if we try to go at a faster pace.” She said the family has no interest in taking the company public.

“No, absolutely not,” Burris said. “It takes away your ability to focus on your people and your customers.”

Like other companies, Wegmans has made mistakes. Over the years, it has had to close nine stores that failed to generate adequate revenues. And critics have accused it of moving stores out of poor urban neighborhoods and focusing its operations on wealthy suburbs. And while the benefits are generous, its pay rates are good, not extraordinary.

Wegmans has also clearly benefited from being based in Rochester, a small but historically prosperous area in upstate New York that was the birthplace of Western Union, Kodak, Xerox, Bausch & Lomb and other companies. Wegmans treats its employees well in part to keep them from gravitating to other firms.

Competition has also forced the company to change. The arrival of Walmart-owned supermarkets caused a sharp reduction in prices in 2004.

“It was clear that people were gravitating to the discount stores,” said Jo Natale, the company spokeswoman. “And so we completely changed the way we did our prices.”

But she and other executives insisted that Wegmans’ real advantage was the company’s happy, high-quality workforce. It sends butchers to Colorado, Uruguay and Argentina to learn about beef. It sends deli managers to Wisconsin, Italy, Germany and France to learn about cheese. Last year, it awarded $4.5 million in college scholarships to employees.

The company has half the turnover of its peers. In February, Fortune magazine declared it the fourth-best company to work for in America in 2012. In 2005, it was number one.

“What some companies believe is that you can’t grow and treat your people well,” Burris told me. “We’ve proven that you can grow and treat your people well.”

Wegmans is a model. It shows that companies can train, innovate and profit at the same time.

PHOTO: Daniel Wegman/Wegman handout

RALEIGH-DURHAM, NORTH CAROLINA — In two small, unassuming offices here, Bob Robinson and Eric Buckland are quietly making heroic efforts to help the American middle class. But American capitalism — and the American government — serve them both poorly.

The two men, the small businesses they painstakingly nurture and the difficulties they encounter are on-the-ground examples of the broad economic challenges the United States faces. Their stories do not present easy answers. Instead, they put the lie to Republican and Democratic orthodoxies regarding economic growth.

Start with Robinson. He is the executive director of the Raleigh Business & Technology Center, a primarily government-funded effort to help the poor and middle-class residents of southeast Raleigh start small businesses. The center — and the neighborhood it calls home — shows how a high-tech boom that has made Raleigh-Durham the fastest-growing metropolitan area in the U.S. nonetheless misses large segments of the population.

Southeast Raleigh has an unemployment rate of roughly 14 percent, three times that of Chapel Hill and other nearby affluent communities. Many local residents lack the education and skill levels needed to obtain high-tech jobs. Instead of trying to launch Internet startups, Robinson helps local entrepreneurs open flower shops, auto repair garages and bakeries. Over the last two years, he has also trained and placed 30 people in construction jobs. His new goal is to train people for entry-level jobs at Wal-Mart and Wells Fargo.

“It’s not all about technology,” he said. “We need jobs immediately.”

Just down the street from Robinson’s center, the South Wilmington Street Center for the homeless is filled to capacity. Frank Lawrence, the shelter’s director, said a decline in the construction industry hit local lower-middle-class and poor households hardest. At the same time, residents of other cities have flocked here after hearing of Raleigh-Durham’s boom.

“A lot of people moved here thinking there are jobs,” Lawrence said. “But they don’t have the skills to get them.”

Robinson’s center, though, doesn’t neatly confirm liberal assumptions about the failings of the private sector. Bo Marshall, one of the small businesspeople Robinson’s center trained, glows with pride when he calls himself a “serial entrepreneur.” An American sense of self-reliance, not dependency, bubbles among the center’s graduates. The magic of owning a small business that Republicans love to extol is palpable.

“They give us the essential tools,” Marshall told me. “But it’s up to the individual to get up and run with it.”

Robinson said the center, which opened in 2000, tries to combine the strengths of the private and public sectors. It helps inexperienced contractors bid for public and private construction projects, trains small business owners in marketing and introduces its graduates to local banks.

“The best solutions that we are involved in include government employees who are knowledgeable and capable of aligning policies and procedures with small business owners’ needs,” Robinson said. “Along with banks that we ask to reinvest and sustain.”

A few miles to the north, Eric Buckland is trying to create middle-class jobs as well, but in a completely different way. Buckland is the president of Bioptigen, an 18-employee high-tech startup that manufactures handheld retinal scanners used by eye doctors and researchers.

The company is based in the Research Triangle Park, a famed public-private partnership that over the last 50 years used skilled graduates from nearby Duke University, North Carolina State and the University of North Carolina at Chapel Hill to draw major corporations. Now, as multinationals trim research-and-development budgets or ship such efforts overseas, park administrators try to keep rents low to accommodate small, high tech firms like Bioptigen.

Buckland’s company relies on a combination of sales, private “angel” investors and federal research grants to function. Buckland says he is confident about the company’s future, but it struggled with cash flow during the recession, dropping from 18 employees to eight. Like hundreds of thousands of other small businesses, it does not offer the quick returns and high profits that draw venture capital.

“It can’t just be about billion-dollar wins that VCs target,” Buckland told me. “We need investments in small and medium-size companies that feed the ecosystem.”

At the same time, the Food and Drug Administration is blocking the sale of Bioptigen’s clinical device in the United States. The scanners are sold in four European countries, India and Australia but are still awaiting approval from Washington.

“You have to balance two mutually exclusive goals,” Buckland said. “One is promoting innovation in the economy and the other is protecting consumers against their fears. And the balance has shifted more toward protecting consumers against their fears.”

Buckland’s views, though, don’t fit Republican dogma. While complaining about overregulation, he says the Obama stimulus definitely worked. Research grants included in the package helped his small business sell high-tech products to universities. And Buckland blames budget brinksmanship by conservative Republicans for delaying a $2.7 million research grant he expected to receive in December.

“It’s really horrible,” Buckland said. “I think Congress has no idea of their impact on small business.”

Both men expressed exasperation with Washington partisanship. Robinson defended both the private and public sectors so vigorously that I struggled to peg him politically. Buckland, despite complaining about overregulation, said he leaned Democratic. Both called for pragmatism.

“My neighbor is a staunch Republican,” Buckland said. “And we both agree that if you can get reasonable people to sit down together, they can reach an agreement.”

“This polarization is killing us,” he added. “We’ve got to get through that, if we’re going to get through this malaise.”

I concur. Out here on the ground, party orthodoxy crumbles.

Update: The December job numbers released this morning continued the same trend described in yesterday’s column. Of the 200,000 new jobs created last month, 78,000 – or nearly 40 percent — were in transportation, warehousing and retail, sectors known for low pay and seasonal hiring. In a far more positive sign, manufacturing gained 23,000 workers in December after four months of little change. A vast expansion of that trend would benefit the middle class tremendously.

WASHINGTON — Between now and November, middle class Americans are going to hear an enormous amount of bragging about job creation.

Mitt Romney will tout his role in the creation of Staples, The Sports Authority and Domino’s, three firms that he says created 100,000 jobs. Barack Obama will say 2.9 million jobs have been created since March 2010, and highlight a surge of 140,000 new private sector jobs in November.

The central question for middle class Americans, however, is: What quality of job is being created? The November job surge, for example, occurred primarily in retail, leisure and hospitality, sectors known for low wages. The other high-growth areas were professional services and health care, where higher education is a central determinant of income. Manufacturing and construction, one of the few areas left in the American economy where members of the middle class without elite educational pedigrees can find strong wages, were moribund. The following chart from the Bureau of Labor Statistics breaks down the numbers.

In a rare moment of bipartisan agreement, Republicans and Democrats both recognize the problem. After years of Democratic politicians complaining about a lack of social mobility for Americans, The New York Times reported this morning that Republican candidates are complaining about the problem as well.

Presidential candidate and former Pennsylvania Senator Rick Santorum warned this fall that movement “up into the middle income is actually greater, the mobility in Europe, than it is in America,” according to The Times. Wisconsin Congressman Paul D. Ryan, a leading House conservative, recently wrote that “mobility from the very bottom up” is “where the United States lags behind.”

The story reported that at least five large studies in recent years have found the United States to be less mobile than comparable nations. A Swedish research project found that 42 percent of American men raised in the bottom fifth of incomes stay there as adults. In Denmark, the number was 25 percent. In Britain, it was 30 percent. At the same time, only 8 percent of American men at the bottom rose to the top fifth. That compares with 12 percent of the British and 14 percent of the Danes.

A Canadian study found that just 16 percent of Canadian men raised in the bottom tenth of incomes stayed there as adults, compared with 22 percent of Americans, The Times reported. Similarly, 26 percent of American men raised at the top tenth stayed there, but just 18 percent of Canadians.

Economists argue that a central tool in reviving the middle class – and creating social mobility – is the creation of better-paying middle class jobs. Like so much else, that task is enormously complex. Scholars say the reduction in pay is the product of worldwide economic trends, from technological change to globalization, that are difficult to counter. Harry Holzer, an economist at Georgetown University, tracked which parts of the economy featured high paying jobs over time. The percentage of well-paying jobs provided by the manufacturing sector fell by half – from roughly 27 percent in 1992 to 13.5 percent in 2003.

Holzer notes that the nature of business in the United States changed over the last several decades. In the past, large, capital-intensive manufacturing companies faced relatively little competition from overseas and depended on workers in the United States.

“Big, stable, highly profitable and not very competitive means a bigger pie,” Holzer said in an interview. “The simplest thing to do is to cut a bigger slice of the pie for workers.”

That business model has disappeared. Globalization caused American firms to face fiercer competition from foreign companies. And technological change allowed American firms to ship manufacturing overseas but still tightly monitor quality. Overall, companies have gained the upper hand on workers, who are increasingly easy to replace.

Paul Osterman, an MIT professor, agreed that those dynamics are irreversible. But he argued that some changes in American business norms unnecessarily accelerated the elimination of middle class jobs. Executives once praised for creating jobs are now rewarded for eliminating them.

“Think about who gets their picture on the cover of Fortune.” he said. “It used to be the ones that were admired were the ones who treated their workers as a family. Now it’s all about re-engineering, downsizing and shareholder value.”

Osterman said research shows that companies have reduced the amount of training they give their workers. He advocates tax incentives that would encourage companies to retrain employees.

Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities and a former economic adviser to Vice President Joe Biden, said the U.S. should not repeat the mistake it made after the last two downturns: building a recovery on a financial bubble.

“A lot of money shuffling at the top, a lot of arbitrage, which has very little to do with adding productive capacity to your economy,” he said. “A better way would be to add jobs that produce value, manufacturing jobs.”

He advocated that the American government adopt a manufacturing policy similar to the one Germany employs, where public-private partnerships target areas where German firms could gain global market share. Such an approach is anathema to many, though not all, business leaders.

The political debate, meanwhile, remains polarized. Democrats see government jobs as a tool in strengthening the middle class, arguing that police, teachers and sanitation workers stabilize the economy. Republicans see government jobs as relentlessly growing cancer that stifles the private sector.

Bureau of Labor Statistics data shows that overall government employment steadily grew from the 1940 to the 1970s, according to Bernstein. Since then, it has declined slightly.

Chart: Jared Bernstein, Data: Bureau of Labor Statistics

Hoping for constructive debate in a presidential election year is naive. And bipartisan commissions are notoriously ineffective. But I wish the National Academy of Sciences or some other nonpolitical group could be tasked with creating a Simpson-Bowles-like effort to examine ways to create better paying jobs. GE’s Jeffrey Immelt and other American executives who have doubled-down on American manufacturing could be included. So could retired Democrats and Republicans willing to move beyond party orthodoxy.

Study after study shows that a dearth of high-paying jobs is dividing our society, politics and middle class. We are falling behind the Canadians, British, and Europeans, as well as the Chinese and Indians. An honest debate over what mix of approaches might save us would be a godsend.