Is There a Moral Obligation to Pay More?

Perhaps this question is an easy one for the average reader of BeingFrugal.net. Perhaps not. Let me explain my current situation and pose a few questions.

Living out in the country my family has to use propane for the furnace, hot water heater, dryer, and stovetop. Every time I see the Amerigas propane truck pull in the driveway to fill our tank I cringe as I know a $400+ bill will soon be in the mail. I am currently paying $2.91 a gallon for propane. Not fun.

But being a frugal person by nature, I am always looking for ways to make my paycheck go as far as possible each month. So when a neighbor told me about a new propane company to the area, and what a great price they are offering, my ears perked up. $2.19 a gallon to be exact, which on a 200 gallon tank comes out to a savings of $144 every time they fill the tank. No small potatoes.

So after another friend recommended their service as well, I decided to make the switch. The savings was just to hard to pass up. But I wanted to give Amerigas a chance to match the $2.19 per gallon. I was hoping they would price-match because it is going to be a small pain to get the tanks switched out and started with the new company.

But when I called them and explained the situation, they told me something that is the reason behind this post. They said,

Oh, well, you really need to consider that they have to be paying their employees much less than what we pay ours. And you will be contributing to this problem if you switch.

My first thought was, no, you need to figure out how to lower costs and overhead so you can compete with them on price. That is how capitalism works, right? That is how Wal-Mart works, right? But instead, I said nothing and told the man that I would re-consider my options.

So that brings me to my question. Is there a moral obligation to pay more so employees are compensated fairly? Is the Amerigas employee playing the sympathy card and just making up the story about salary discrepancies? Should I just stay with Amerigas figuring that the cheaper propane company is enticing new customers only to raise the price in a couple months? Have you ever had a company say this about a competitor and what was the result? Looking forward to your comments.

A surefire way to compete on price is to use online coupons. I knew I could tie coupons into this post! 



Author

By , on Jul 29, 2009
Kyle James Kyle James owns and operate a website called Rather-Be-Shopping.com which specializes in coupon codes for over 750 stores, organized in 25 shopping categories. He also has a blog, where he writes about frugal living and personal finance tips as well as other musings about the adventures and mis-adventures of raising 3 active kids.

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{38 Comments}

  1. Is this other company local? If they are ethical and of good business practices, I would chose the locally owned propane company – whether they were cheaper or not.

    I’m not sure I agree with the other company telling you that they have to pay more because they pay their employees more. That is certainly their prerogative. But it’s yours to spend the hard earned money you make where you choose.

  2. Great post! A lot of food for thought. There are definitely times where spending more makes sense: better quality, supporting local vs. sweat shops, organic vs. pesticides. I don’t agree with the CS rep guilting you like that, but too often we make the choice to go for the cheaper price tag without considering all the other factors involved.

  3. marci:

    There are instances where I do pay more….
    this is a very small town.
    I will pay more at the local co-op for gas as 1. they carry my account,
    and 2. it supports local owners and 3. the prices are fairly competitive. This is instead of paying Freddies, where most of the profits go out of town.

    I will pay for local produce and support my local dairy industry…of course, buying Tillamook Cheese and Ice Cream is no burden at all :)

    Check out the promises on the new company tho, and get it in writing for how long they will keep the lower prices. Also see if it is possible to check with some customers to see how the service is. Hopefully there is no big hurry – sometimes it’s best to sit on a decision until you have all the fact gathering done.

  4. bob:

    Its called capitalism and competition. Go for the cheap stuff!

  5. Lisa:

    Very well said Lynnae.

    Personally, if I had that phone conversation I would feel like I was being manipulated. That puts my back up and they would have lost my business on that alone. What are you supposed to reply after that conversation?

    Debbie @6:21 AM–I was interested in that information, too. The CEO, Eugene Bissell, makes $442,000 a year with a total compensation package of over $2,000,000. My guess is the receptionist wasn’t talking about the CEO 8-)

    http://investing.businessweek......tners%20LP

  6. Lynnae:

    Ok, I’m back with my thoughts.

    I don’t think there’s a moral obligation to pay more, meaning, I don’t think everyone in the U.S. has an obligation to make the same shopping decisions.

    In the case of the propane companies, that’s a huge discrepancy in price. And I’m not sure what your minimum wage laws are in CA, but I know here in OR, we have one of the highest minimum wages in the country, so I don’t worry too much about how much the competition is paying their employees.

    The other thing about employee pay rates is this…if everyone paid a family wage, where would the college students work? I worked my way through college as a cashier at Target. They certainly didn’t pay me enough to support a family, but that’s not what I was there for. When an employee gets hired, they agree to what they are to be paid, if they accept the job. So that’s not something that generally falls into play when I make my moral shopping decisions.

    But since I have family in the farming industry, I tend to shop locally for produce, because I want to support local farmers. Farming is something I have personal experience with, so I tend to be more sensitive in that area.

    I think “moral obligation” is a very individual decision, based on your financial situation, your priorities, and your life experience. And there’s not one standard that applies to everyone.

  7. Kat:

    Interesting question you pose. If you look at the Wal-Mart situation a little more closely, you see the drive to lower prices comes at a cost. For example: you have a great name brand product. Wal-Mart offers to carry it. This is a huge deal – only a fool would turn it down, right? So they carry it, but in order to make enough profit on the deal, they need to change the way they manufacture it. When Wal-Mart wants to do the “falling prices” on that product, they need to find a way to do it even more cheaply. First, the quality of the product suffers. Metal parts and durable assembly become plastic parts and less durable assembly. Eventually, they are squeezed enough that they can’t make it more cheaply by product and they have to pay people less to make it. With the tax rates and the cost of benefits and the wage bottom limit, eventually, companies are forced to have their products made overseas in order to take advantage of cheaper labor so that they can stay in business. In the meantime, they have squandered their good name because a once reliable product is no longer reliable. This is the difference between buying at a “box store” versus a store that services what they sell. Those stores tend to buy the better models (although they look exactly the same on the outside and have exactly the same features.)

    Sometimes it will make a difference, sometimes it won’t. The question is best broken down into two questions in order to adequately arrive at a solution. How much quality do I need with this particular product? What are the reasons behind the price difference?

    Maybe I just want a cheap item to last for a short term. Then again, will that cheap item adversely affect something else? Maybe I pick a brand name dish detergent because I get a rash if I use the cheap stuff. That’s a different motive behind the choice than just does it clean. Now maybe I have a high-end washing machine. I want to make homemade washing soap, yet if I do, I will likely damage my machine. Is the savings worth the cost of dealing with the damage? No.

    With your specific situation? Amerigas may or may not be right. On the other hand, Amerigas is a national brand. The bigger the company, the more likely you are going to run into corporate bloat. If you know that the product is just as good a quality (is it possible that maybe you will get less efficiency from it), then it might be worth looking into how they treat their employees. There was a time that I wouldn’t have considered that. On a certain level, those people have chosen to work there. Now, I don’t know. So, if that is on your heart, by all means, follow up on it! I would ask again if they would be willing to come down on their price. If it’s going to be a hassle and they will raise their price once the competition is beat out (also a Wal-Mart strategy in smaller town areas), then you have gone to a lot of hassle. It doesn’t sound like something that you lightly do. Then again, Amerigas may realize this and so they are a little less willing to come down in price, hoping that people don’t want to risk having their yard torn up in order to switch to a lower price.

    I hope you less us know what you decide. I don’t know that there is a wrong choice here.

  8. kath:

    Larger companies usually charge more because their overhead is higher. They do a lot more advertising in larger venues, probably have larger offices, pay more rent, and maintain a larger fleet of trucks as well as other expenses. That’s what you’re paying for. Their employees are probably making as much as the smaller companies employees are, unless they have been with the larger company for many years and their pay reflects that. Don’t let them make you feel guilty just to keep your business.
    My only concern with changing to a company that charges so much less is that maybe it’s an introductory offer and within a few months the costs will be equal to or higher than your existing company.

  9. Great, thought provoking post and good comments!

    My first response: yes, there are situations where I would pay more for an item, but this isn’t one of them!

    If you are genuinely interested in staying with the original company and want to give them another chance to price match, I might call back and try another Customer Service Rep. I will often ask to speak with the manager, since many times the reps don’t have the authority to make those decisions anyway.

    But at the end of the day, $144 is a huge savings, and I would jump on it!

  10. Molly:

    Wow, this is a good post and comment thread.

    I’m a bit conflicted/undecided about this.

    I don’t think I always have a moral obligation to pay more if I’m not getting of value out of it (customer service, quality product, etc). If they are identical in all aspects about which I KNOW, I see no problem buying cheaper. In this instance, I’d pick the cheaper gas.

    However, I don’t shop at Walmart anymore. I buy handmade soap. I try and support WAHMs. I’m getting something out of those transactions. And I will happily pay more for that.

  11. Lynnae:

    I just woke up, so I won’t post my thoughts until I’ve had my coffee. But isn’t this a great post by Kyle? And I’m loving all the comments, too! Very thought provoking!

  12. Robert in SF:

    @Storm:

    I am curious if you have a reference for your statement about it being illegal to pay an employee more than they are worth in a public company:

    “While Amerigas should be free to do this, by law this is in fact illegal since they are a publicly traded corporation and so are responsible to shareholders NOT to pay more than the efforts of employees are worth.”

    I don’t think that it is illegal, unless you are thinking of nepotism (and I don’t even know if that’s illegal in non-governmental jobs).

    Just as with customer/business contracts being between the two parties to negotiate and agree to, the employer(owner)/employee arrangement is between only them, and although the business manager has a fiduciary responsibility to run the business well, to say it is *illegal* to pay above and beyond “worth” is applying the wrong standard.

    Worth is up to the manager/owner and the employee to determine…if they make the wrong decision, then it is bad business, but not illegal (unless breaking some sort of accounting/minimum wage law).

  13. Chandra:

    We also use propane for heat, cooking, water heater, etc.. Amerigas here is much higher priced than several other propane companies. We use a family owned propane company that is much cheaper than Amerigas. I think Amerigas is famous for the holyier than thou attitude and their prices reflect that. I wouldn’t worry about their ploys to try to keep you as a customer. I am sure it is just that a ploy!

  14. Abby:

    I agree with K. I think this applies to Shop Local campaigns, too. We happily paid more (much more!) to buy our son’s bicycle at the independent bike shop instead of hitting a sale at Target or WalMart. The service they provide is worth it, and they reinvest in our community. More $$$ came out of our pocket, but we can’t calculate the rewards.

    But there’s another local business that just fails – poor service, lousy selection, often closed when their posted hours say otherwise. No matter how much I like the owner, I’m not inclined to shop there just because.

    I don’t think of it as getting the lowest price, I think of as getting the best value for our dollar – which is often the same thing, but not always.

  15. Debbie:

    Wow. Good post.

    I agree with most of the commenters, the guilt angle is pretty low. I would agree with Amerigas if their competion was in a developing country and you know for a fact that the employees would be extremely under paid. Knowing that isn’t so is pretty pathetic.

    My husband says to ask how much $ the CEO/President of Amerigas is making and how much profit they make. I’m sure the other company is showing significantly less $ in both of these categories.

  16. Storm:

    I agree with the majority of the posts above; certainly there is no moral obligation ever to pay more in such situations. The Amerigas representative was in essence claiming that they employ people out of charity, paying them more than their efforts are worth. While Amerigas should be free to do this, by law this is in fact illegal since they are a publicly traded corporation and so are responsible to shareholders NOT to pay more than the efforts of employees are worth. Clearly this representative was being dishonest with you.

    The competitor is paying a fair wage. I can state this with absolute certainty since slavery, well non-governmental slavery, is illegal in most nations. The competitor is not threatening the employees or forcing them to work, instead those employees sought out the jobs and agree to the work arrangement. Perhaps they get more days off, or flex time, or other benefits which can reduce costs or make life more enjoyable and so result in a situation of lowered costs to the customers. Regardless of the specifics, the interaction between employer and employee is a wholly voluntary one and so always necessarily a morally good situation.

    And for Patricia’s sake, one cannot conclude that since all voluntary interactions are moral, that one cannot or should not tip waitstaff. The interaction between patron and waitstaff is also a voluntary one in which tipping is a part.

  17. My thoughts are that I can’t worry about the employees or how a company is able to offer me a lower price. I have to do what’s best for my family & if that means going to a competitor then so be it. I certainly understand the argument, though & understand ones dilemma for wanting to do the right thing.

  18. K:

    A thought provoking post.

    I could easily argue both side of this post….

    On the one hand, it is not your/my responsibility to assure a company stays afloat and their employees are paid well by paying more for their merchandise/services. Should I spend our hard earned money and deprive my family of something so that another family/company can make a living? I think not.

    On the other hand, I am part of a union family. My spouse is a journeyman in a skilled trade. He is a great employee, reliable and has excellent skills. Non-union contractors can easily under bid his company for the same job, because they pay their less skilled workers significantly less (MUCH less than 25-50 cents/hour) than what my husband is paid.

    In the end, the market/consumers solve the problem. Many, many times over the years, construction jobs that were “lost” to the lower bidding firms now call my husband’s company to fix the numerous mistakes that the “fly by night” companies made…..at much greater effort and expense than it would have cost if the job had been done properly and *safely* in the first place. (New construction is cheaper than a re-do). As they discover that their cost savings actually aren’t real savings, they now call my husband’s company *first*, despite the elevated cost.

    I would try the new company. If you find they offer a comparable product at a comparable price, then you will save yourself a nice chunk of change.
    If you find that they aren’t reliable, have poor customer service, etc., then you have a decision to make. How much are you willing to tolerate to save money?

    By the way….I was a waitress. In college. I chose to get an education and make more than just tips. Additionally, as mentioned, we are a union family. However, we shop at WalMart. We only pay more for a product or service IF that product or service is the best decision for our family. If it is union, all the better.

  19. Kristen:

    I agree with Meg. It’s a very poor business practice to bad mouth your competition. And I agree with Steele that the comment may have been nothing but guilt. Do you know for certain that the other company pays their employees less?

    I would not patronize a business that I knew for sure treated their employees badly, but in this case, I think it was a ploy to get you to stay. The money you would be saving is nothing to sneeze at. If you are getting the same product for less money, I would make the switch. I would also write a letter to the owner/president of Amerigas and tell him or her about your experience. The higher ups should know what their frontline sales people are telling customers.

  20. Robert in SF:

    This is an interesting question…it has many levels to it, such as:

    What is a reasonable amount of expense for “employee-minded” overhead (salary, employee safety expenses, benefits, training, etc.)? In other words, how much is too little, too much, or just right?

    Is there a point where the business’s profits above and beyond these expenses is enough that they can easily lower prices to obtain new business/keep business without cutting these expenses?

    Can I trust *this* company when they tell me these expenses are set reasonably, and thus so are their prices?

    What moral/ethical obligation do I have to support those business that do have these reasonable expenses and adequate profits over other businesses that do not when the choice will affect my own budget significantly?

    I think the point you make about capitalism being about managing prices to keep business is, from a layman’s view, incorrect. Capitalism is about the freedom to set prices, and own the business and its related expenses and profits…not about necessarily conducting business to maximize profit or get the most cash flow. That, in a vacuum, is not even necessarily good business practice, as counterintuitive as it seems. If we seeks only to maximize profit without regard to building long term customer business, then we can run the business into the ground very quickly. Sure the first 2 quarters had great return, but few customers came back to us in the third quarter b/c out workmanship or support was so bad. In other words, you can get great utilization out an expensive car by never taking it off the road for a tune-up or other maintenance…but without that longer-term view, we will ruin the engine, wheels, suspension, etc. very quickly and thus the car will be a real loss much sooner. A car (or business) that is run with a long term view may not have the most payback in a short period of time, but it makes up for on long-term volume.

    I think that when a company makes an incredibly high level of profits (as compared to say other vendors, or vendors in a similar business model, or just to the median household), profits that far exceed it costs, and thus the prices set for their customers are waaaaaaay above costs, then perhaps the business should consider when there is profit enough and pass the savings on to the customers….

    Sometimes it’s about the community we are in. We are all in this together, you know? But sometimes the business is about “profiteering” at the customers’ expense.

    As for this case, it sounds like the vendor gave you some “personal service”, in that they played the “guilt” card… Trump it by asking for numbers or how they manage those costs, with the employees and community in mind? Talk to the delivery gal/guy and ask them what they think…Turnabout is fair play.

  21. Patricia Tucker:

    Not sure I agree with Steele, but I love the post. If one were to follow Steele’s reasoning, one might not tip waitpeople because they choose to work in a system that makes them hustle for tips AND share them with others. I think this is a legitmate question which comes up over and over. Do you pay for more locally made stuff or less from stuff made overseas in sweat shops? Do you pay more (in terms of tips) for those who are in a system that allows them to be paid less with tips in mind? I am not sure Amerigas is right. My hunch is that they could take a bit less profit and lower their profits. What is missing is how much a company is entitled to make? I will be interested in hearing/reading other comments.

  22. Steele:

    Whether or not the competing company pays their employees less than the company you are currently getting your gas from is not revelant. When in probability your current gas company is using a sales technique called “guilt” to keep you as their customer. And I think this is a very POOR way to conduct business and POOR customer service, even if it is the truth. Its nothing more than a guilt sales technique.

    The bottom line is that if in fact that is true, the employees of the second company are working there of their own free will. They may in fact be making maybe $0.25 less per hour, maybe $0.50, but that does not even touch the comparison in price difference between the two companies.

    Remember, in business, its all about making money, a profit, and without you as a customer, their profit drops. For you, it’s about saving money. If you can save $144 everytime you fill up your tank, then Id go for it.

  23. Kyle:

    Wow, great comments everybody! A lot of food for thought. I think what I am going to do is take the advice from Kat to call back and speak to an Amerigas manager and explain the situation and see if they will come down on their price.

    If they won’t, I agree that my 1st and foremost moral obligation is to my family and kids, and thus I will switch to the lower priced propane company. $144 savings a couple times a year is easily enough for back to school clothes and supplies for 3 kids. Hopefully, I will get the same amount of customer service. Which I guess means that they won’t ever let my tank run out completely before they come out and fill it.

    On a side note, I also found out that Amerigas has a “Service Disconnect Fee” – This fee covers the administrative costs associated with me leaving. Plus they charge $80 to come and get my old tank. Wow, they get you coming and going. The new company has no such fees.

  24. Melissa:

    We faced a similar situation a couple years ago with our propane company. A new company was offering a great deal, so we called our existing company to see if they’d match, or at least come close to matching the deal at the new company.

    We were told that the new company was offering a low rate for a season to get people to go through the hassle of switching over. (New tanks, rental or purchase? etc.) But that once the honeymoon period was over, the new company would significantly raise their prices.

    We were also told that there would be a fairly large fee to switch back to their company if we left it.

    Unsure what to do, we just stayed with our original propane company.

  25. Meg:

    Well, I think it’s bad taste for a business guy to say that about another business. After all, can you be sure that he knows what the other guys are paying and is being honest about that? Maybe the other company pays their guys better but runs more efficiently. Perhaps the one company is more expensive because the management takes a higher salary. The only way to know would be to call each up and ask them what they pay their employees — though who knows if they’d answer truthfully if at all.

    However, if something does seem too cheap, chances are that corners are being cut somewhere. I’ve often heard that you never go with the lowest bidder, because there’s always someone willing to stoop to lows that others wouldn’t and shouldn’t.

    And I DEFINITELY believe that we have a responsibility to spend our money wisely, which means not only getting the best price but also supporting (or not supporting) companies according to our values. Shopping does have worldwide consequences. And while I can’t say that none of the stuff I own was made in sweat-shops, I do try to shop better these days, buying more local produce & other products, buying eco-friendly soaps, buying fair trade, shade grown chocolate, etc. etc. etc.

    I know that some people can’t afford to think about where stuff comes from because they’re on very limited budgets, but I think most of us can do better — even if the only thing we do is just to buy less stuff. For example, do you or your kids really need more trinkets from heaven knows where that are probably full of lead anyhow?

    Sometimes the price difference isn’t even that much — heck, sometimes local produce at a farmers’ market is even cheaper than what you’ll find at a discount grocery store. And when something ethical/green is more expensive, it is often better for you in other ways, whether it’s healthier or just better quality — and a frugal person takes both into account anyhow!

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