Do rivals need to follow Costco’s minimum wage lead right now?
For many years, Costco has consistently been ranked among the best retail companies to work for. The retailer is known for valuing employees, and this week it will demonstrate that once again when it offers something that its rivals in the warehouse club segment do not — a $16 minimum wage.
The chain’s CEO Craig Jelinek, announced last week in testimony before the Senate Budget Committee, that Costco is lifting its starting wage from $15 to $16.
Raising the minimum is “not altruism” according to Mr. Jelinek. “Paying employees good wages and providing affordable benefits makes sense for our business and constitutes a significant competitive advantage for us,” he testified. “It helps us in the long run by minimizing turnover and maximizing employee productivity, commitment and loyalty. We encourage our employees to view Costco as providing a career rather than just a job.”
The Costco CEO’s Senate appearance coincided with a current debate on raising the national federal minimum wage of $7.25 an hour to $15, either in one fell swoop or over a period of years. The last time the minimum wage was increased was in 2009.
Proponents of the increase point to a change in the demographics of workers in low wage jobs, which has shifted from teenage workers to primarily adults, with women, including those with children, holding down positions in predominantly service industry roles.
Opponents argue that forcing the requirement on employers, particularly small to medium-sized businesses, will result in job losses and business closures. Others say it may make sense to lift the minimum wage in metropolitan regions but that it would damage rural economies.
A New York Federal Reserve Bank report issued in 2019 examined the effect of a hike of that state’s minimum wage had on employment compared to Pennsylvania, which kept its minimum at $7.25 an hour. The net result found earnings rose more in New York with “no adverse employment effects” compared to its neighboring state.
An analysis by the nonpartisan Congressional Budget Office has concluded that a bump to $15 would raise wages for 27 million workers and lift 900,000 Americans out of poverty. It would also cost 1.4 million jobs over four years.
- Testimony of Craig Jelinek, President and CEO of Costco Wholesale Corporation, Before the U.S. Senate Committee on the Budget February 25, 2021 – U.S. Senate Committee on the Budget
- Minimum Wage Impacts along the New York-Pennsylvania Border – Federal Reserve Bank of New York
- The Budgetary Effects of the Raise the Wage Act of 2021 – Congressional Budget Office
DISCUSSION QUESTIONS: Do you agree with Costco CEO Craig Jelinek that “paying employees good wages and providing affordable benefits … constitutes a significant competitive advantage” for the retailer? How likely are Costco’s direct rivals and other retailing competitors to raise their starting wages to match the warehouse club giant?