Costco’s investor returns from 2005 to the present have been almost five times those of Walmart. Given the large gap in employee compensation between the two, one might expect Costco to have lower profitability - but this isn’t the case. Walmart, meanwhile, pays its entry-level staff less than 9 dollars an hour and has an average wage of less than 13 dollars for nonsupervisory staff. But that’s where the easy similarities end between Costco and Walmart: the starting wage for Costco’s employees is 11.50 dollars an hour, and their average wage is nearly 21 dollars an hour. A 2005 article in the New York Times even named Costco “The Anti-Walmart.” Discount retail is an extremely low-margin, highly competitive industry, with usual profit margins of 1 or 2 percent. Its primary competitor is Walmart, and the contrast between the two retailers is stark. The most talked-about example of a company that pays fairly, and is doing better economically, is Costco. Let’s dig into some examples of this pro-growth, pro-worker strategy in action. This is not just a choice (that can be reversed), it’s a poor choice for corporate growth and long-term profitability. Decades of management philosophy has pointed toward labor as a cost to be minimized, never placing people on the “assets” side of the balance sheet. So it’s not just government policy that matters to wage growth, it’s changing our understanding of what makes a company successful. And they have proven that the key to breaking the trade-off is a combination of investment in the workforce and operational practices that benefit employees, customers, and the company.” “They have demonstrated that, even in the lowest-price segment of retail, bad jobs are not a cost-driven necessity but a choice. High-performing companies like QuikTrip convenience stores and Costco wholesale clubs “not only invest heavily in store employees but also have the lowest prices in their industries, solid financial performance, and better customer service than their competitors,” says Ton. ![]() So it’s easy to conclude that firms that offer higher wages can do so only because they cater to more elite clientele - their customers are willing to pay higher prices.īut according to a growing number of business experts like Zeynep Ton of MIT, the presumed conflict between employee compensation and low prices is a false one. Their hands are tied they can’t raise prices or they’ll lose customers. Especially for retailers with business models that are all about low, low prices, jobs that pay low, low wages are just assumed to be part of the deal. It’s globalization, it’s competition, it’s high input prices, it’s uncertainty, it’s the need to please the stock market, it’s poor demand … It’s always something. The conventional wisdom seems to be that many companies have no choice but to offer bad jobs. In The Fight for Fifteen (The New Press, 2016), David Rolf documents not only this ongoing battle for higher wages but also its various points and successes, compelling readers to understand that a simple fifteen dollars could be the first step toward better things.įor more books that pique our interest, visit the Utne Reader Bookshelf.Īgainst The Stereotype: How American Companies Are Committing To Higher Wages and Still Succeeding So, now, more and more voices rise up, clamoring to be compensated more fairly for the work that they do. ![]() Many employees cannot live on the salary afforded to them by their companies. The debate over minimum wage has been a long one in America’s recent history.
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