Costco’s CEO Supports a Minimum Wage Hike: What Gives?

Costco CEO Craig Jelinek has scored plenty of praise, and cynicism, for his support of an increase in the U.S. minimum wage. Costco has long been a leader in social sustainability, maintaining a decent living for its employees. The company has long attracted plenty of venom from Wall Street for paying high wages, fronting almost 90 percent of employees’ premiums and passing on savings from its wheeling and dealing with suppliers onto customers.

So is Jelinek and Costco, thanks to co-founder and former CEO Jim Sinegal’s legacy, acting out of altruism or blatant self interest? After all, critics point out that it is easy to support a higher minimum wage when you already pay above and beyond what federal labor laws require. Plus Costco’s business model does not require hordes of employees to line up along its stores’ aisles. True, Costco does have a high sales-per-employee ratio. But as Slate contributor Liza Featherstone pointed out a few years back, keep in mind Costco is loaded with many more high-end and posh products than its competitors that pad those sales figures. (I acknowledge that I didn't mention the possible burden a higher minimum wage places on small business owners.)

Take a look at Costco’s main competitor, Walmart’s Sam’s Club, which is about as close as one can get to retail big box purgatory. While Sam’s Club’s employees only make a tad less than their counterparts at Costco on their first day on the job, within a few years that same Costco employee can make over $40,000 a year--far more than at Sam’s Club or Walmart. Costco also boasts a lower employee turnover rate than its competitors, saving the company training and recruitment costs. The history of companies who have fallen on their sword by rewarding employee layoffs is a long one; Home Depot, for example, suffered reduced profits, dismayed customers and furious shareholders after former CEO Robert Nardelli fired many experienced employees in the guise of cutting costs (but not his compensation and severance package).

Of course the fundamental question comes up whether there should be a minimum wage at all--economists are divided on this issue. After all, in a free market, workers would just move to another employer if their current boss did not pay a justifiable wage. But there is no such thing as a free market anywhere: large companies, lobbyists, trade associations and politicians have done an excellent job sabotaging free enterprise in favor of an economic system skewed to those with the money and connections. Hence the odds are stacked against workers: the stubborn fact persists that the factory workers of our parents’ and grandparents’ generation would work in retail today because for many of them, these are the only jobs available.

So is Jelinek a hypocrite for trying to shove it to the competition buy forcing them to pay higher wages and therefore increasing their costs? Well, so what if he is? Businesses manipulate markets and laws all the time and are often dismissive of the public good: the automakers undermined mileage standards for years; energy companies cavorted with Dick Cheney in undisclosed locations for a policy favorable towards them; and many observers have alleged the Monsantos of the world wrote their products into American agricultural policy. Costco is just playing all of its cards.

So before the Walmarts of the world cry over a potential minimum wage increase, they should take a hard look at their overall strategies and corporate responsibility agendas. It is great to build parks, send employees to volunteer to schools and slap solar panels on top of warehouses. Taking responsibility for employees and treating them as assets, not liabilities, would be a huge step for social responsibility. Plus it would enhance these firms' bottom line in the long run. Companies who pay employees better, and hire more of them, fare better on a variety of performance metrics.

Leon Kaye explored children’s health issues in India February 18-27 with the International Reporting Project. Based in Fresno, California, he is the editor of GreenGoPost.com and frequently writes about business sustainability strategy. Leon also contributes to Guardian Sustainable Business; his work has also appeared on Sustainable Brands, Inhabitat and Earth911. You can follow Leon and ask him questions on Twitter or Instagram (greengopost).

[Image credit: Wikipedia]