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Please begin with an informative title:

Two years ago the Washington Post reported that the longtime CEO and co-founder of Costco, Jim Sinegal, announced his retirement while earning $350,000 a year. At the time Costco’s stock was up 40 percent from the previous year --- and all while paying his employees a fair wage with generous benefits.

The Seattle Times had reported that Costco's new CEO, Craig Jelinek, would be paid an annual salary of $650,000 plus a bonus of up to $200,000 starting on January 1, 2012 (with stock awards based on company performance).

That's not very much considering what other CEOs on the Fortune 500 list earn. Today most CEOs take home an average of 380 times more that their employees. In 1973 the average CEO received 20 times their average worker’s pay. In 1980, when the middle-class had peaked, the average CEO received 42 times their average worker’s pay. Today Costco's CEO only earns about 28 times his average employee. 

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Last year Forbes ranked Costco #24 on the Fortune 500 list (Wal-Mart ranked #2 behind Exxon Mobil). Maybe Costco would have gotten a higher ranking if they didn't treat their employees so darn well.

"At Costco, we know that paying employees good wages makes good sense for business," Jelinek said in a statement. "We pay a starting hourly wage of $11.50 in all states where we do business, and we are still able to keep our overhead costs low."

Do you hear that Wal-Mart? That's just the starting wage. The average wage at Costco is $17.00 an hour.

While although $11.50 a hour is barely enough for one person to live on, at least $17.00 a hour is much more survivable. One Wall Street analyst had complained, "It's better to be an employee or a customer than a shareholder of Costco".

But even so, just looking back over the last ten years, it appears that Costco's shareholders had nothing to complain about either (with the exception of the 2008 financial disaster). Costco's stock price has only gone up, and while also paying their shareholders dividends along the way (see the Google Financechart below).

Costco posted a fiscal 2012 profit of $1.7 billion, up 17 percent from the previous year, as revenue rose 11 percent to $99.1 billion. It ranks as the world’s seventh largest retailer.


Some Costcos are union, but mostly they are not union jobs. The warehouses that used to be the old Price Clubs (before Costco and Price Club merged in 1993) are, for the most part, still union --- but hey are few and far between these days. The International Brotherhood of Teamsters members working at Costco have negotiated wage and benefits packages that are among the best in the retail industry. According to the Labor Research Association, Costco employees who belong to unions enjoy seniority-based promotions, a grievance procedure, and minimum hours for part-time workers.

The excellent compensation of Costco’s union-represented employees is a testament to the company’s belief that treating employees well is good for business. A 2004 Business Week study confirmed the wisdom of this approach. Findings indicated that Costco employees sell 50 percent more per square foot of sales space than Wal-Mart’s rival warehouse chain Sam’s Club. They bring in profits that are about 25 percent higher than those at Sam’s Club, despite the fact that Costco’s hourly employees average $17 per hour and employees pay only eight percent of their health insurance costs

Costco’s corporate philosophy that workers should share in the profits they generate is the key to its high rate of employee retention --- a cornerstone of productivity. Costco's CEO's salary (plus bonuses) is  far lower in the income gap that exists between CEOs and employees at comparable businesses.

In an interview with The New York Times, the former CEO Sinegal defended his company’s practices against Wall Street criticism that shareholders could earn more if Costco lowered its compensation and benefits package to match that of other retailers.  Sinegal asserted his belief that customers like shopping at a store where they know workers are treated fairly and paid a living wage. His comments are bolstered by Costco’s share price, which is steadily increasing. 

So why can't other companies like Wal-Mart also pay fair wages to their employees AND make a good profit? Does the Walton family's collective net worth really need to be over $100 billion? Isn't that obscene? The answers to those questions and more are all answered very easily in this video I posted at YouTube.

Last year the long-time consumer advocate Ralph Nader penned a nice letter to Craig Jelinek urging him to support raising the minimum wage. The Huffington Post recently reported that Jelinek did in fact come out in support of the Fair Minimum Wage Act of 2013, which aims to raise the federal minimum wage to $10.10 per hour, and then is annually adjusted for inflation. It's still barely enough for someone to live on, but at least it's a starting point.

Let's compare some wage numbers: 

   *   Costco pays their employees a starting wage of $11.50 an hour ($23,920 a year),
   *   But the average wage at Costco is $17.00 and hour ($35,360 a year),
   *   The CEO of Costco supports the Fair Minimum Wage Act of 2013, which aims to raise the federal minimum wage to $10.10 per hour ($21,008 a year),
   *   Last year the average Social Security benefit for a retired worker was $1,230 a month ($14,760 a year),
   *   The average Social Security disability benefit was $1,111 a month ($13,332 a year), 
   *   The Social Security Administration reports that as of 2011, 50 percent of all wage earners had net compensation less than or equal to $26,965 a year.
   *   Walmart’saverage "sale associate" earns $8.81 per hour (that's only $15,576 a year, based upon Walmart’s full-time status of 34 hours per week).
   *   40 years ago in 1973, as a high school drop out, I made $7.50 a hour ($15,600 a year + over-time and full benefits) in a union sheet metal shop. Adjusted for inflation, today I would be earning $38.90 an hour ($80,912 a year). That would mean that in today's dollars, the $26,965 median wage is 66% less than what I had earned 40 years ago in 1973.


Hail to the Chief of Costco!

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