The first people to put Costco on my radar screen were Kossacks. Forgive me for preaching to the choir, but I thought you might like to see your inclinations justified in print (or at least on your computer screen).
This is from the Labor Research Association and the author is Moira Herbst:
To workers and union leaders, it is a familiar refrain. These days, the story goes, consumers demand low prices, meaning goods must be produced and sold cheaply -- and retail wages must be kept as low as possible. Companies like Wal-Mart insist they're feeling the squeeze and must pay workers poverty wages -- even while netting $10.5 billion in annual profits and awarding millions to top executives.
But there's another company that is breaking the Wal-Mart mold: Costco Wholesale Corp., now the fifth-largest retailer in the U.S. While Wal-Mart pays an average of $9.68 an hour, the average hourly wage of employees of the Issaquah, Wash.-based warehouse club operator is $16. After three years a typical full-time Costco worker makes about $42,000, and the company foots 92% of its workers' health insurance tab.
The clearest difference between Costco and Wal-Mart is their attitude toward organized labor. If memory serves me well, what Herbst is describing here is a little something economists call the union wage effect:
Though only about 18% of Costco's total workforce is unionized, union representation creates a ripple effect and helps determine labor standards in all stores. The Teamsters represent about 15,000 workers at 56 Costco stores in California, New York, New Jersey, Maryland and Virginia. Workers are covered by West coast and East coast contracts, negotiated in February and April of last year.
"The agreements lock in wage and benefits packages that are the highest in the grocery and [discount] retail industries," said Rome Aloise, chief IBT negotiator for Costco and Secretary-Treasurer of Local 853 in San Leandro, Calif.
Costco passes on similar compensation packages to its non-union workers; the contracts act as templates for other stores' employee handbooks.
Indeed, Costco has a business philosophy that is almost diamterically opposed to Wal-Mart's:
Strong union representation isn't the only reason Costco jobs are so well compensated; the company itself has an unusually forward-looking corporate philosophy.
Costco CEO Jim Senegal has said: "We pay much better than Wal-Mart. That's not altruism. It's good business."
Chief Financial Officer Richard Galanti explained: "From day one, we've run the company with the philosophy that if we pay better than average, provide a salary people can live on, have a positive environment and good benefits, we'll be able to hire better people, they'll stay longer and be more efficient."
And for those people who question the wisdom of comparing any retail company to Henry Ford in the 1910s or General Motors in the 1950s, chew on this:
Besides the efficiency of its workforce, another reason Costco can afford to pay more is that it cuts the fat from executive paychecks. The overall corporate philosophy is that workers deserve a fair share of the profits they help generate -- not just a pat on the back or a new job title like "associate."
For example, while CEOs at other major corporations average 531 times the pay of their lowest-paid employees, Sinegal takes only 10 times the pay of his typical employee. His annual salary is $350,000, compared to about $5.3 million awarded to Wal-Mart's Lee Scott.
After California Costco workers ratified their Teamster contract last March, CEO Jim Sinegal said Costco workers are "entitled to buy homes and live in reasonably nice neighborhoods and send their children to school."
As Atrios likes to say: Reward good behavior. Indeed, Costco is practically the posterchild company at Buy Blue with a rating of 99%.
There is no Costco in my community, but I did visit one up in Boulder with my in-laws. Yes, they are airplane hangars too, but that's about the only similarity you'll find between Costco and Wal-Mart (as I don't believe Wal-Mart's prices are all that low, I'm not including prices). Read the whole article and you'll see.
JR