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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. 

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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Comment Preferences

  •  Years Ago After The Dot.com Thing I Lost My Job (10+ / 0-)

    went from making $100,000 plus a year to well taking a job at a 7/11 type store for minimum wage . Funny thing happened. That shift I worked, the graveyard shift, always seemed to turn a profit for the store. Things didn't walk out of the store. Work got done.

    Heck there were a fair number of people that came in just because I always made sure there was a fresh pot of coffee on and I greeted then with respect.

    I left telling the owner that maybe they should pay their workers just a little more. And by doing so they'd get a more stable, better worker. That cared about the company.

    The owner laughed at me .... I know I am right here!

    When opportunity calls pick up the phone and give it directions to your house.

    by webranding on Fri Mar 08, 2013 at 12:12:03 PM PST

  •  Actually, no one is forcing (14+ / 0-)

    anyone else to be a shareholder in COSTCO.  Folks invest because the company has a good business model -- not because they necessarily give a shite about the workers.

    I'm a long term COSTCO member -- I don't buy as many things in bulk anymore -- but paper products, cat food and cat litter are worth the trip.  And no other parking lot (including Wal-Mart) is anywhere near as packed.

    " My faith in the Constitution is whole; it is complete; it is total." Barbara Jordan, 1974

    by gchaucer2 on Fri Mar 08, 2013 at 12:19:08 PM PST

  •  How Is Target? (2+ / 0-)
    Recommended by:
    4Freedom, greengemini

    I have a good friend. She has a full time job. But has a part time job with Target where she works like 12-15 hours a week stocking, just as a side thing late at night or on the weekend. Because for many one job isn't enough.

    When opportunity calls pick up the phone and give it directions to your house.

    by webranding on Fri Mar 08, 2013 at 12:23:38 PM PST

  •  Letsee... (7+ / 0-)

    In ten years, WalMart has increased $20/share or 38%.  Costo has increased $73 a share or 240%.  Which is the better investment again?

    'Guns don't kill people, video games do - paraphrased from Lamar Alexander (Sen-R-TN)'

    by RichM on Fri Mar 08, 2013 at 01:07:01 PM PST

  •  Good labor practices are the foundation of a (4+ / 0-)
    Recommended by:
    Uncle Moji, bluezen, PeterHug, greengemini

    successful, long term business. Consider the WalMart model versus the Costco model. WalMart shelves are scantily stocked because more consumers are awakening as to the poor quality of WalMart products and poor service.

    Costco is packed to the walls with merchandise, and the service is much better.

    I would also imagine that Costco is a better credit and pays vendors in 30 days, rather than the 120 days it takes WalMart to pay many vendors. In this difficult business climate, slow payers are getting slow-shipped on re-stocking, and the good payers are getting their orders filled quicker.

    You can't go back and rewrite your past, but you can use your past to create your future. ~ Ray Lewis

    by 4Freedom on Fri Mar 08, 2013 at 01:07:56 PM PST

  •  Costco did one thing for us poor folk (4+ / 0-)
    Recommended by:
    Uncle Moji, vzfk3s, Shotput8, PeterHug

    They forced the price down on common patent free prescription drugs. It seemed like a well kept secret that they were only marking up 12-14% over cost while the chain drug store on expensive real-estate was selling the same drugs for 25x what they paid for it. I used to be fascinated when I told a Wal-Greens Pharmacist who wanted $280.00 for one prescription that I could get it at Costco for  $14.00 . They didn't care. "Do you want it or not?" "Your manager won't price match?" "No".

    Then Wal-Mart finally responded with their $4.00 drugs for a 30 day supply. Still, you can get a better deal by buying in 90 day lots from Costco than having to stop in to Wal-mart every 30 days to pay $4.00. I started using Costco 14 years ago to save money because there was no RX cards on the junk insurance I was getting.

    Now I see Wal-Greens charging the same as Costco. Apparently, it finally caught up with them. I suspect that the price they charge the insurance company is much higher though. I don't attribute this massive cut in the price of common drugs to Wal-Mart. That distinction applies to Costco. It has saved me thousands of dollars every year for the last 14 years, directly or indirectly. Same with eye glasses . I always hoped they would open a dentistry office on the premises.

    After reading the about the massive screwing of Americans by Heath Care providers in Time Magazine, I think there is a huge soft belly of margin that a well-finance company like Costco could go after by opening up clinics in their facilities. You bet rich people would use them too. It would force many providers to do the same thing that happened on prescription drugs not under patent with MAP (Minimum Advertised Price) restrictions.

    Big Box stores  are starting to go the way of the main street retailers that they put out of business. I think Costco could be a sole survivor if they went after that market . It would provide them the earnings power and capital to grow their business. Something the Walton's will never allow Wal-Mart to do. They need their 2.4 Billion in in dividends each year.  It's unreal they collectively own over 50% of that company. Who the hell would buy the stock of a company that enriched five undeserving heirs like the Walton's who undoubtedly have their own class of shares with  special voting rights and dividends.

    The Heirs are a collectively worth 125 Billion up from a 100 Billion since this Fed induced rally started. What a fricking waste.

  •  thank you for this diary. tip'd & rec'd. e/m (3+ / 0-)
    Recommended by:
    Shotput8, PeterHug, greengemini
  •  Gas (1+ / 0-)
    Recommended by:
    greengemini

    We finally got a Costco gas station on Maui last year.  Prices at all the other stations on the island immediately dropped $.15.

    Since then Costco's gas price has been as much as $.50 lower then the other stations.

    I've been a member since before they merged with Price.  I love Costco!

    Don't be fooled by appearances. In Hawaii, some of the most powerful people look like bums and stuntmen. --- Matt King

    by hobie1616 on Fri Mar 08, 2013 at 06:30:09 PM PST

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