Costco CEO supports raising the minimum wage


Costco’s CEO says he supports a federally-mandated minimum wage hike. Image: Fan of Retail/Flickr/CC BY-SA

Unlike most retailers, Costco is siding with President Obama in his call to raise the federal minimum wage to $9 an hour. In fact, it would do the President one better, supporting a minimum hourly wage of $10.10.

New bill to raise minimum wage

In his last State of the Union address, President Obama recommended raising the federal minimum wage from $7.25 an hour to $9 an hour. Since then, a new bill, the Fair Minimum Wage Act of 2013, has been introduced, seeking to raise it even higher, to $10.10 per hour, and thereafter indexing it keep up with inflation.

The federal minimum wage currently stands at $7.25 an hour. However, if indexed with inflation since its peak in 1968, it would now, according to NBC, be $10.58. Therefore, many see that move as long overdue.

Most retailers balk

The National Retail Federation, following President Obama’s address, warned that raising the federal minimum wage would slow job growth and raises prices. Likewise, Fred Deluca, CEO of Subway sandwich shops, warned that the move would “cause franchisees to raise prices.”

Costco CEO bucks industry

In a move unusual for profit-driven retailers, Craig Jelinek, CEO of the big box store chain Costco, has thrown his support behind the new bill.

Jelinek, a liberal supporter of President Obama, says the support is long-sighted and not entirely unselfish.

“An important reason for the success of Costco’s business model is the attraction and retention of great employees,” Jelinek said. “Instead of minimizing wages, we know it’s a lot more profitable in the long term to minimize employee turnover and maximize employee productivity, commitment and loyalty. We support efforts to increase the federal minimum wage.”

The ‘anti-walmart’

Costco is known as a quality employer that pays its employees more than its competitors, like Walmart. That is the reason that the New York Time’s Steven Greenhouse once labeled it the “anti-Walmart.” Since it already pays its employees more than the proposed higher minimum wage, its bottom line would not be affected.

“At Costco, we know that paying employees good wages makes good sense for business,” said Jelinek. “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.”

Walmart starts its employees at $8 an hour.

Move could spank competitors

On the other hand, as  Matt Brownell pointed out in Daily Finance, the wage increase would force its competitors to raise wages, and possibly prices also, in an effort to maintain profit margins. That could not hurt Costco’s standing one iota.


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