In this piece by John McDuling of Quartz, the author discusses and examines President Obama’s recent public affinity for Costco outlet stores in America. Shortly after delivering his State of the Union address on January 28th, Obama toured the shiny linoleum floors of an outlet in the suburbs of Washington D.C. On numerous occasions, the president has lauded the wholesale retailer’s high-paying jobs for all of its employees. The average wage for a Costco employee is $20.80 per hour, which is nearly triple the $7.25 per hour minimum wage and higher than Wal-Mart’s $12.67 per hour. During his tenure, Obama has been a staunch advocate for raising the minimum wage for the average, blue-collar working American.
Personally, I have never set foot in a Costco but I invest in the company with my own meager college money. Costco has a potent double-edge competitive advantage over its wholesale retailer peers: higher worker productivity and a lower salary gap. Akin to Henry Ford’s generous “$5-a-Day” innovative pay structure in 1913, Costco is paying its average workers double the wage of similar jobs in order to boost productivity. Quite simply, when workers look forward to a meaningful and enjoyable workday, they tend to perform more efficiently and effectively. Just think about your favorite college course or professor lectures – you tend to have higher participation rates, write higher-quality papers and receive higher marks. You not only improve yourself as a student, but widely benefit classroom engagement and intellectual richness. Moreover, the new CEO of Costco earns $650,000 per year while Wal-Mart’s CEO earns $1.3 million. The mere fact that the former company exhibits stronger growth and profitability at lower executive pay rates is very admirable.
For both stakeholders and shareholders, the generous Costco salary model is an enlightening business tool for America. The company’s various stakeholders, including shareholders, board members, shoppers and local communities, value the unique pay model as it has proven to be an effective business model and encouraged an enticing shopping experience. Shareholders are also rewarded in the superior market returns of its share price. While raising the country’s minimum wage affects a multitude of other economic factors, such as inflation and pocketed unemployment, Costco represents perhaps the best salary model of today.