Costco CEO: Raise minimum wage - to hurt WalMart!Submitted by DeBosco on Tue, 04/02/2013 - 14:57
Insightful analysis by Monica Perez:
Crony Capitalism: How the Sausage Is Made
When I saw a recent headline: Costco CEO: Raise The Minimum Wage To More Than $10 Per Hour, my first thought was, “How does this guy benefit from a higher minimum wage?”, and my second thought was, “Aha!” I cracked the code in an instant. Costco I thought, must pay more than $10 per hour already, while its competitors must pay less. That means Costco would not be affected at all by an increase in the minimum wage to $10, while any of its competitors that pay below $10 per hour could see their business models severely impaired. And so it is.
Costco’s minimum salary is $11.50 per hour while Wal-Mart pays new workers only $8. Costco is very light on service and very high on efficiency, with each customer spending much more per visit than Wal-Mart customers. A skillful, efficient workforce is integral to Costco’s business model. On the other hand, Wal-Mart has myriad employees, some of whom do nothing but greet customers, and with lower priced items and higher customer volume, each employee-customer interaction generates only modest revenue to the company. Its larger but lower-cost sales force is the only way for Wal-Mart to keep volume up and prices low.