Why Costco is Backing Obama's Minimum Wage Push

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Spencer Platt, Getty Images
In a break with the rest of the retail industry, Costco has expressed support for President Obama's proposal to raise the federal minimum wage to $9 an hour.

In fact, Costco CEO Craig Jelinek is throwing his support behind the Fair Minimum Wage Act of 2013, a new bill that would eventually raise the federally-mandated minimum wage all the way to $10.10.

It's unusual to see a retailer advocate for a higher minimum wage -- after Obama called for the increase in his State of the Union address, the National Retail Federation said it would raise costs and kill job growth. But in a news release announcing his support, Jelinek makes it clear why he wouldn't mind seeing the minimum wage go north of $10: He already pays his employees at least $11.50 an hour, so a hike wouldn't directly impact Costco's payroll at all.

"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," Jelinek said. "We support efforts to increase the federal minimum wage."

Jelinek is a Democrat who supported Obama during his 2012 re-election campaign, so it's not surprising that he would support a liberal cause. But it's also fair to say that Costco would stand to benefit from a higher minimum wage.

After all, the law would mean that Costco's wages would stay the same, while its competitors -- like Walmart-owned Sam's Club (WMT) -- would have to raise their employees' pay. Anything that increases costs for the competition has to be a plus for Costco, especially if it means that those competitors have to raise prices to maintain their profits.

A higher minimum wage would give many of Costco's customers a bit more disposable income. That's a side effect that Obama alluded to in his address, noting that "for businesses across the country, it would mean customers with more money in their pockets."

For a company like Walmart, it's debatable whether increasing the buying power of their less-prosperous customers would really offset the impact of having to pay higher wages. But for Costco, which follows a business model that already includes a relatively high wage for its employees, it's easy to see how a higher minimum wage could boost sales without increasing costs.

Matt Brownell is the consumer and retail reporter for DailyFinance. You can reach him at Matt.Brownell@teamaol.com, and follow him on Twitter at @Brownellorama.

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99 Comments

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suealiaim

why? well, that's easy..it's so they can justify not paying their employees more (or even a living wage)

March 10 2013 at 3:38 AM Report abuse rate up rate down Reply
gwnichol

Hey AOL, you really need to fix this thing, it said it wasn't posting my message because of technical difficulties.

March 09 2013 at 4:22 PM Report abuse rate up rate down Reply
1 reply to gwnichol's comment
rohrscheibcroh

always

March 09 2013 at 5:41 PM Report abuse rate up rate down Reply
gwnichol

Gee, i wonder if Romney will continue to shop there after this?

March 09 2013 at 4:19 PM Report abuse -1 rate up rate down Reply
dkelmstra

What COSTCO is then doing is hurting their employees because they would then make only $1.00 hr over MIN wage vs $3.00 hr over MIN wage today. They are going to want PAY RAISES since when you raise min wage ALL WAGES end up going up as prices will go up on everything.
Every time we have raised min wage we see job losses and prices go up on EVER THING from gas to rent to food to autos etc

March 09 2013 at 3:55 PM Report abuse -2 rate up rate down Reply
Lisa Leary

It has been known for quite some time now that Mr. Jelinek is a decent human being and treats his employees quite well. Because of that, the turnover is very low, employees are happy and they offer great customer service. It doesn't take a rocket scientist to understand that if you treat someone well, they'll keep coming back. Believe it or not, there is absolutely nothing wrong with raising the minimum wage to $10.00 per hour. For that matter, there's nothing wrong with every person in America having decent health care and affordable housing. Those who have a problem with treating their fellow human beings well, are saddled with their own personal issues leading to the belief that they themselves cannot feel adequate unless someone else is suffering. Those people have many names such as pessimists, naysayers, bearers of gloom and doom, haters, haterade drinkers, etc. I was born a 'Pollyana' and will remain one until the end of time. Good on Mr. Jelinek! His endeavors will always be successful for one reason only, the generosity of his heart and soul.

March 09 2013 at 3:51 PM Report abuse +3 rate up rate down Reply
ajpic

So why does COSTCO care............. It is not a bad idea if COSTCO will eat the cost, but I fear not, because the people end up paying the freight.........No different then Obama Care......People are losing their jobs, and are being asked to reduce their hours from 37 and half to 25 and half especially part timers and that hurts the people.....So who really cares about the Public .......Not here. There is no free ride in any of these programs like it is being reported. Does the idea sound good........Watch out. not good in this economy.

March 09 2013 at 3:21 PM Report abuse -4 rate up rate down Reply
1 reply to ajpic's comment
suealiaim

low wages are bad for the economy...

March 10 2013 at 3:37 AM Report abuse rate up rate down Reply
saxmusic6339

Lets not get it twisted people this is nothing but another event to try and keep people mind occupied and not on the real issues with 200 + million still out of work who does it benefit ? you can't get paid if you don't have a job

March 09 2013 at 3:01 PM Report abuse -2 rate up rate down Reply
1 reply to saxmusic6339's comment
rohrscheibcroh

true an watch there prices go up. this is a no win . Either raise peices to the shoper or close the company then they are called names years i worked min wage .an neger got raises yet the prices were always changes about overhead . no one got raises

March 09 2013 at 5:40 PM Report abuse -1 rate up rate down Reply
camorelli1

Let's not cloud the issue of what companies are making profits and which ones aren't.

Minimum wage is not meant to be a 'living wage'. It's for 16 year olds and their first job, for high schoolers working and going to school. It's for entry level positions. A 'living wage' is what you make as you move up the ladder.

It's so predictable that the real meaning of the term would be changed to support the whims of a President and Congress that have never had to meet a payroll using money of their own, let alone real money.

As a small business person I feel like I've just been thrown under the bus by Cosco.

March 09 2013 at 2:57 PM Report abuse rate up rate down Reply
1 reply to camorelli1's comment
suealiaim

minimum wage should be a living wage....and if you're not willing to pay your employees a living wage then you shouldn't have any...my brother is a small business owner, pays his employees very well (including cell phones, health benefits - that he is not required to provide, even under obamacare, and other perks) and does quite well for himself. problem is most "small business owners" are just as greedy as the big buisness owners AND they think they're self made...which they aren't. they're made BY their employees...

March 10 2013 at 3:43 AM Report abuse rate up rate down Reply
camorelli1

Let's not cloud the issue of what companies are making profits and which ones aren't.
Minimum wage is not meant to be a 'living wage'. It's for 16 year olds and their first job, for high schoolers working and going to school. It's for entry level positions. A 'living wage' is what you make as you move up the ladder.
It's so predictable that the term would be changed to support the whims of a President and Congress that have never had to meet a payroll with real money.

As a small businesss person I feel like I've just been thrown under the bus by Cosco.

March 09 2013 at 2:57 PM Report abuse -3 rate up rate down Reply
camorelli1

Let's not cloud the issue of who is making profits and who isn't.

Minimum wage is not meant to be a 'living wage'. It's for 16 year olds and their first job, for high schoolers working and going to school. It's for entry level positions. A 'living wage' is what you make as you move up the ladder. It's so predictable that the term would be changed to support the whims of a President and Congress that have never had to meet a payroll with real money.

As a small businesss person I feel like I've just been thrown under the bus by Cosco.

March 09 2013 at 2:42 PM Report abuse -3 rate up rate down Reply