Costco CEO Comes Out In Support Of Minimum Wage Increase

With the President using the State of the Union address to call for an increase to the federal minimum wage rate to $9, and lawmakers introducing a bill yesterday that would actually increase that amount to $10.10 over the next two years, folks around the country are debating the merits and problems of the issue. But Costco CEO Craig Jelinek says he is firmly behind the move.

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

The head of the large warehouse club says that one of the keys to his company’s success is “the attraction and retention of great employees. Instead of minimizing wages.”

According to Jelinek, Costco is more profitable in the long-run when it has productive employees who stay longer.

But over at Forbes.com, Tim Worstall counters that while Jelinek might have a point about paying for quality employees, Costco might be stung a bit if its competitors suddenly have to pay more:

“If the general wage level rises then this effect won’t be seen. As long as Costco’s wages are higher than other peoples’, and they continue to use significantly less labour than other people, I’m sure it will continue to be a delightful experience for them. But if the minimum wage were raised to the level of wages that Costco pays (and why not, eh? After all, if it works for them it will work for everyone, right?) then that increased commitment and reduced turnover would disappear.”

The Fair Minimum Wage Act of 2013, introduced yesterday by Senators Tom Harkin (Iowa) and George Miller (California), would not only increase the national minimum wage level to $10.10/hour by 2015, it would tie the rate to inflation starting in 2016. It would also increase the minimum wage for tipped workers from $2.13/hour to 70% of the minimum wage.