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CNN reported on the 25th (local time) that Costco, a large retailer, announced its intention to raise the minimum wage to $16 per hour starting in March as early as coming March. It is analyzed that the decision was made in accordance with the strategy to increase productivity by reducing turnover with the best treatment in the industry. The minimum wage suggested by Costco is more generous than US President Joe Biden’s pledge of $15 per hour, and it is expected that other retailers will consider raising wages. However, there are many voices concerned about the rapid wage hike movement as the economic shock from the novel coronavirus infection (Corona 19) remains.
According to CNN, Craig Jellyneck Costco’s Chief Executive Officer (CEO) announced at a US Senate Budget Committee hearing that he would raise the hourly minimum wage from $15 to $16 starting next week.
This is far more than its rival Wal-Mart ($11/hour), as well as $1 more than the world’s largest e-commerce company Amazon and retailer Target/Best Buy ($15/hour). “It is important that our employees get the opportunity to earn more than $15 or $16 an hour,” said Jellyneck CEO. “This helps minimize turnover and maximize employee productivity, commitment and loyalty.”
Considering the characteristics of the distribution industry with a high turnover rate, Costco is actively pushing for wage hikes, but the problem is cost. Costco raised its minimum wage to $14 in 2018 and $15 in 2019. Some analysts say the average wage is $24 per hour when added to the bonus. The reason why Costco was able to preemptively raise wages is the strong earnings. As a result of early efforts in the online business, last year’s sales reached 163.22 billion dollars, an increase of 9.3% from the previous year. Operating profit also surged 14.7% to $5.43 billion.
However, the circumstances of other retail companies are poor compared to Costco. In such a situation, if a wage increase is made by crying and eating mustard to prevent employees from leaving, there is a high possibility that the management difficulties will worsen. In fact, Best Buy, which has the largest number of stores selling electronic devices in the United States, recorded solid sales even in Corona 19, but fired 5,000 employees this month alone as the proportion of online business increased. Arindragit Duve, a professor of economics at the University of Massachusetts, told CNN that “Costco’s move could be an opportunity to press competitors like Wal-Mart and Amazon to set their minimum wage to $16.”
The bigger problem is that Joe Biden’s administration is pushing the federal minimum wage from $7.25 an hour to $15 in stages by 2025. Accordingly, the industry’s opinion is that a wage increase is a matter of time.
Many small and medium-sized enterprises (SMEs) object to this, saying that if the government’s minimum wage increase becomes a reality, they have no choice but to reduce jobs or close their doors. Large corporations are also expressing concerns about the government’s pursuit of raising the minimum wage. Wal-Mart CEO Doug McMillan also said in a letter announcing the absence of the Senate Prediction Committee, “I support raising the federal minimum wage itself,” and “$15 an hour may feel too high in some industries and regions.” “It makes no sense for the government to promote wage increases,” said Matthew Shay, president of the National Retailers Association. “As companies differ in their positions, it is best to let the market decide the wages.”
/ Reporter Park Seong-gyu [email protected]
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