Can a company make money and also pay its workers well?
Many aren’t quite hitting the right balance. Hundreds of dissatisfied workers at major American companies like Wal-Mart, McDonald’s and Wendy’s have either walked off work or joined protests nationwide in the past year demanding higher wages and better benefits.
But one company that hasn’t had to deal with such strikes is Costco.
The no-frills warehouse chain pays its hourly workers an average of just over $20 an hour, compared to $12.78 at competitor Wal-Mart. Even President Obama cited Costco as a model in a recent speech about improving the economy and raising the minimum wage.
The recession has been good for both companies. Sales at Costco have grown 40% since 2009 to $97 billion and its stock price has more than doubled, while profits have grown an average of 15% annually.
During the same period, Wal-Mart’s sales grew about 17% to $470 billion. Profits rose an average of 7% each year, while its stock price increased 70%.
Costco seems to be investing some of that back into its employees.
Cesar Martinez, a 37-year-old fork lift operator, has worked at a Costco in North Carolina for 19 years. He makes $22.82 an hour, gets full benefits and a pension plan. He puts money into savings and doesn’t worry about hospital bills for his daughter, who suffers from asthma.
“That’s the reason why I’ve been here for so long,” he said. “The company gives you a decent wage and treats you with respect and takes care of you. That’s why we all give 100%.”
Experts say higher wages equals happier employees, which is the reason why Costco’s model has worked.
Some experts say companies aren’t able to adopt the Costco model, because they can’t charge its $55 annual membership fee.
However, research shows that it pays to pay employees well, because satisfied workers are more productive and motivated, according to Zeynep Ton, a professor at MIT Sloan School of Management, who focuses on operations management.
“How many times have you gone to a store, and the shelves are empty or the checkout line is too long, or employees are rude?,” she said. “At Costco, you see a huge line that disappears in minutes.”
The productivity translates into sales, she said.
Ton conducted a study that found that sales per employee at Costco were almost double those at Sam’s Club, its direct warehouse competitor owned by Wal-Mart.
But big box retailers and fast food chains don’t see it this way.
Last week, fast food workers in seven cities from chains like McDonald’s, Wendy’s and Yum Brands-owned KFC, protested for higher wages of $15 an hour. It’s a demand they’ve been making since last November. And it’s been spreading — from hundreds of Amazon warehouse workers in Germany to Wal-Mart workers walking off work, all calling for better pay, fair schedules and affordable health care.
The median pay for fast food workers nationwide is $9.05 an hour, or about $18,800 a year. That’s about $4,200 lower than Census Bureau’s poverty income threshold level of $23,000 for a family of four.
“While the fast food and retail industry is making record profits, its workers are forced to rely on public assistance just to afford the basics,” according to Fast Food Forward, a union- and community group-backed organization behind some of the protests.
Emily Jane Fox | CNN