Competitors’ pay raises forces wholesaler to act accordingly.
Workers at the very bottom on the Costco Wholesale ladder will see their pay increase by $1.50 an hour before March comes to an end. The pay hike, which brings entry-level earnings to about $13 an hour, is the first for the retail chain’s lowest tier employees in nine years.
Costco has a practice of reviewing its pay scale every three years, generally providing increases at the top end, which is currently around $22.50. Floor worker pay hasn’t been increased until now because Costco’s compensation has
been far ahead of that of its competitors. The national bulk retailer has gained a strong reputation for being employee friendly. Costco was part of a Harvard Business Review study demonstrating that paying well promotes good performance.
Citing a desire to “be the premium at all levels,” CEO Robert Galanti told investors of the pay hike during a recent earnings call. The news broke even as investors learned that the chain’s earnings are down, although sales remain strong. The move to increase pay is expected to dip into current quarter earnings by about a penny a share and 2 cents per share for the next three quarters, Galanti said. The decision, he insisted, is the right one for Costco and its workers on the floor, who perform a physically challenging job.
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Costco’s decision to increase its entry level scale comes as others in the industry are doing the same. Competitor Walmart, which operates Sam’s Club locations, announced an increase to $10 an hour. Target also offers similar pay.
With nearly 700 stores globally, Costco reported a net income of $546 million, $1.24 a share in the quarter that ended Feb. 14. In the same quarter last year, Costco reported a net income of $598 million, $1.35 a share during the same quarter last year. The earnings dip, attributed to rising costs, came despite a 1% growth in sales.
Costco’s pay increase is expected to take effect before the end of March. Although it falls short of the $15 minimum wage activists across the country have been pushing for, it does keep the company ahead of the competition and may deliver an edge in attracting the high-performing workers it’s after.
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