Costco announces it's raising its minimum wage to $16 because it 'makes sense for business'
People love going to Costco for the generous free samples, super-low prices on pizza slices, and the ability to buy a year's supply of UTZ mix. But now, there's another reason to renew your Costo card: The retail giant has raised its minimum wage to $16 an hour.
Costco has around 180,000 employees in the U.S. and the wage increase will affect about 20% of its hourly employees. Previously, the company raised its minimum wage to $14 in 2018 and $15 in 2019.
The average Costco employee makes around $24 an hour.
Recently, Costco employees received a $2-an-hour hazard pay raise due to the COVID-19 virus. Given the increase in the minimum wage, the company is looking to end its hazard pay program although some employees will receive a permanent raise.
"Since Costco's inception, the company has been committed to paying employees very competitive retail wages and providing them broad and affordable health care benefits," CEO Craig Jelinek said during a Senate Budget Committee hearing. "Two years ago we moved our starting hourly wage to $15 everywhere in the U.S. Effective next week, the starting wage will go to $16."
According to Jelinek, it just makes good business sense.
BUDGET COMMITTEE HEARING: Cosctco CEO Craig Jelinek argues that a higher wage and healthcare benefits for employees… https://t.co/rrs0OTiLE9— Forbes (@Forbes) 1614280274.0
"I want to note this isn't altruism," Jelinek said at a Senate hearing. "At Costco, we know that paying employees good wages ... makes sense for our business and constitutes a significant competitive advantage for us. It helps us in the long run by minimizing turnover and maximizing employee productivity."
By making Costco a more attractive place for workers it puts pressure on rivals such as Amazon to increase their minimum wage.
The decision comes as Democrats are hoping to raise that national minimum wage to $15-an-hour. The threshold has been stuck at a meager $7.25 since 2009. President Joe Biden attempted to put the $15-an-hour pay raise in his COVID-19 aid proposal but didn't think it'll make it past Senate budget negotiations.
Raising the minimum wage to $15 an hour would help many Americans but also lead to layoffs as some companies with slim margins won't be able to survive the increase in labor costs.
The Congressional Budget Office said the phase-in of a $15 federal minimum wage by 2025 would give 17 million Americans a raise and lift one million out of poverty. However, it could also result in 1.4 million people losing their jobs, raising the unemployment rate by 0.09%.
"Young, less educated people would account for a disproportionate share of those reductions in employment," the CBO said.
Costco's decision to step up and give their employees a raise shows that companies can do the right thing without having to be forced to by the government. It also sets a great example for other major corporations by showing how raising the minimum wage can be good for both employees and the bottom line.
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