Walmart and Costco Wages
Megan McArdle has a post up at Bloomberg View trying to answer the question, "Why doesn't Walmart pay its workers higher wages like Costco?"
This is hardly an academic point; Ms. McArdle doesn't mention it, but President Obama himself, in a recent speech, said, "I'll be asking our businesses to set an example by providing decent wages and salaries to their own employees. And I'm going to highlight the ones that do just that. There are companies like Costco, which pays good wages and offers good benefits. ...These companies prove that it's not just good for the employees, it's good for their businesses to treat workers well. It's good for America."
Ms. McArdle notes that while Costco jobs pay more than Walmart jobs, Costco creates a lot fewer of them than Walmart does: Costco has 107,000 U.S. employees, while Walmart has 1.7 million. She could have gone even further and asked, as a matter of public policy, should the government really be in the business of encouraging companies to go the route of fewer higher wage jobs versus more lower-wage jobs? President Obama likes the higher-wage jobs because they help solve the "middle class" and "inequality' issues he expresses concern about. But the lower-wage jobs address the "unemployment' issue that Mr. Obama doesn't talk much about but that nonetheless is a problem. It seems to me that the government should be neutral on this point, allowing business owners and potential employees to choose the approach that works best for them, or some combination of the approaches, which aren't necessarily mutually exclusive. But Mr. Obama, not only though the speechmaking but also by mandating costly health insurance benefits, is pushing the high-wage approach.
Another point not mentioned by either Mr. Obama or Ms. McArdle, but worth emphasizing, is that a lot of the people working in Costco aren't actually those relatively high-paid Coscto employees. On two recent visits to a Costco in Dedham, Mass., I found the aisles full of employees wearing badges, offering samples of food, and answering questions about where to find merchandise. They don't work for Costco, but for a company called Club Demonstration Services. (A similar company called Warehouse Demonstration Services handles the Costco work in some other states.) Posts on employment law bulletin boards (here) say things like, "I work for Club Demo Services within Costco. We are titled Sales Advisors and do all the demos in Costco. We are all part time, no benefits, @$11.00 per hour. Our shift is 6 hours - a paid 15 minute break and an unpaid 30 min lunch." The Warehouse Demonstration Services site describes it as "a perfect part-time job."
This article from 2008 tells more about the way that Costco treats these demonstrators who work in its stores as second-class citizens, or at least, with lower compensation that its regular employees, and, in some cases, wages so low that the employees qualify for food stamps.
This is the sort of issue that you might think the national press corps might show some curiosity about, given Mr. Obama going around endorsing the workplace practices of Costco, a company whose board includes at least two major campaign contributors to Obama and the Democrats.
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