07-26-2004, 03:04 PM
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#7 (permalink)
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Insane
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Quote:
Originally posted by kutulu
I'd like to add something to my post. A typical arguement is that raising minimum wages and forcing benefits has to force companies to raise prices. Costco is an example of a company that offers benefits and has much higher than minimum wage. In fact, most people make at least twice the minimum wage. At the same time, their prices are just as good (or better) than Sam's Club's prices.
Interesting.
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Yeah, it is interesting. I was reading about the phenomenon at inequality.org:
Quote:
[...]
The second nugget got far less attention, unless you're inclined to read the truly radical press: Business Week. In the April 12 issue, reporters Stanley Holmes and Wendy Zellner penned a terrific piece called "The Costco Way," with an even more provocative sub-title: "Higher wages mean higher profits. But try telling Wall Street." The authors point out that Costco recently posted a 25 percent profit gain, as well as a 14 percent sales hike. Yet Wall Street punished Costco's stock, driving it down 4 percent. What gives? As the authors report: "One problem for Wall Street is that Costco pays its workers much better than archrival Wal-Mart Stores Inc. does, and analysts worry that Costco's operating expenses could get out of hand. 'At Costco, it's better to be an employee or a customer than a shareholder,' says Deutsche Bank analyst Bill Dreher."
And there it is in a nutshell. In today's economy (or, for that matter, yesterday's economy), whether a company treats its workers fairly and satisfies consumers does not matter to Wall Street. Stock analysts don't reward such a feat--preferring instead that a company conform to Wall Street standards by wringing out every cent from regular people's wallets.
But the great piece of reporting (and public service) that Holmes and Zellner perform is that they actually run the numbers and get beyond the rhetoric. They compare Costco to Wal-Mart's Sam's Club, the unit with which it directly competes. Costco, which has about a 20 percent unionization rate, pays workers 40 percent more than Sam's Club and gives them comparatively superior benefits (for example, health care and profit-sharing plans).
Costco, surprise, has a lower turnover rate and a far higher rate of productivity: it almost equaled Sam's Club's annual sales last year with one-third fewer employees. Only six percent of Costco's employees leave each year, compared to 21 percent at Sam's. And, by every financial measurement, the company does better. Its operating income was higher than Sam's Club, as was operating profit per hourly employees, sales per square foot and even its labor and overhead costs. Here's a quote to emblazon for corporate America: "Paying your employees well is not only the right thing to do but it makes for good business," says Costco CEO James D. Sinegal.
It's one thing for wacky columnists to bemoan the Wal-Martization of America. But Wal-Mart cannot let stand a salvo from the mainstream business press. My suspicion is that Wal-Mart will do everything possible to discredit the authors, in a campaign that will make the White House's assault on Richard Clarke look mild by comparison. During the dreadful supermarket strike in Southern California, the big supermarkets said they had no choice but to demand draconian cuts from their 70,000 workers because of the competitive challenge posed by Wal-Mart and its lower prices. The radicals at Business Week explode that myth, encapsulated in the article's final sentence: "Costco shows that with enough smarts, companies can help consumers and workers alike."
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