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Costco faces a problem bigger than retail theft and inflation

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Costco is known for its employee-friendly policies and has consistently offered higher wages compared to other retail companies.

Minimum pay


The warehouse club raised its minimum pay to $15 per hour in 2019 without any protests, showcasing its commitment to fair compensation. Costco, led by former Chief Financial Officer Richard Galanti, has prioritized employee satisfaction as a valuable investment that yields positive returns.

Employee well-being


Galanti, who recently retired after a long tenure with the company, emphasized this focus on employee well-being during Costco’s first-quarter earnings call.



“We look at the wages in a vacuum, and we want to do as much as we can for our employees,” he said. “And — and certainly, you know, there were several increases starting with the front-line-worker premium during the initial year of covid. We kept half of that in there, which you know, we kept one of those $2 an hour in there, which was like $400 million a year. Again, we’ve also benefited from stronger sales and productivity, so we were able to afford that.”

Competitive wages


By offering competitive wages, the company has successfully maintained a loyal workforce. Galanti mentioned that Costco regularly assesses and adjusts its employee compensation to ensure employee satisfaction and retention.



“We look at them independently, and we’ll continue to do that. And to the extent inflationary pressures are down, that means there’s probably a little less inflationary pressure on wages,” he added.

Significantly more


“But [over] half of our employees are top of scale, and they’re getting increases, irrespective of some of the extra things we’ve talked about every March. And then, as you go from a new employee over the first 9,000 or 10,000 hours, you’re getting constant increases that are more — significantly more,” he added.



While Costco is known for its forward-thinking stance on wages, it has encountered criticism from employees in certain regions. Despite this, Costco has received an “A” rating for its employee retention efforts according to Comparably’s evaluation of companies.

Quality employees


“Costco is in the top 10% of similar-sized companies in its ability to retain quality employees. 58% of employees would not leave Costco if they were offered a job for more money while 68% are excited to go to work each day,” Comparably said.



Costco outperformed major competitors like Walmart, Amazon, Best Buy, and Target, securing the top spot in rankings. However, this success did not shield the chain from facing efforts to unionize by its workforce.



“Costco workers in Norfolk, Va., voted overwhelmingly yesterday to join Teamsters Local 822, marking the union’s first organizing victory at the wholesale retailer in two decades,” according to a statement from the Teamsters union. “The 238-worker group seeks strong representation to address years of concerns and improve working conditions.”



Initially, the unionization at Costco in January seemed like a singular occurrence, but now another Costco branch has also become part of the Teamsters union. This development of Costco workers joining the union may lead to increased expenses for the company. With this new addition, Costco now has another location affiliated with the Teamsters union.

Costco drivers


“More than 150 Costco drivers in Sumner, Wash., voted overwhelmingly yesterday to join Teamsters Local 174, becoming the first-ever group of workers at a Costco Distribution Center to organize with the Teamsters,” the union said in a news release.

Teamsters contract


“They are seeking strong representation to address years of workplace concerns under the backing of a Teamsters contract. Key issues include wages, retirement, and a lack of seniority and grievance procedure.”



The union strongly criticized the company when announcing the addition of another location to its membership.



“Costco isn’t the company it once was. The culture has shifted dramatically the past few years. Management told us they heard our concerns, but they weren’t listening. We were tired of being ignored,” said Paul Lowrie, a three-year driver at Costco and new Teamster. “My fellow drivers and I knew that the only way to reclaim control of our future and make things better was by joining the Teamsters.”

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