Friday, January 28, 2005

Beyond Minimum Wage

A good article that looks at how two Seattle companies: Costco and Dick's Burgers are able to be successful businesses while paying higher wages than their competitors.

Economists will tell you there are at least two reliable, legal ways to make money in America.

One is to fleece the workers, taking not only their wool but their skin. A proven model resulting, the Economic Policy Institute in Washington, D.C., tells us, in CEOs earning in a day and a half what took their beleaguered flock a year to earn in 2003.

Or, there's the Henry Ford model: Pay people well enough that they stick around, cutting both turnover and training costs while boosting efficiency. Better yet, pay them well enough so they can even go out and buy something.
And at Costco? Its overhead costs were lower, its volume of sales per employee higher, and its total sales bigger in 2003 than its arch rival, Sam's Club, a subsidiary of Wal-Mart.

Yet, Costco's health plan covers a larger percentage of employees than Wal-Mart's does, and workers pay less for it. Costco, in fact, provides among the best wage-and-benefit packages in hourly retail. And it pays the same wage scale everywhere in the country.

A cashier at Costco can make more than $40,000 annually within four years. The average store manager makes $107,000, with a crack at $40,000 in performance bonuses on top. The company also pays hourly workers annual bonuses from $4,000 to $7,000.

No wonder they stick around: Turnover at Costco is less than a third the industry average. Costco has low turnover, 22 percent overall, compared with 65 percent typical in the retail industry
via Pacific Northwest Magazine

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