Costco to Raise Minimum Hourly Wage to $14 This Month

Costco to Raise Minimum Hourly Wage to $14 This Month

The warehouse club retailer Costco announced on Thursday that it was raising starting wages for its US employees by $1 to $14 or $14.50 per hour, effective June 11, while other workers will receive raises of 25 to 50 cents an hour, Seattle Times business writer Benjamin Romano reported:

The raise, to be paid for with part of Costco’s savings from U.S. federal corporate tax cuts that took effect this year, will go to upwards of 130,000 U.S. employees, costing the company about $110 million to $120 million a year before taxes, Costco chief financial officer Richard Galanti said during the company’s fiscal third quarter earnings report Thursday. … Costco competitors including Target and Walmart announced wage increases and bonuses for their employees tied to the tax cuts earlier this year.

“But not everyone at Costco is happy,” Romano notes:

Some salaried employees, including some in the company’s Issaquah corporate headquarters, say they’re being left out of the equation as Costco spreads around the tax benefit. One person, who asked not to be named for fear of retaliation, said after the wage increase announcement, “I would make a considerable amount more going back and gathering carts for the warehouse in the parking lot.”

Raising pay and benefits for entry-level hourly employees has been a growing concern for US retailers and other low-wage employers in recent years as the labor market has tightened, making even low-skill workers more challenging to attract and retain.

Walmart, the country’s largest retailer, has been bumping up wages for its store employees incrementally since 2016, and announced in in January that it was putting some of its tax savings toward raising its pay floor from $9 to $11 an hour, as well as expanding its parental leave policy for both full-time hourly and salaried employees. This week, the big-box retailer, to which Costco is second in terms of US sales, also announced a new education benefit that will subsidize employees to obtain college degrees from certain partner universities in fields relevant to the retail industry. Target, another giant in the retail industry, raised its entry-level wage to $11 an hour last September and is committed to increasing it further to $15 by 2020.

Large US corporations got a major windfall from the tax reform package passed by Congress in December, which sharply reduced the corporate tax rate from 35 percent to 21 percent, and prominent companies like these mega-retailers are facing pressure to spend those savings on their employees, both as a matter of public relations and for political reasons, to improve popular perceptions of the tax cuts and curry favor with the Trump administration. Accordingly, a number of companies announced raises, bonuses, or new benefits at the start of the year, though the lion’s share of corporate tax savings is still accruing to shareholders, while labor market dynamics are perhaps a more significant factor in these decisions than tax policy. Smaller employers, meanwhile, are less sure of how much money the tax cuts will save them in the long run and more reticent to increase rewards, hindering their ability to compete with larger companies in this regard.