When CNNMoney asked the question “Can a company pay its workers well and also make money?” they could have started and ended the next sentence with “yes” and then ran the article with only those 12 words, because the answer is just that simple. So simple in fact, that even a Republican (we’ll have to get the coloring book version for Tea Partiers later) can understand it when it is put as clearly and simply as it is about to be put. Let’s start with a graphic, shall we?
The three real-life employees you see in this graphic represent the average worker at Wendy’s, Walmart, and Costco in the United States. That’s not a misprint though, the average Costco worker really does make over two times more than the average Walmart employee and almost three times more than the average Wendy’s worker. Before anyone gets the wrong idea here, and makes false claims or assumptions: No, those are not union wages at Costco. Not at all.
The second extremely noticeable difference between the three companies is the health care coverage offered by their employers. While Wendy’s simply doesn’t offer any coverage, and Walmart’s coverage is more expensive than most of its employes can afford, Costco not only supplies their employees with a health care package, but also offers a 401K savings plan that makes saving for their employee’s futures stress free and accessible.
So far so good right? Well, let’s look into how these higher wages, health care packages and 401K savings plans hit Costco where it hurts, and costs them in their profits and their stock prices. There’s no way they can remain competitive by throwing money down the drain. It’s impossible. So let’s look at the stock prices for Walmart, Wendy’s, and another big player in the employment field, McDonald’s.
Not to throw dirt on Wendy’s profitability as a company, but their stock prices are pretty uncompetitive with those of McDonald’s and Walmart, which leaves Costco falling somewhere in the middle of these three industry giants as a given, right?
Yeah, about that “Can a company pay its workers well and also make money?” question again:
[box type=”shadow”]Many aren’t quite hitting the right balance. Hundreds of dissatisfied workers at major American companies like Wal-Mart (WMT, Fortune 500), McDonald’s (MCD,Fortune 500) and Wendy’s (WEN) have joined protests nationwide in the past year demanding higher wages and better benefits.
One company that hasn’t had to deal with such strikes is Costco.
The no-frills warehouse chain pays its hourly workers an average of just over $20 an hour, compared to just under $13 at competitor Wal-Mart. Even President Obama praised Costco in a recent speech about helping the middle class.
The recession has been good for companies that targeted budget-minded customers. Sales at Costco (COST, Fortune 500) have grown an average of 13% annually since 2009, while profits have risen 15%. Its stock price has more than doubled since 2009.
During the same period, discount retailer Wal-Mart’s sales grew an average of 4.5% each year, profits rose 7%, and its stock price increased 70%.[/box]
So let’s be clear here, shall we? While Costco offers its employees two to three times the hourly wage of the average customer service worker, supplies them with extended health benefits and a 401K savings plan, companies like Walmart who are making just as much profit, and seeing their stock values rise even faster claim that a raise, any raise in the minimum wage, would spell catastrophic financial hardship for them.
And yes, there is that little pesky $55 a year fee that Costco charges its customers to shop with them that many claim is the reason why the Costco business model cannot be applied to its competitors. There’s an answer for that too:
… Research shows that it pays to pay employees well, because satisfied workers are more productive and motivated, according to MIT Sloan School of Management professor Zeynep Ton, who focuses on operations management.
“How many times have you gone to a store, and the shelves are empty or the checkout line is too long, or employees are rude?,” she said. “At Costco, you see a huge line that disappears in minutes.”
The productivity translates into sales, she said.
According to Ton’s research, sales per employee at Costco were almost double those at Sam’s Club, its direct warehouse competitor owned by Wal-Mart.[/box]
Paying workers a liveable wage, and in the case of Costco, paying them a wage that allows their employees to flourish, save and plan for the future is only the tip of the iceberg when it comes to the benefits that employees, their community and the country all experience when people are paid a decent wage. Other benefits include:
- A growing economy where Americans have money to spend
- Lower employee turnover rates that save companies money
- Happier employees who produce and work at higher levels
- Lowered reliance on government subsidies and handouts
- Higher job creation as Americans spend more money for products
- Lowered instances of crime and numbers of arrests
All you have to do is ask Cesar Martinez, the featured Costco employee from the main graphic in the article why a decent wage and health benefits is important to him and his young daughter with asthma, and you’ll understand why so many people want the same opportunity that he has, but are denied it by their employers over tired excuses of profitability.
“That’s the reason why I’ve been here for so long,” he said. “The company gives you a decent wage and treats you with respect and takes care of you. That’s why we all give 100%.”
You pay a worker a fair wage and you get an honest hard day’s work from them. The profits, the stock prices and the sales, well, they all start from that same place and have only one direction to go: Up.
There’s nothing partisan about the numbers, stock prices don’t have political affiliations, and America isn’t two separate countries colored red on one side, and blue on the other. Fair wages benefit everyone. Fair wages benefit America. Fair wages benefit you.
Leave a comment below, and let us know what you think about fair wages for American workers.
Now about that coloring book we promised you:
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