Walmart vs. Costco

Last week, striking Walmart workers and supporters of OUR Walmart converged on the company's shareholder meeting in Bentonville, Arkansas, calling for higher wages and better working conditions. Walmart employee Janet Sparks delivered a shareholder resolution that would have required senior executives to hold a large portion of their company shares until reaching retirement age, which would more closely align executives' interests with shareholders. She told the crowd that the last bonus associates at her Baton Rouge, Louisana store received was for just $26.17 and that Walmart CEO Mike Duke made more than 1,000 times what the average Walmart worker did last year.

Low wages and insufficient benefits for Walmart workers don't just affect workers and their families. Low-wage workers often need to rely on public benefits for healthcare, food, and other necessities for themselves and their families. A recent report by Congressional Democrats calculated that one Wisconsin Walmart supercenter likely costs taxpayers $900,000 a year when public assistance costs for the store's employees and their families are added up.

When Elizabeth Grossman wrote last week about the Equitable Food Initiative, which combines respect for farm workers with food safety, one of our readers commented that EFI leading participant Costco has other initiatives to improve the food supply and pays employees well (including good benefits). A recent BloombergBusinessweek piece on Costco explores Costco's treatment of employees, which is in stark contrast to Walmart's. Brad Stone writes:

Despite the sagging economy and challenges to the industry, Costco pays its hourly workers an average of $20.89 an hour, not including overtime (vs. the minimum wage of $7.25 an hour). By comparison, Walmart said its average wage for full-time employees in the U.S. is $12.67 an hour, according to a letter it sent in April to activist Ralph Nader. Eighty-eight percent of Costco employees have company-sponsored health insurance; Walmart says that “more than half” of its do. Costco workers with coverage pay premiums that amount to less than 10 percent of the overall cost of their plans. It treats its employees well in the belief that a happier work environment will result in a more profitable company. “I just think people need to make a living wage with health benefits,” says [Costco CEO Craig] Jelinek. “It also puts more money back into the economy and creates a healthier country. It’s really that simple.”

In February, Jelinek set Costco’s convictions in ink, writing a public letter at the behest of Nader, urging Congress to increase the federal minimum wage for the first time since 2009. “We know it’s a lot more profitable in the long term to minimize employee turnover and maximize employee productivity, commitment and loyalty,” he wrote.

... Costco’s constitutional thrift makes its generous pay and health packages all the more remarkable. About 4 percent of its workers, including those who give away samples and sell mobile phones, are part-time and employed by contractors, though Costco says it seeks to ensure they have above-industry-average pay. And while Walmart, Amazon, and others actively avoid unionization, Costco, while not exactly embracing it, is comfortable that the International Brotherhood of Teamsters represents about 15 percent of its U.S. employees. “They are philosophically much better than anyone else I have worked with,” says Rome Aloise, a Teamsters vice president.

...Many conscientious companies such as Costco are performing well financially. Over the last few years, Nordstrom (JWN), the Container Store, Sephora, REI, and Whole Foods Market (WFM), all of which are known for treating employees well, have outpaced rivals. “This is the lesson Costco teaches,” says Doug Stephens, founder of the consulting firm Retail Prophet and author of the forthcoming The Retail Revival. “You don’t have to be Nordstrom selling $1,200 suits in order to pay people a living wage. That is what Walmart has lost sight of. A lot of people working at Walmart go home and live below the poverty line. You expect that person to come in and develop a rapport with customers who may be spending more than that person is making in a week? You expect them to be civil and happy about that?”

So far, Costco and other retailers that invest in employees seem to be performing well because customers are willing to seek out a high-value experience. For those of us who have lots of options for where to shop, it's worth remembering that Costco and Walmart may both be big-box stores, but they treat employees differently.