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Why Costco is Backing Obama's Minimum Wage Push

Posted by on Mar. 8, 2013 at 9:22 PM
  • 16 Replies

Why Costco is Backing Obama's Minimum Wage Push

Spencer Platt, Getty Images
In a break with the rest of the retail industry, Costco has expressed support for President Obama's proposal to raise the federal minimum wage to $9 an hour.

In fact, Costco CEO Craig Jelinek is throwing his support behind the Fair Minimum Wage Act of 2013, a new bill that would eventually raise the federally-mandated minimum wage all the way to $10.10.

It's unusual to see a retailer advocate for a higher minimum wage -- after Obama called for the increase in his State of the Union address, the National Retail Federation said it would raise costs and kill job growth. But in a news release announcing his support, Jelinek makes it clear why he wouldn't mind seeing the minimum wage go north of $10: He already pays his employees at least $11.50 an hour, so a hike wouldn't directly impact Costco's payroll at all.

"Instead of minimizing wages, we know it's a lot more profitable in the long term to minimize employee turnover and maximize employee productivity, commitment and loyalty," Jelinek said. "We support efforts to increase the federal minimum wage."

Jelinek is a Democrat who supported Obama during his 2012 re-election campaign, so it's not surprising that he would support a liberal cause. But it's also fair to say that Costco would stand to benefit from a higher minimum wage.

After all, the law would mean that Costco's wages would stay the same, while its competitors -- like Walmart-owned Sam's Club (WMT) -- would have to raise their employees' pay. Anything that increases costs for the competition has to be a plus for Costco, especially if it means that those competitors have to raise prices to maintain their profits.

A higher minimum wage would give many of Costco's customers a bit more disposable income. That's a side effect that Obama alluded to in his address, noting that "for businesses across the country, it would mean customers with more money in their pockets."

For a company like Walmart, it's debatable whether increasing the buying power of their less-prosperous customers would really offset the impact of having to pay higher wages. But for Costco, which follows a business model that already includes a relatively high wage for its employees, it's easy to see how a higher minimum wage could boost sales without increasing costs.

Matt Brownell is the consumer and retail reporter for DailyFinance. You can reach him at Matt.Brownell@teamaol.com, and follow him on Twitter at @Brownellorama.
by on Mar. 8, 2013 at 9:22 PM
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annabl1970
by Platinum Member on Mar. 8, 2013 at 9:24 PM
1 mom liked this

I"nstead of minimizing wages, we know it's a lot more profitable in the long term to minimize employee turnover and maximize employee productivity, commitment and loyalty," Jelinek said. "We support efforts to increase the federal minimum wage."
clapping

annabl1970
by Platinum Member on Mar. 8, 2013 at 9:24 PM

Costco Co-Founder Jim Sinegal Backs President Obama on Business

 
Jul 23, 2012 9:35pm

President Obama is getting some help defending his record toward small businesses from a major player in the corporate world.

Former Costco CEO and co-founder Jim Sinegal endorsed the president's economic policies and bid for a second term in an email message Monday night to be blasted out by the Obama campaign.

The show of support comes amid an onslaught of attacks by Republicans that paint Obama as anti-business, including a new TV ad by presumptive GOP nominee Mitt Romney that uses out-of-context remarks by the president to suggest he has denigrated small business owners' success.

"You might be seeing some ads or hearing some folks say that President Obama doesn't support small business owners," Sinegal wrote. "But he understands that small businesses grow and prosper because of individual initiative - because entrepreneurs like you and me do the hard work it takes, and we can't do it alone."

Speaking in Roanoke, Va., earlier this month, Obama pushed the importance of continued government investments in public services and infrastructure that many U.S. businesses rely on to function.

"If you were successful, somebody along the line gave you some help," Obama said. "Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you've got a business, you didn't build that. Somebody else made that happen."

Republicans have seized on the line "you didn't build that" to falsely claim that Obama was speaking directly to business owners about their businesses.

Making subtle reference to Obama's comment, Sinegal wrote supportively, "Thanks to a strong nationwide transportation system and internal infrastructure, we've opened warehouses across the country and around the world."

Get more pure politics at ABC News.com/Politics and a lighter take on the news at OTUSNews.com

"I'm proud to support him in this election," he wrote. "Don't let Mitt Romney's misleading ads or false attacks tell you otherwise - President Obama's support for small business owners is unwavering."

Sinegal's support for Obama does not come as a surprise.  A longtime and generous Democratic donor, he maxed out his personal financial contribution to Obama in 2008 and will host the president Tuesday at his Hunts Point, Wash., home for two high-dollar fundraisers for the 2012 campaign.  Sinegal also publicly advocated for Obama's health care law at the height of debate in 2009.

The email to Obama supporters, and an accompanying campaign Web video that illustrates how Romney has "tampered" with Obama's remarks, suggested the president's team of strategists see the Republican offensive as a potential threat that needs to be neutralized.

Costco is the nation's second-largest retailer behind Walmart, with 605 stores and 160,000 employees. Sinegal founded it in 1983.

annabl1970
by Platinum Member on Mar. 8, 2013 at 9:25 PM

Jelinek is a Democrat- why I am not surprised? :)

LauraKW
by "Dude!" on Mar. 8, 2013 at 9:26 PM
1 mom liked this
Sounds great to me.
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annabl1970
by Platinum Member on Mar. 8, 2013 at 9:26 PM

I will be shopping in Costco even more.

muslimahpj
by Ruby Member on Mar. 8, 2013 at 9:27 PM
1 mom liked this

I need to start shopping at Costco.

The.Hug.Life
by on Mar. 8, 2013 at 9:29 PM
2 moms liked this

I think I'm going to get a Costco membership. (They are the membership type store, yes?)

I'm really pleased with this article.

annabl1970
by Platinum Member on Mar. 8, 2013 at 9:30 PM

 

Yep! It's great place to shop. And I never saw depressed, angry employees like in Walmart there

Quoting muslimahpj:

I need to start shopping at Costco.


 

annabl1970
by Platinum Member on Mar. 8, 2013 at 9:31 PM
1 mom liked this

 :)

http://www.costco.com/join-costco.html

 

 

Quoting The.Hug.Life:

I think I'm going to get a Costco membership. (They are the membership type store, yes?)

I'm really pleased with this article.


 

muslimahpj
by Ruby Member on Mar. 8, 2013 at 9:34 PM

One day I was in the check out line at Wal Mart and the cashier checking out was complaining along with an employee who was in line in front me, checking out about how they had to work black Friday. Im sorry, but, there is a time and a place for it, and that was not it. 

Unfortunately, the closest Costco is an hour away.

Quoting annabl1970:


Yep! It's great place to shop. And I never saw depressed, angry employees like in Walmart there

Quoting muslimahpj:

I need to start shopping at Costco.




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