Wednesday, 29 January 2014

Costco v Sam's Club/Walmart

Costco pays its workers 40% more, on average, than Sam's Club, and offers a very generous health insurance plan.

Despite the prevailing weakness in the U.S. retail sector, Costco has recorded impressive sales growth in the last few quarters. The firm's comparable-store sales grew at an average pace of more than 5% for the last three quarters. The biggest drivers fueling this new growth include the company's rapidly swelling membership base and the robust growth of the warehouse industry in the country. Costco's core value proposition, strong private labels, and ancillary businesses have also been at the helm of this progress.

Costco: One of the Leading Retailers Defying the Big Box Apocalypse

 Sam's Club is laying off over 2,000 workers; Costco is expanding.

Rick Ungar addressed precisely this point last summer in Forbes: 'Walmart Pays Workers Poorly And Sinks While Costco Pays Workers Well And Sails-Proof That You Get What You Pay For', along with a bunch of other commentators, all concluding that Costco is going to eat Walmart's lunch.

This is why Obama is following up his call to "Give America a Raise" in last night's State of the Union address with a speech at at Costco in Maryland today.

His message is pretty clear: paying a decent wage is good for business as well as good for employees and the economy.
Has he just given Democrats a decent campaign platform to run on in November?  Time will tell, but I wouldn't be enthusiastic about running against it, and it could well do something to make up the enthusiasm gap that the Democrats suffer from in mid-term election cycles, when young and minority voters tend not to show up at the polls.  It was striking on CNN's Iowa focus group last night that even a registered Republican admitted-Obamafoe (Obamaphobe?) who had been out of work for three years was in favour of raising the federal minimum wage.

And the Republican retort (see for example Rand Paul on CNN last night), of "why not a minimum wage of $100 an hour" will start to be called out as bull by journalists over the course of the year.  (Remarkably, when asked by Wolf Blitzer, whether as a US Senator he had a position on whether there should be a minimum wage at all, Paul's response was "I'm not sure about that".)

Those journalists who haven't yet worked out why a minimum wage of $100 an hour is a bad idea should watch the clip below from The Daily Show late last year.

Anyway, Walmart wages are generally the legal minimum permitted; as a result a great many Walmart employees are recipients of government assistance, such as Food Stamps, which are of course paid for by the tax-payer.  Could Walmart (who notoriously ran a food drive for their own employees last Thanksgiving) afford to give its workers a pay rise?

Source: CNN
Of course!  Walmart made $17billion in profits last year.  A CNN Money analyst concluded last year that it could increase worker's wages by 50% and still not affect the share price.  But why would it?  If Walmart and the Walton family can judiciously spend a few million dollars on Republican patsies congressmen here and there who can be relied upon to vote against any increase in the federal minimum wage (worth 20% less today in real terms than it was in 1981), Walmart (along with McDonald's, Wendy's and the rest of the fast food/low wage retail economy) continue to indirectly receive billions in dollars from the federal government who step in to ensure that their employees, putting in a full week of honest work, have enough money to feed their families and put a roof over their heads.

Just another sad example of the GOP railing against state subventions while their corporate chums laugh all the way to the bank with tax-payer dollars.

So next time you have a choice where to shop, have a quick look at the calculator below to remind yourself who are the real 'welfare queens': working single moms on food stamps, or Sam Walton and co?

Costco v Walmart: how many hours work to earn a living wage?

To save DC residents the bother, I've done the calculations. A single parent with 2 children would have to work 71 hours a week at Costco to provide a secure yet modest income for their family.  If they worked at Walmart, they would need to work 171 hours per week.

(P.S. There's a great piece in the Post about Obama's love-affair with Costco. )

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