Pages

Wednesday, March 6, 2013

Costco: Raise Minimum Wage to $10 an Hour

     Nothing elicits differences among economists like a debate over the minimum wage. Right of Center economists like Sumner, Tyler Cowen, Bob Murphy, and David Henderson are certain it will lead to higher unemployment. Christina Romer Obama's former Chair of his Council of Economic Advisers has said that  raising the EITC is preferable-she tbhinks this would be "less distortionary" , etc.

     I can't deny that I find some of the arguments of the conservatives rather weak. Murphy and others use the reduction absurdem argument that if you don't think a $9 minimum wage will raise unemployment then why not raise it to $100. Sure, and since 2 aspirin do me good I figure I should swallow a whole bottle and it         twill do me even better.

   Then they declare that it's simple supply and demand-it has to raise unemployment as demand decreases when you raise the price. On the one hand I admit maybe I'm too sentimental but I do rebel against the idea of treating the human labor market as just another market like apples or basketballs. It this too romantic an attitude? I do think there are good economic reasons for this too. You might argue that a certain amount of "human sentimentality" is probably itself economic-the idea of trying to be "pure" in your ergonomic logic is itself uneconomic.

    However, even on the level of supply and demand, isn't it a fact that raising the price of a good doesn't always reduce demand, certainly not markedly. After all, certain purchases are very inelastic. I believe there are also other economic reasons why raising the price of a good may not actually hurt demand.

    No question there are sharp differences on this question. Here's someone you might not expect to take the side of the minimum wage: how about the huge retailer, Costco. Who would guess that they would spurn Sumner?

      "On Tuesday, Costco CEO and President Craig Jelinek came out in support of the Fair Minimum Wage Act of 2013, which aims to raise the federal minimum wage to $10.10 per hour, then adjust it after that for inflation.
"At Costco, we know that paying employees good wages makes good sense for business," Jelinek said in a statement. "We pay a starting hourly wage of $11.50 in all states where we do business, and we are still able to keep our overhead costs low."
      http://www.huffingtonpost.com/2013/03/06/costco-ceo-minimum-wage-craig-jelinek_n_2818060.html?utm_hp_ref=business
      Costco kind of flies in the face of the logic of Walmart which argues it has to pay such low wages to offer consumers "such low prices"-I'm actually skeptical that they're so low at least on the food side. I think the clothes side is pretty cheap. Yet Costco is all about cheap prices too, and you heard the guy, they are able to keep their overhead costs low while paying their employees quite generously:
      Costco has a reputation for paying its employees above market rate, with the typical worker earning around $45,000 in 2011, according to Fortune. Walmart-ownedSam's Club, in contrast, pays its sales associates an average of $17,486 per year, according to salary information website Glassdoor.com.
Costco also provides health insurance to a significantly larger percentage of its workers than does Walmart, the Harvard Business Review reported in 2006.
Jelinek's predecessor, Costco founder Jim Sinegal, has also expressed support for raising the federal minimum wage in the past. "The more people make, the better lives they're going to have and the better consumers they're going to be," Sinegal told the Washington Post in 2007. "It's going to provide better jobs and better wages."
     So there you go: Costco disagrees with Sumner, Murphy, Henderson, et. al. If you plan for a job in retail it's clear where you want to do entry level and where you don't as well. 
      

   

No comments:

Post a Comment