Costco CEO: Minimum Wage Should Be Raised to More Than $10

Friday, 08 Mar 2013 08:13 AM

By Michael Kling

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President Barack Obama wants to raise the federal minimum wage to $9 by 2015, but Costco CEO Craig Jelinek says it should go even higher.

“At Costco, we know that paying employees good wages makes good sense for business,” Jelinek said in a press release from Business for a Fair Minimum Wage. “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.”

The membership-based retailer believes it succeeds by attracting and retaining good employees, he noted. That strategy boosts profits in the long run by decreasing turnover and improving employee productivity.

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A bill before Congress would raise the federal minimum wage from $7.25 to $10.10, and then provide annual increases linked to the cost of living.

Costco supports that bill and so do other businesses, according to Business for a Fair Minimum Wage, a network of business owners and executives.

Supporters include British American Auto Care in Maryland, Vintage Vinyl in St. Louis, Spencer Organ Company in Massachusetts and Busboys and Poets, a restaurant chain in Washington, D.C., Virginia, and Maryland.

“The biggest problem for Main Street businesses is lack of customer demand,” said the organization’s director, Holly Sklar.

Minimum wage increases have not kept pace with inflation, Sklar said. Workers making the current $7.25 an hour, or $15,080 a year, have less buying power than minimum wage workers did in 1956, and far less than they had at the minimum wage’s high point in 1968, adjusted for inflation.

Corporate profits are at their highest since 1950, as a percentage of national income, while the share going to employees is near its low point, she said.

However, other executives say raising the minimum wage would discourage businesses from hiring and prompt prices to increase.

“It will cause franchisees to raise prices. There is no question about it,” Subway CEO Fred Deluca told CNBC.

Gradual increases over time are better, he argued. “Doing a sharp raise all at once is a bad idea. Minimum-wage workers deserve to make more and a little bit of an increase makes sense to me,” he said.

“If I started Subway today, Subway would not exist.”

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