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Struggling to find employees? Be like Costco.
The consumer goods warehouse chain understands something profound about how to win in this economy: Be good to people.
I love Costco — like, love Costco.
I’ll never forget the first time I walked into one of their sparsely-lit cement-gray warehouses way back in ‘93. It was the samples. From pesto ravioli to slices of sharp cheddar to animal crackers — I basically had a free lunch. And then, I had my actual lunch in the form of a kosher polish sausage with onions, sauerkraut, ketchup, mustard, and relish.
During my senior year of high school, when other kids were using their off-campus lunch to waste money on cardboard pizza or fast food, my friends and I would go to … Costco.
Cheaper and better, it’s the Costco way. Whether it's a HD TV, a garden hose, or your gallon of milk, Costco almost always offers the best products at the best value. But I don’t only love Costco for its incredible inventory of fantastic products and samples.
I love it because it comports with my values.
One thing you always notice at Costco, whether you’re trying samples, checking out, or just asking someone for directions to that electric toothbrush they’ve got on sale, is that Costco employees look genuinely happy to be there. It’s like they love Costco as much as I do.
Though they already set industry standards for pay and benefits, Costco recently raised its minimum wage to $16 an hour — up from $15 an hour two years ago. Indeed, their average hourly pay is a full $24 an hour. Full-time employees get a pay raise twice a year and are eligible for biannual bonuses of up to $4,000 a year. That helps explain why the average Costco employee has worked there for nine years, and more than 60% of employees have worked there five years or longer.
“We know that paying employees good wages and providing affordable benefits makes sense for our business and constitutes a significant competitive advantage for us,” CEO Craig Jelinek said at a Senate Budget Committee hearing earlier this year.
“No one’s willing to work right now,” is a complaint you’ve likely recently heard from a manager you know. Across the country, business owners and corporations alike have registered the same complaint in America’s so-called “underemployment crisis.”
The buzz has bolstered skeptics of pandemic spending, including enhanced unemployment benefits and stimulus checks. Together, employee shortages and stimulus spending have contributed to hand-wringing about the specter of runaway inflation.
Inflation is a process by which more money chasing fewer goods and services drives up their prices. In response, employees demand higher wages to afford more expensive goods and services. This drives up production costs, driving up prices, in turn driving up wage demand … and a vicious spiral ensues.
The consumer price index, an inflation measure which compares year-on-year increases in the costs of a range of consumer goods, showed a 5.4% increase between June 2020 and June 2021 as well as a 0.9% increase since May of this year. The most obvious explanation, of course, is that demand for goods in June of 2020 was artificially low considering we were in the worst throes of the early days of the pandemic. But this increase may also reflect the fact that the economy is just now reawakening from pandemic slumber when production was particularly low — setting up a moment when supply is artificially low and demand uncommonly high.
It’s telling that the sectors of the economy where prices rose most were used cars and trucks, gasoline, and transportation services. Americans cooped up at home for 16 months are trying to get back out. Demand has outstripped supply, and prices have increased. That’s just part of the story, however.
A deeper cut into the used car and truck market, for example, shows how unique this moment is to the pandemic, rather than a full-on inflationary spiral. Rental cars account for a substantial proportion of the used car market every year as companies sell off their stock to update their fleets. But as travel ground to a halt in 2020, rental car companies sold off much of their fleet without buying replacements to keep themselves afloat. But as travel roared back in early 2021, these companies found themselves without the cars they needed. They’re not just holding on to every car they have right now, they’re buying up used cars to rent out to customers newly on the go. That explains why there are far fewer rental cars on the market, and why they’re so much more expensive.
The market for people’s labor.
What do used cars have to do with Costco? Economic worrywarts are hemming and hawing over inflation indices, arguing that they imply that an inflationary cycle is taking hold. They argue that stimulus spending, like direct cash payments and enhanced unemployment, is driving this — all that extra money chasing fewer goods and services as we are “paying people to stay home.” They point to companies’ inability to hire at their previous wages as an indication of how bad the situation is getting.
But they should just go to Costco. Not only do they have great deals on wart cream, but Costco has had no trouble attracting great people to come work at their warehouses. And though prices may be rising at Costco too, these are mainly attributable to rising shipping costs — the morning aches of an economy coming out of slumber.
Costco’s lesson is clear: If you want people to work for you, pay them more and treat them better. Indeed, the extremes of the pandemic have forced Americans to reassess what they value in life. A survey of American workers showed that nearly half have either found a new job or will look for one after the pandemic. And while that means that many employers will be left looking for workers, it’s an opportunity for them to rethink their relationship with their employees overall.
Costco’s already figured that out. And there are samples.