How this week's cover got made
Joe Carcello has a great job. The 59-year-old has an annual salary of
$52,700, gets five weeks of vacation a year, and is looking forward to
retiring on the sizable nest egg in his 401(k), which his employer
augments with matching funds. After 26 years at his company, he’s not
worried about layoffs. In 2009, as the recession deepened, his bosses
handed out raises. “I’m just grateful to come here to work every day,”
he says.
This wouldn’t be remarkable except that Carcello works in
retail, one of the stingiest industries in America, with some of the
most dissatisfied workers. On May 29,
Wal-Mart Stores (WMT)
employees in Miami, Boston, and the San Francisco Bay Area began a
weeklong strike. (A Walmart spokesman told MSNBC the strike was a
“publicity stunt.”) Workers at an
Amazon.com (AMZN)
fulfillment center in Leipzig, Germany, also recently held strikes to
demand higher pay and better benefits. (An Amazon spokesman says its
employees earn more than the average warehouse worker.) In its 30-year
history, Carcello’s employer, Costco, has never had significant labor
troubles.
Costco Wholesale (COST),
the second-largest retailer in the U.S. behind Walmart, is an anomaly
in an age marked by turmoil and downsizing. Known for its $55-a-year
membership fee and its massive, austere warehouses stocked floor to
ceiling with indulgent portions of everything from tilapia to toilet
paper, Costco has thrived over the last five years. While competitors
lost customers to the Internet and weathered a wave of investor
pessimism, Costco’s sales have grown 39 percent and its stock price has
doubled since 2009. The hot streak continued through last year’s
retirement of widely admired co-founder and Chief Executive Officer Jim
Sinegal. The share price is up 30 percent under the leadership of its
new, plain-spoken CEO, Craig Jelinek.
Photograph by Ryan Lowry for Bloomberg BusinessweekCostco CEO Craig JelinekDespite
the sagging economy and challenges to the industry, Costco pays its
hourly workers an average of $20.89 an hour, not including overtime (vs.
the minimum wage of $7.25 an hour). By comparison, Walmart said its
average wage for full-time employees in the U.S. is $12.67 an hour,
according to a letter it sent in April to activist Ralph Nader.
Eighty-eight percent of Costco employees have company-sponsored health
insurance; Walmart says that “more than half” of its do. Costco workers
with coverage pay premiums that amount to less than 10 percent of the
overall cost of their plans. It treats its employees well in the belief
that a happier work environment will result in a more profitable
company. “I just think people need to make a living wage with health
benefits,” says Jelinek. “It also puts more money back into the economy
and creates a healthier country. It’s really that simple.”
In
February, Jelinek set Costco’s convictions in ink, writing a public
letter at the behest of Nader, urging Congress to increase the federal
minimum wage for the first time since 2009. “We know it’s a lot more
profitable in the long term to minimize employee turnover and maximize
employee productivity, commitment and loyalty,” he wrote.
Photograph by Ryan Lowry for Bloomberg BusinessweekJose Almaraz, 6 years at CostcoThe
letter barely moved the needle. Although President Obama echoed
Jelinek’s sentiment and called for a $9-an-hour wage in his State of the
Union address, Congress is deadlocked on the issue. But Jelinek’s
letter had a secondary effect. It cast a brighter light on Costco’s
philosophy and created a stark contrast with its competitors.
That
juxtaposition raises an important question: Can the rest of corporate
America become more like Costco? Or will Costco, buffeted by the same
disruptive changes affecting all of retail, be forced to become more
like everyone else?
The Issaquah (Wash.) headquarters of
Costco, 20 miles from Seattle, radiate frugality. The floor of the
executive wing is covered in faded blue carpet, and in the boardroom,
six faux-wood tables—which would look at home in a public school
teachers’ lounge—are jammed together. On the walls are several Van Gogh
and Picasso prints (less than $15 at Art.com), along with two badly
staged photographs of the company’s board of directors. In one, a
picture of Jelinek’s head has been awkwardly taped onto the frame,
hovering above a Weber grill.
