- Starting next week, Costco will raise its minimum wage to $16 for U.S. employees, Craig Jelinek, the company’s president and CEO, told the Senate Budget Committee on Thursday.
“This isn’t altruism,” Jelinek told the committee. The higher wage coupled with “affordable benefits” lead to better retention rates and incentivize employee productivity, commitment and loyalty, he said.
As the one-year anniversary of the pandemic nears, Jelinek said that Costco plans to end the temporary $2-hour premium for hourly employees it started last March and, in its place, will add a permanent increase to each step of its hourly wage scales. Jelinek’s testimony comes at a time when Democrats are looking to raise the federal minimum wage from $7.25 to $15 and grocers contemplate hazard pay measures as the pandemic continues.
Boosting its minimum wage gives Costco a competitive advantage, Jelinek told the senators, noting that the company bumped its wage to $15 or more for U.S. employees two years ago.
Costco’s wages and benefits make the company’s retention rates “very high by retail standards,” Jelinek said, noting that U.S. employees average more than nine years with the company, more than 60% have been there for five or more years, and more than one-third have more than 10 years of tenure. “We feel the experience level and loyalty of our employees is a significant advantage for our company,” Jelinek said.
In recent years, other major retailers have bumped their minimum wages to $15 or more, including Amazon in 2018 and Target in 2020.
A Kroger spokesperson told Business Insider that the grocer’s average hourly wage has been $15 an hour since 2019 and that, with benefits included, it extends past $20 on average. Meanwhile, Walmart announced earlier in February that it’s boosting its average hourly wage to above $15, which will impact 425,000 employees. The retailer’s minimum wage, though, remains at $11 an hour.
Some retail executives have noted that the focus shouldn’t be just on their minimum and starting wages, but also on other incentives, benefits and hiring practices.
“Although there’s a lot of external focus on starting wages and minimums, it’s important to us that Costco employees have an opportunity to make more than just $15 or $16 an hour,” Jelinek told the committee before explaining the company’s wage increase schedule, bonuses and premium pay, which was brought on by the pandemic.
For Sprouts Farmers Market, promoting people into higher-paying roles improves employee retention, Denise Paulonis, the chain's chief financial officer, said in an earnings call Thursday. Last year, the company filled 72% of its store manager positions with internal candidates and promoted roughly 7,200 employees, Paulonis said, adding that more than 80% of its full-time team members earn above $15 an hour.
“It's not about coming in as a cashier and staying as a cashier,” Paulonis said. “You can do that, but we have so many opportunities and so many more jobs to fill."