Entry-level workers will see another dollar an hour, and supervisors will also get a raise — but it's unclear who else at the retailer will be seeing a pay increase.
Barely 10 months after raising wages for its entry-level workers, an increasingly profitable Costco is offering another modest pay hike — though it’s unclear how many employees will be seeing it or how satisfied they’ll be.
Wages for U.S. and Canadian entry-level workers at the Issaquah-based retailer will increase by a dollar — from $14 to $15 for stockers and other “service assistants” and from $14.50 to $15.50 for cashiers and other “service clerks,” the company confirmed Friday, a day after posting a 27 percent jump in second quarter earnings. The news sent Costco’s share price up 5.1 percent, to $227.82, by Friday’s close.
The wage increase, which went into effect Monday, was announced by Chief Financial Officer Richard A. Galanti during a quarterly earnings call with analysts Thursday. The increases are part of a new three-year “employee agreement” that includes an increase of 55 cents an hour for the company’s top hourly employees, the company said. A top-of-scale clerk will now make $25.65 an hour.
But some aspects of the new compensation package remained unclear.
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Galanti told analysts that supervisors will be getting a raise, but did not say how much. Nor was it clear whether the new package includes raises for salaried employees or for hourly workers in jurisdictions that already mandate higher minimum wages, such as Seattle, where large employers must now pay a minimum of $16. A company spokesman was unable to clarify these details by press time.
On the surface, Costco’s second raise in less than a year reflects the company’s desire to share its rising fortunes with its employees.
When it announced the June raises, the company said it wanted employees to enjoy some of the company’s financial windfall from the Trump tax cuts. At the time, Galanti said the raises reflected a broad desire among businesses to “to use some of this (tax windfall) to help employees, to share that wealth if you will, to drive their business.”
Likewise, the current round of raises comes as Costco’s business continues to thrive. Beyond the strong earnings, the company posted stellar results both at its warehouses, where core same-store sales rose 6.7 percent over last year, and in its online business, which saw sales increase 25.5 percent.
In fact, Costco moved ahead of Amazon in a recent customer-satisfaction survey of online retailers, thanks to a new online grocery delivery service and a same-day delivery business with Instacart, according to the American Customer Satisfaction Index.
But the wage hikes likely also reflect a tightening national market for entry-level labor.
In recent years, Costco and other retailers have been forced to compete ever more fiercely with food-service companies, hotels and even ride-share platforms like Uber and Lyft for workers at the bottom of the wage scale. Nationally, the unemployment rate fell to 3.8 percent, the U.S. Labor Department reported Friday, the lowest rate since the late 1960s.
That competition has led to a wave of wage increases from retailers traditionally known for their low pay. Last year, Walmart raised starting hourly pay to $11 an hour, and offered a one-time cash bonus. Target plans to boost its current minimum of $12 to $15 by 2020. Even Amazon now offers a $15 minimum wage.
Roughly 90 percent of Costco’s employees are hourly workers, and the average wage is $23 an hour, according to a company spokesman.
Not everyone is impressed by Costco’s recent wage hikes.
Several employees at the company’s corporate headquarters complained that the increases, though welcome, don’t keep up with increases in the local cost of living — or even with wages offered by some other local employers. “There are a lot of disgruntled employees here who could quit and go to work at Dairy Queen and get a raise,” said one employee, who asked not to be named for fear of retaliation.
Another employee, who also spoke on condition of anonymity, took issue with the term “employee agreement,” which makes the wage increases sound like a deal negotiated between labor and management.
In fact, less than 7 percent of the company’s more than 230,000 employees are unionized, according to company filings with the Securities and Exchange Commission. It’s “far from an agreement,” the employee said. “We are given the [agreement] and told to sign no questions asked.”