Costco raises minimum wage to $16 an hour

This week, Costco plans to raise the starting wage to $16 an hour for U.S. workers. The decision was first revealed by Costco CEO Craig Jelinek in testimony to the U.S. Senate Budget Committee last week. Costco raised its starting pay to $15 an hour in 2019. More than half of Costco's hourly workers in the U.S. are paid above $25, Jelinek said. Yahoo Finance’s Brian Sozzi discusses.

Video Transcript

JULIE HYMAN: -- All right. We're gonna get Brian Sozzi's take right now as we are amidst this big minimum wage debate on a national level. There is one retailer that you watch closely, Brian Sozzi, that's raising its minimum wages and raising it even above the sort of $15 threshold that had been talked about in some of that latest legislation.

BRIAN SOZZI: Yeah. This is probably Myles's new suburbia fave, Costco. Costco raising its minimum starting wage, this week, to $16 an hour. The company last raised its starting wage in 2019 to $15 an hour.

Quick note here, too. And this was brought to light by CEO Craig Jelinek-- Costco CEO Craig Jelinek-- last week in some testimony to a US committee-- noting that more than half of Costco's workers, hourly workers, are now paid $25 an hour. That is just crazy more-- crazy more than the federal minimum wage of $7.25 and a lot more than a lot of workers are getting in retail, specifically in those dollar stores, which in large part, are still getting paid hourly wages.

So, and I have a bigger piece on Yahoo Finance now about this, looking at why Costco has historically paid more, well more, than the minimum wage. And it goes back to co-founder Jim Sinegal, who, for years, championed the just paying its hourly workers more under the thesis that happy workers give better customer service, leads to better sales, leads to better profits, and, over time, leads to a better stock price. And also, too, paying your workers more, chances are if Costco has paid those workers more, they're back in the Costco stores and spending more money inside of Costco, which, again, just creates a whole feedback loop.

And in this story, right now on Yahoo Finance, I go back, looking about 11 years. Over the past 11 years, Costco has added more than $90 billion in sales-- $90 billion in sales. And they have added over $3 billion in net profits. The stock price going back to August 29, 2010, up 502%, compared to about 155% gain for Walmart.

So, clearly, guys, this approach to paying workers more has worked well for Costco. Now Walmart and Target, they have started to raise their wages. You know, Target, last summer, raised its starting minimum wage to $15 an hour. But, again, both of them remain well behind-- well behind Costco.

MYLES UDLAND: But I think as we get the minimum wage debate kind of fired up here over the next couple of years-- because it does seem that we are going to see the minimum wage go higher in the US-- how high is really the question. At this point, I think these stories are worth reminding folks that the businesses that pay minimum wage are, by and large, small businesses. And so that is sort of how you see that driving alliance between small business owners and the GOP, which both oppose minimum wage hikes because they are the businesses that pay the minimum wage.

Big businesses-- Home Depot, Target, Costco, Walmart, et cetera-- they are paying more than the minimum wage partly because they can afford to, and, also, because if they pay more, it makes those small businesses that they are competing against-- and hoping to subsume-- less competitive, from a wage perspective, against them. But, you know, Sozzi, to your point about Costco's long-standing view on paying workers more, we've seen this with the stimulus checks that were sent out in the enhanced unemployment benefits. If you give people more money, they will then spend more money. And so there is also this belief that paying workers more would be a negative for growth.

And, yet, paying workers more puts more money into the hands of consumers. And when the vast majority of growth is based on consumer consumption-- or just on consumption-- then, of course, it sort of follows, right, that people getting paid more would eventually work its way back into the economy. But there's a lot of hardening that has happened here along political lines, along economic ideological lines, that is going to be very difficult-- perhaps impossible-- to ever sort of, you know, kind of cross that chasm. But, you know, I think all of these things are likely to take a more prominent role in the economic conversation going forward because it does seem that wages are the place that these conversations are going to play out.

We asked, you know, how would sending stimulus checks, you know, reverberate through the system? I think the answer is how much more are we going to pay people. How much more are we going to mandate that people be paid seems to be the conclusion, rather, the follow-on conversation from what we learned about the checks.

BRIAN SOZZI: And, Julie, you know, I'll quickly mention here, I am concerned how the longer-term business models of a dollar stores, even a fast-food restaurants, how they play out in the $15 an hour minimum wage, where this certainly appears to where it's going. I don't know about you, but I'm not paying $20 for a Big Mac. I'm just not. I'm not doing it.

JULIE HYMAN: Well, I'm not buying a Big Mac anyway. So I'm not in the-- I can't speak to that. But I will say, just to piggyback on what Myles was saying, you know, when so much of the conversation over the past year has talked-- has centered around equity, equity among workers, equity among Americans, you can't have that conversation without having the minimum wage conversation. It really is very closely tied what people get paid and how we sort of raise the stakes for everyone. You can't really do that without paying people more. So it seems like, to your point, this is a conversation that is definitely not going--