gbaji wrote:
If the employer could double his profits by paying his employees double their pay, he'd do it in a heart beat
Doubtful. Not when ideology is involved.
Quote:
The market's view of Costco speaks volumes about the so-called Wal-Martization of the U.S. economy. True, the Bentonville (Ark.) retailer has taken a public-relations pounding recently for paying poverty-level wages and shouldering health insurance for fewer than half of its 1.2 million U.S. workers. Still, it remains the darling of the Street, which, like Wal-Mart and many other companies, believes that shareholders are best served if employers do all they can to hold down costs, including the cost of labor.
Surprisingly, however, Costco's high-wage approach actually beats Wal-Mart at its own game on many measures. BusinessWeek ran through the numbers from each company to compare Costco and Sam's Club, the Wal-Mart warehouse unit that competes directly with Costco. We found that by compensating employees generously to motivate and retain good workers, one-fifth of whom are unionized, Costco gets lower turnover and higher productivity. Combined with a smart business strategy that sells a mix of higher-margin products to more affluent customers, Costco actually keeps its labor costs lower than Wal-Mart's as a percentage of sales, and its 68,000 hourly workers in the U.S. sell more per square foot. Put another way, the 102,000 Sam's employees in the U.S. generated some $35 billion in sales last year, while Costco did $34 billion with one-third fewer employees.
Bottom line: Costco pulled in $13,647 in U.S. operating profit per hourly employee last year, vs. $11,039 at Sam's. Over the past five years, Costco's operating income grew at an average of 10.1% annually, slightly besting Sam's 9.8%. Most of Wall Street doesn't see the broader picture, though, and only focuses on the up-front savings Costco would gain if it paid workers less. But a few analysts concede that Costco suffers from the Street's bias toward the low-wage model.
Source (a bit old, but proof that lower wages aren't necessarily a better business practice): http://www.businessweek.com/stories/2004-04-11/commentary-the-costco-way
Quote:
Costco generated $21,805 in U.S. operating profit per hourly employee, compared with $11,615 at Sam’s Club. Costco’s stable, productive workforce more than offsets its higher costs.
Source: http://hbr.org/2006/12/the-high-cost-of-low-wages/ar/1
Oh look, almost double the profit per employee at costco vs. walmart's "Sam's Club" - with 70% or so higher wages. Yet Walmart continues it's low-wage no-benefits part-time employee crap nonetheless
Why? Because wall st. loves it. Why? Ideology.
Edited, Mar 14th 2013 10:20am by Olorinus