Costco CEO Supports Minimum Wage Boost. But Why?

From the WaPo:

The chief executive of Costco Wholesale, the nation's largest wholesale club, yesterday became the most prominent member of a new organization of business owners and executives pressing Congress to approve an increase in the federal minimum wage.

Jim Sinegal, a maverick entrepreneur who founded Costco in 1983 and has resisted Wall Street pressure to cut wages and benefits for his 130,000 employees, said he signed onto the effort because he thinks a higher minimum wage would be good for the nation's economy as well as its workers.

Nonsense. The Post has completely missed the real story. Costco is (a) playing to the ideological predilictions of its top management, (b) trying to get some favorable publicity in the blue state areas where it does most of its business, and (c) trying to hurt both Walmart and the small businesses with which Costco competes:

Posted on Wednesday, January 31 2007 | Permalink

Since when did you develop a concern for “mom and pop” businesses?

If Walmart and Costco can deliver better prices, shouldn’t the Mom and Pop places go out of business.

Isn’t that the way the market is supposed to work?

PB Replies: Go here for my 2/2005 critique of Wal-Mart:

http://www.professorbainbridge.com/2005/02/the_conservativ.html

Posted by  on  01/31  at  01:36 PM

Isn’t that the way the market is supposed to work?

tde - So are you for or against the minimum wage increase?  Wouldn’t an elimination of the minimum wage be the best way to “let the market work”?

Posted by  on  02/01  at  06:35 AM

There’s a cynical, pragmatic, “supply side” reason for Costco (et al.) to support an increased minimum wage: Presuming that the net effect of increasing the minimum wage is a net overall increase in that population cohort’s disposable income,* where do you think they’re going to spend it? Hint: They’re not all going to stop shopping at Costco/MallWort and subscribe to the Neiman-Marcus holiday catalog. Further, as noted, an increase in the minimum wage is not going to increase Costco’s own labor costs.

* That is admittedly a big assumption, but it’s one that virtually everyone in the debate makes… I’m not comfortable with it solely due to the lack of data.

Posted by C.E. Petit  on  02/01  at  07:32 AM
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