[Before you think I'm against minimum wage laws (I'm not) and complain in the comments, read the whole post.]
An article in the Huffington Post points out something that I think should be obvious to all businesspeople, but apparently isn’t. The article is about Costco CEO Craig Jelinek, who recently came out in favor of increasing the federal minimum wage. But for him, paying good wages is just good business:
At Costco, we know that paying employees good wages makes good sense for business. Instead of minimizing wages, we know it’s a lot more profitable in the long term to minimize employee turnover and maximize employee productivity, commitment and loyalty. We support efforts to increase the federal minimum wage.
And indeed, Costco just announced that its profits are up over 36% from the same period a year ago.
Ironically, Costco would be largely unaffected by raising the minimum wage. In 2011, the average Costco worker made around $45,000. And Costco provides health insurance for part- and full-time employees. Compare this to another well-known big box membership store, who famously skimps on health insurance and pays its employees an average of $17,486 per year. So, does paying (much) better salary and benefits pay off? Obviously, Costco isn’t in precisely the same business as Walmart (or its membership store, Sam’s Club), but Costco makes more than $10,000 per employee, while Walmart makes $7,400 per employee. And that’s not counting other benefits, like lower employee turnover and better customer satisfaction by having employees who actually like their job and have been around long enough to know how to do it.
Other companies (including Starbucks) have figured this out. Keeping your employees happy and healthy leads to profits. Google is another example of a company that figured out that providing really good benefits to your employees provides even better returns in increased productivity.
I work in the computer industry (including as a CEO and starting multiple companies) and I know that the most important thing you can do is hire the best talent and make them happy. Studies have shown that good programmers can be more than an order of magnitude more productive than their peers. Recruiting and keeping these people can not just increase profits, but make the difference between a successful company and failure.
But as long as our country is obsessed with cost cutting and short term profits, we will need minimum wage laws. It is time to raise the minimum wage. Not just because it is the right thing to do, but because it is good for business.