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Retail can help rebuild the middle class

By Jim Sinegal

Jan 31, 2018

Photo: Getty

In any conversation about what makes a healthy middle class, the discussion generally centers on people affording a home, sending their children to college, accessing good health care, and saving for retirement.

Unfortunately, the retail industry isn’t a model citizen in supporting these ideals. Many retail workers earn low starting wages, with little upside potential, and don’t get scheduled for as many hours as they want or need. And retail employees often do not have access to affordable health insurance or a corporate retirement plan.

In short, retail has never traditionally been a great place for workers to pursue the American dream.

As co-founders of Costco, my partner Jeff Brotman and I saw things a little differently. Our company considers our workers — currently numbering some 240,000 around the world — to be our most valuable asset. This principle predates Costco to Price Club Founder Sol Price (a man I started working for in 1954, when I was 18 years old), who believed that business was about more than making money. He supported the idea that companies had a responsibility to operate on the basis of a social contract with their customers, suppliers, community, and employees. That included providing fair wages and great health benefits to employees, as opposed to commoditizing the workforce.

We adopted this principle when we started Costco in 1983 and preserved it when Costco and Price Club merged in 1994. Today, it’s more important than ever. Treating employees as key partners who deserve respect for their contributions is simply the right thing to do.

But beyond ethics, it also makes business sense. Here’s why: Annual Costco memberships are essential to our business; if our members aren’t satisfied, we will quickly fail as a company. And satisfaction is not just earned through what we sell, but the way members are treated by our employees.

How do we try to do just that at Costco? It begins with above-minimum starting wages to get our new workers on solid ground as soon as possible, and a wage scale that enables them to move up over a relatively short period of time. Our policy is to promote from within, so that employees who perform well get first crack at promotions. On top of that, we offer generous benefits for full-time and part-time workers, including health, dental, vision, retirement, and paid sick leave to support families. We help our young employees get college degrees by keeping a job open for them if they go off to school, and we try to work with their schedules so they can work part time while they study.

A retail sector committed to widespread opportunity could help reshape the American workforce.

All of these measures help create a healthy workforce with employees who stay around. This, too, is important for business. It’s gratifying to see signs of longevity popping up more and more in our warehouses and offices. We have a tradition of awarding a silver name badge to employees who have served 25 years. We’re seeing increasing numbers of them throughout our company. Employee retention in our warehouses is well above the average in retail. Several of us have even been around since the beginning.

Costco started in 1983 with a single warehouse in Seattle and now has nearly 750 locations around the world. None of this could have happened without our strong commitment to our workers. And as we’ve grown, we’ve stayed aware of the influence we have when sourcing products for our global warehouses. We work with many of our suppliers to ensure that the farmers and others who manufacture goods are fairly compensated. The people in this vast supplier network all deserve to reach their own dreams, too.

As proud as we are of what we do at Costco, we’re convinced we need not be unique. My colleagues in the retail industry can and should provide the same opportunities for American workers. With nearly 16 million people employed in the U.S., a retail sector committed to widespread opportunity could help reshape the American workforce.

Yes, we believe in our workers and in a vibrant middle class. It is part of our DNA, dating back to 1954. It’s the right thing to do, and it’s smart for our business.


About the author:

Jim Sinegal and the late Jeff Brotman co-founded Costco in 1983. Mr. Sinegal served as the company’s CEO until his retirement in 2012. He recently announced his retirement from Costco’s board of directors after 35 years of service.