Why Costco pays its retail employees $20 an hour

by Aaron Taube

Businessweek reports that Costco's hourly employees earn more than $20 an hour.

Last week, we wrote about The Container Store and its "1 = 3" theory, which says that one "great" employee is just as productive as three workers who are only "good."

Kip Tindell, the company's CEO and founder, says this rule allows him to pay his retail employees an average salary of nearly $50,000 a year — almost twice the retail industry average.

Of course, The Container Store isn't the only major retail chain that professes a commitment to paying its workers a livable wage.

At Costco, hourly workers make an average of more than $20 an hour — well above the national average of $11.39 for a retail sales worker — according to a 2013 Businessweek story. For employees who put in 40 hours per week, that works out to about $43,000 a year.

In addition, Businessweek reports that 88% of Costco's 185,000 employees have company-sponsored healthcare.

The Container Store uses its high salaries to lure and retain elite talent. Costco is primarily focused on making everyone who works at one of the company's 663 warehouses happy. The idea is that a more pleasant workplace will lead to lower employee turnover and a more productive workforce.

"I just think people need to make a living wage with health benefits," CEO Craig Jelinek tells Businessweek. "It also puts more money back into the economy and creates a healthier country. It's really that simple."

To that end, the company's turnover rate is a measly 5% for employees who have been there more than a year.

Nonetheless, some argue that not every retail company would be successful offering its workers such high wages.

In fact, the industry group The National Retail Federation has said that raising the minimum wage from its current $7.25 an hour pay would make it harder for stores to maintain current staffing levels.