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Costco boosts pay over $30 per hour for most U.S. workers

Most workers’ hourly rate will rise to US$30.20, with additional US$1 increases coming in each of the next two years

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Costco Wholesale Corp. is raising pay for most of its hourly U.S. workers to more than US$30 an hour amid contract talks with unionized employees.

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The company will raise the hourly wage for employees at the top of its pay scale over the next three years, chief executive Ron Vachris wrote in a memo to staff this week that was viewed by Bloomberg News. In March, these workers’ hourly rate will rise by US$1 per hour to US$30.20, with additional US$1 increases coming in each of the next two years.

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Workers at the bottom of the scale will get raises of 50 cents U.S. to US$20, according to the memo. The changes apply to employees at non-union locations.

Costco, which is based in Issaquah, Wash., declined to comment. The company and the union that represents thousands of its workers are in negotiations over a new collective bargaining contract. The current contract is set to expire on Friday, and Costco Teamsters — which represents less than 10 per cent of the company’s roughly 219,000 employees in the U.S. — has voted to authorize a strike, demanding better pay and benefits.

Matthew McQuaid, a spokesman for Costco Teamsters, said in an email that while the union is pleased that workers will make more money, it was the group’s pressure that led to the increase.

Tough industry

U.S. retailers have been boosting pay and benefits for hourly employees in recent years in an effort to find more workers and boost the reputation of an industry known for low pay, erratic schedules and monotonous tasks. A 2022 McKinsey study found that the quit rate for retail workers is more than 70 per cent higher than in other U.S. industries.

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The COVID-19 pandemic made the problem even worse, and while some of the pandemic-era labour shortages have improved, for many chains it’s still tough to hire and retain employees. The mean hourly wage for US retail workers stands at $14.12, according to government data.

Costco’s hourly U.S. employees typically start at an entry rate before getting periodic increases based on their time with the company until they hit the top of the scale. Because of the higher wages it pays, the retailer has a low rate of worker turnover and more than half of Costco’s hourly workers are in the top category. As of July, Costco’s starting wage was US$19.50.

Other benefits for non-union workers include an additional week of vacation after 30 years of employment and vacation for new employees during their first year.

Walmart Inc., Target Corp. and other big-box retailers have also raised pay for store workers in recent years. Target said in 2022 that new employees hourly wages could range as high as US$24 depending on the job and the local market.

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Walmart Inc. said this month it would increase compensation for its market managers, who each supervise roughly a dozen store managers, with higher annual stock grants, bonuses and base pay effective in the company’s new fiscal year. Walmart has roughly 440 market managers across the U.S. Last year it raised compensation for store managers too, bringing their potential pay to more than US$500,000.

It’s not just retailers boosting hourly wages. Last year Bank of America Corp. increased its minimum rate to US$24 an hour, taking the next step toward a goal of paying US$25 by 2025.

Bloomberg.com

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