Maverick Costco CEO Joins Push to Raise Minimum Wage
Tuesday, January 30, 2007
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.
"The more people make, the better lives they're going to have and the better consumers they're going to be," Sinegal said in an interview. "It's going to provide better jobs and better wages."
That view opposes the position held by many business groups, which have lobbied against legislation moving through Congress to raise the minimum wage to $7.25 an hour from $5.15. Democrats have placed a high priority on increasing the minimum wage, which has fallen to its lowest level in more than 50 years when adjusted for inflation. The measure has passed the House but is stalled in the Senate, where Republicans have said they will support it only if tax breaks are included for small businesses.
Without those tax breaks, many business groups argue that a mandate to raise wages would force them to lay off some employees or forgo hiring.
"Mandated wage hikes on small employers with small profit margins cost positions, particularly on the entry level of our industry," said Brendan Flanagan, vice president of federal relations at the National Restaurant Association. According to a survey by the association, the most recent minimum-wage hike, nearly a decade ago, led to the elimination of 140,000 restaurant jobs, Flanagan said. This time around, he said, two in five association members say they will have to cut jobs.
"There are unintended consequences associated with a minimum-wage hike, and it's hard to overlook that," Flanagan said.
Sinegal is one of dozens of business owners and executives who don't buy that argument and are lending their voices to an effort called Business for a Fair Minimum Wage, a project of Business for Shared Prosperity, an organization of "forward-thinking business owners, executives and investors committed to building enduring economic progress on a strong foundation of opportunity, equity and innovation," according to the organization's Web site.
Chuck Collins, the organization's director, described the group as "high-road businesses" that are already "paying well over the minimum wage" to their employees and must compete with companies that pay less. The group, Collins said, is "as nonpartisan as it gets." However, in its maiden campaign, Business for Shared Prosperity has teamed with Let Justice Roll, a coalition of church and community groups that also includes the AFL-CIO, the big labor federation.
Costco, of Issaquah, Wash., would suffer no direct impact from a higher minimum wage because its lowest-paid employees now make about $11 an hour, Sinegal said, adding that the average worker in the company's 504 stores in the United States makes $17 an hour.
"In my view, some of these industries that pay minimum wage are constantly turning their people," Sinegal said. "They spend more on turnover than they would in paying the additional wages."