Costco is famously employee-friendly -- but hadn't increased entry-level wages in nine years. (Mike Blake/Reuters)

No one who knows anything about business would accuse Costco of being a bottom-feeder. The Seattle-based bulk retailer is famously employee-friendly, serving as a case study for the thesis that paying good wages leads to good performance.

That's why it was surprising when investors learned on Thursday that Costco hadn't raised its entry-level wage since Congress last voted to raise the federal minimum wage, nine years ago — meaning that it had actually declined, when factoring in inflation.

Of course, Costco hadn't really had to raise that floor to attract workers, with its average wage for hourly employees reportedly topping $20 an hour. That's well above other big retailers like Target and Walmart, who fall more in the $10 to $13 range; staying a little higher should allow Costco to attract the kind of better-than-average employees it wants.

But with its competitors raising their bottom wages as well, that was no longer enough. On an earnings call, chief executive Robert Galanti explained that Costco reviews its payscale every three years, and usually raises just the top end — which right now is about $22.50. This year, they were boosting the floor as well, by $1.50, to $13.

"We want to be the premium at all levels. We're a huge premium at the top of scale. That's as others raise their rates at the bottom," Galanti said. "And frankly in some markets, this is a physically challenging job. You're on your feet, you're lifting cases, you're pushing carts at these entry level jobs. And so we thought it was time to do it."

Galanti might also have been paying attention to statistics. Retail wages, after nosediving in the recession and then stagnating in the recovery, have bounced back strongly over the past year when adjusting for inflation:


That's still nowhere near the $15 an hour that activists have been pushing for — and quite a bit below what retail workers were pulling in decades ago. But it's getting closer.