Higher wages pay off for Costco

Wal-Mart - soon to arrive here - is at the low end of retail scale

Posted: Monday, September 12, 2005

Juneau's lone warehouse outlet Costco is paying employees some of the highest wages in the retail business, as the company experiments with new policies to beat the competition.

Two more large retailers - Wal-Mart and The Home Depot - will locate here in the next two years and some residents worry about the quality of jobs they will bring.

The average Costco job pays $15.97 an hour, while Sam's Club positions average $11.52 and Wal-Mart pays about $9.64, according to BusinessWeek magazine. Compared to Sam's Club, in 2003 Costco sold about the same amount of volume, $34 billion, but with 68,000 employees, less than Sam's 102,000-person workforce.

Juneau Costco department manager David Ahrens says he'd be happy never to change jobs again.

"This is it for me," Ahrens said. "It's an all-around great place to work."

After five years at the store, he has completed a training course called "Costco University" and is eyeing upper management as a career.

Wal-Mart has been singled out nationally for paying wages sometimes below $7 per hour to keep prices down.

Costco is going in the other direction by paying some of the highest wages and hoping increased productivity can make up the difference.

Warehouse manager Mike Kryder said a hot dog vendor could make as much as $19 an hour at Costco. It is worth the money to him if the employee does not have to be supervised and can handle problem situations, he said.

Wall Street is not completely sold on the corporate philosophy, with the stock fairing less since Costco began paying higher wages last year.

Kryder said pleasing shareholders is not what the company is all about.

"It's more about doing the right thing," he said.

For Costco, high turnover is not an option. BusinessWeek found it cost retailers an average of $2,500 to train new employees, plus management is preoccupied with finding replacements.

Kryder said he'd rather spend his time training existing employees. Some 65 to 70 percent of Juneau employees are long-term, Kryder said. The store opened in Juneau 12 years ago.

At 10 a.m., Ahrens is out of breath. He has been supervising restocking in the food section, which began at 4 a.m. Large stores typically hire an evening crew for the task, but the concept here is to do it within a shorter amount of time and pass the savings on to the customer.

"They reward you for the work you do. Even a 'thank you' or a 'please' goes a long way," Ahrens said.

Employees said high wages were not the most important reason they are working at Costco, but safety supervisor Rene Mercure said it allows her to stay in Juneau where the cost of living is high.

Misty Garner came to Juneau from Idaho and heard from a relative that Costco had good pay and benefits.

"Pay raises come every other month," she said.

• Andrew Petty can be reached at andrew.petty@juneauempire.com

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