Costco Wholesale Co is raising entry-level wages for its hourly workers for the first time since 2007 as the warehouse club operator fights to compete in a tighter labor market.
The company told investors on Thursday that it would pay workers US$1.50 more per hour in the US and Canada effective this month. Workers are to earn at least US$13 or US$13.50 per hour, up from a minimum of US$11.50 or US$12 per hour.
The move is to squeeze profits for the third quarter and beyond.
The steps come as other major retailers have been increasing the minimum wages for their entry-level workers.
Wal-Mart Stores Inc, the US’ largest private employer, increased wages last month for more than 1.2 million workers.
It was part of a US$2.7 billion investment over two years in its workforce that also includes better training.
Entry-level Wal-Mart workers now get paid at least US$10 per hour. In its first round of wage increases, implemented last year, Wal-Mart raised its entry level wages to US$9 per hour.
Wal-Mart has already seen sales perk up in its US business as customer experience improves in the store. However, those investments are also squeezing profits.
Kohl’s Corp last month also referred to its increase in wages putting pressure on profits.
Costco chief financial officer Richard Galanti said that the increase would hurt its earnings for the current quarter by US$0.01 per share and US$0.02 per share each quarter for the following three quarters.
Galanti said he wants to offer top salaries at all levels, adding that Costco pays premium wages at the top of the scale. For entry-level workers, he described the work as tough.
“You’re on your feet, you’re lifting cases, you’re pushing carts at these entry-level jobs,” Galanti said in a conference call after Costco’s quarterly earnings report. “And so we thought it was time to do it.”
Costco’s pay is considered one of the highest in the retail industry.
Industry consultancy Hay Group estimated that hourly pay for the industry averages US$9.26 for cashiers and low-level retail sales staff.
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