News about minimum wage increases and pay issues made for prominent news during the month of February throughout the retail industry and beyond. Last week, the CEO of Costco announced increasing its hourly minimum pay to $16 starting in March 2021 for its U.S. store workers. This wage increase continues a trend from 2019 when it raised hourly pay to $15. Costco employs 180,000 U.S. workers with the average tenure being over nine years and 60 percent greater than five years for its U.S.-based workforce.
In mid-February, Walmart announced it would be raising pay for 425,000 U.S. workers, raising its average hourly pay rate to above $15. Walmart is the largest US employer with over 1.5 million workers and its starting pay will remain at $11 per hour. The CEO of Walmart will continue to raise their minimum wage with pay increases tied to store location, employee role and tenure, with the goal of creating a career path for all Walmart employees.
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Retailers Battle to Set the Bar
Costco is setting the bar high against its major rivals of Amazon, Target and Walmart in the ongoing issue of providing affordable wages for their associates. Amazon and Target had previously both increased wages to $15 per hour, but now they find themselves behind Costco.
With compensation being one of the primary reasons for employment, this move should help Costco in attracting talent and retaining their existing workforce, especially in markets where they find themselves competing against their retail rivals, as the call for raising the national minimum wage gains momentum in Washington D.C.
The Role of Employee Turnover in Wage Increase
One way to fund wage increases is to understand the cost of employee turnover. A recent study published by EmployBridge regarding the blue-collar workforce reported that the average cost for employee turnover to be nearly $5,000 for an employee who makes approximately $14 per hour. At that amount, employers could fund a wage increase up to $2.50 per hour to help drive down employee turnover.
As the battle for talented blue-collar workers and automation of stores and distribution centers continues to grow, keep an eye out for announcements for major retailers that are continuing advancements in total compensation throughout the coming months.