Feature

Why Walmart can’t pay Costco wages

Well-off policy analysts tend to see Walmart and Costco as two peas in a pod, but they’re really very different.

Megan McArdleBloomberg.com

Those who criticize of Walmart’s low wages have a standard argument, said Megan McArdle. If big retailers such as Trader Joe’s and Costco can pay their workers living wages and still be highly profitable, they say, America’s largest employer should be able to do the same. But is it actually true “that Walmart could increase its wages by 50 percent and still prosper?” Probably not. Well-off policy analysts tend to see Walmart and Costco as two peas in a pod, but they’re really very different. Costco is where “affluent, high-socioeconomic-status households occasionally buy huge quantities of goods on the cheap.” Walmart, on the other hand, “is mostly a store where low-income people do their everyday shopping.” That means Walmart has “to devote a lot of shelf space, and labor, to products that don’t turn over that often,” and that Costco needs only half as many employees per square foot as Walmart. I often hear from people who say they’d gladly pay 25 percent more for their Walmart goods if it went to higher wages. But I suspect these people visit Walmart “only on road trips.” Walmart’s bread-and-butter customers go there for low prices, and they “can’t afford to pay extra for top-notch service.”

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