Wednesday, 21 July 2004

Costco vs. Wal-Mart

I wrote in a previous post on CasdraBlog about some of the differences between retail competitors Wal-Mart and Costco. It seems that their organizations are also competing in national politics as they have contributed to different presidential candidates with Costco supporting Kerry and Wal-Mart supporting Bush
The differences are based on more than ideology: Each retailer has a stake in the election's outcome in areas from health care to the minimum wage to the way unions can organize work forces.

Kerry, 60, a four-term senator, pledges to induce more employers to insure workers with a $257 billion proposal calling for the government to pay most so-called catastrophic health-care costs -- only for companies that provide comprehensive coverage. He'd raise the minimum wage and make it easier for workers to join unions.

Those policies might benefit Costco and hurt Wal-Mart.

Issaquah-based Costco offers comprehensive health insurance to most of its 78,000 U.S. employees, making it eligible for Kerry's plan, said Kerry's top domestic policy adviser, Sarah Bianchi, 31. That could cut 10 percent, or $35 million, off its annual health care premiums.

Wal-Mart's health plan for its 1.3 million U.S. workers is probably not broad enough to qualify for the savings that Kerry's proposal would bring, since it doesn't cover enough workers, said Jason Furman, 33, the Democrat's chief economic-policy adviser. Fewer than half of Wal-Mart's employees are enrolled in the company health plan, according to figures supplied by the retailer.

Costco wouldn't have to raise salaries with Kerry's proposal to increase the minimum wage to $7 an hour, from $5.15 now. It already pays hot-dog vendors as much as $16 an hour, and the lowest wage it pays is $10 an hour.

That's higher than the $9.96 average wage paid at discount stores bearing the Wal-Mart name. Sam's Club spokeswoman Jolanda Stewart declined to provide wage information for the warehouse unit.
Now let me get this straight. Costco is supporting Kerry because his plans will essentially have no effect on them because they are ALREADY paying ALL their employees over Kerry's proposed minimum wage and insure all of their employees. Wal-Mart doesn't do either, so of course they support Bush.

Maybe it would cost Wal-Mart too much to act like Costco. Let's see, if I'm reading this Income Statement correctly their 2003 PROFIT was over 9 BILLION DOLLARS. Again, that is PROFIT - PROFIT - for ONE YEAR. The question I have is did they really have to make that much money? Would it really be bad business to have their employees have heath insurance and let them make a decent wage? Who would that have hurt? I guess the same people that most benefited from the Bush tax cut. My personal Wal-Mart boycott continues. Costco knows paying their employees well is good for their business and they continue to get my enthusiastic support.

1 comment:

Walker said...

Mike, this is a good example showing that it is faulty thinking that suggests that it's usually in the best interest of business to support Republicans or to oppose any legislation that puts reins on business excesses. Like individuals, businesses have a wide range of behaviors with respect to treatment of employees, stewardship of the environment, and protection of the consumer. If government imposes no restrictions on corporate behavior, those corporations that are behaving responsibly are hurt just as much as those who pay attention only to the bottom line are aided.

Here's the kicker: Even if a proposed regulation is sufficiently restrictive to require costly changes for good corporate citizen, it is likely to be less costly for them that for their irresponsible competitors, and ultimately will result in a competitive advantage that outweighs the obvious cost. In fact I would suggest that it is one very good measure of the desirability of a proposed regulation to determine the extent to which its cost to business is proportional to the business' current misbehavior.