Monday, July 18, 2005

Penny Wise, Pound Foolish

Ezra Klein: Condemning CostCo

Via Nathan Newman comes this NY Times article on how Costco became the anti-Wal-Mart. These pieces pop up every so often to contrast Costco CEO Jim Sinegal's pro-worker philosophy with Sam Walton's throw-them-in-pits attitude. What I love, though, are the clockwork quotes from analysts upset at Costco's good labor practices. Even though Costco's stock price has jumped more than 10% in the last year, even though they sell stock at 23 times what their earnings would predict (Wal-Mart is 19 times), it's not enough. If you're not squeezing the workers, say the analysts, you're not doing your job:

Costco's average pay, for example, is $17 an hour, 42 percent higher than its fiercest rival, Sam's Club. And Costco's health plan makes those at many other retailers look Scroogish. One analyst, Bill Dreher of Deutsche Bank, complained last year that at Costco "it's better to be an employee or a customer than a shareholder."
Emme Kozloff, an analyst at Sanford C. Bernstein & Company, faulted Mr. Sinegal as being too generous to employees, noting that when analysts complained that Costco's workers were paying just 4 percent toward their health costs, he raised that percentage only to 8 percent, when the retail average is 25 percent.

"He has been too benevolent," she said. "He's right that a happy employee is a productive long-term employee, but he could force employees to pick up a little more of the burden."

That reporters can regularly solicit quotes condemning the CEO of a wildly successful business for being too attentive to consumers and workers is such a perfect window into the skewed values informing business that I feel I should frame each and every one. But much to my surprise, I never need to. There's always another analyst willing to play Greed's advocate.

I have, incidentally, a personal affection for the Costco-Wal-Mart feud as a metaphor for Democrats and Republicans. In some ways, the economic divisions in this country really are about who you favor: owners and shareholders, or workers and consumers. And, Democrats who're always trying to figure out how to talk about better wages and benefits without being labeled anti-growth, would do well to keep the Costco example in mind. What's hurting workers in this country, by and large, isn't the need for business to remain competitive, it's the pressure on CEO's to squeeze out a few more dollars for shareholders at worker expense. With the decline of the labor movement, workers have no powerful counterforce speaking for them: for Democrats, that should be the role of government.

One of the things that makes me nuts about the contemporary scene is the idea that it is an affront against God and Nation to pay a worker a decent wage for their work.

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