Re "Why Costco backs a wage hike," March 7
Costco has other reasons to support a higher federal minimum wage besides the congratulatory ones mentioned in The Times' article.
Increasing the minimum wage would raise the cost of hiring low-wage workers relative to the higher-wage workforce at Costco. This would increase competitors' prices, thereby boosting demand and profits at Costco.
Costco is echoing a move by Wal-Mart, which has supported minimum-wage hikes. Because Wal-Mart already pays more than the federal minimum, an increase would raise competitors' costs and Wal-Mart's profits, while demonstrating its compassion for workers at no cost.
If Costco's higher-wage business model benefited every employer, all would adopt it. But just as not every retailer offers samples like Costco, not all would gain from its labor strategy. Under the cover of compassion, Costco's support for a higher minimum wage actually imposes harm on its rivals.
Gary M. Galles
The writer is an economics professor at Pepperdine University.
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