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Costco Versus Walmart

Reported by Eleanor - July 24, 2004 -

On Forbes On Fox (July 24, 11:25 a.m.) the pundits tackled the issue of why Costco expects to benefit from a Kerry administration, and Walmart will profit from four more years of Bush. Why would the rival stores care, and why are each giving money to their respective candidates?

The first bit of data presented is that Walmart pays their employees an average of $9.64 an hour while the minimum at Costco is $10.00 an hour. Walmart doesn't like the Kerry economic plan because it would boost the minimum wage, and many Walmart workers are minimum wage workers, so the wage average would go up. (The average is inflated already with management salaries). Also, Walmart has so many stores that people will stay at Walmart if slow job growth continues?? (Not sure how to interpret this)

Costco gives generous wages and benefits with 6% unionization. Walmart takes active steps to discourage unions. Costco's wages and benefits will be helped with Kerry's health care plan. Walmart has efficiencies of size and can save money on everything but labor. Labor is a fixed expense and in a different category. Employees want a greater share of profits.

If the economy does better, half of American households are already members of Costco, so where would their growth come from? Walmart will go overseas.

Comment: A lot of this seems intentionally fuzzy, but a couple of things are clear. Increasing the minimum wage hurts Walmart because they have so many minimum wage workers. Government assistance with health care helps Costco because they provide more health benefits to their workers. Walmart likes Bush because they like the "labor unfriendly" status quo, since labor's fixed expense uncontrollably eats into profits. Walmart is #1 in revenues and #8 in profits in the world. See Walmart Profits. Costco provides good wages already, and they like Kerry because he promises a partnership with government that shares benefit costs. Walmart provides very few employee benefits, and they don't care to expand them, so government assistance is not an issue.