Dive Brief:

• Effective this week, hourly, U.S. Costco workers will make a minimum of $16 an hour, Costco CEO Craig Jelinek announced during a U.S. Senate Budget Committee hearing.
• The club retailer paid hourly workers an extra $2 starting in March 2020 because of the coronavirus pandemic. It will end that payment this month as the new wage floor takes effect.
• Costco raised its starting hourly wage to $15 in the U.S. two years ago, staying true to a commitment to competitive retail wages, Jelinek said.

Dive Insight:

For Costco, higher wages bring a number of benefits — not just for the worker, but for the business. "We know that paying employees good wages and providing affordable benefits makes sense for our business and constitutes a significant competitive advantage for us," Jelinek said.

Specifically, robust compensation minimizes turnover while maximizing productivity, commitment and loyalty among employees, Jelinek said. More than 60% of Costco employees have worked at the store for more than five years, with the workforce boasting an average tenure of nine years, according to Jelinek; "Costco provides a career, rather than a job."

Hourly workers at Costco make an average of $24 an hour, excluding overtime pay. The figure takes into account twice-annual bonuses that can total up to $4,000, Jelinek said. Full-time workers receive two raises each year, while part-time workers see one increase. More than half of Costco's U.S. hourly workforce are paid at the top of the chain's pay scales, making more than $25 per hour. The retailer also provides workers "broad and affordable" health benefits.

Competitive compensation packages may be particularly important for retailers, many of whom are in dire need of workers to keep up with demand heightened by the coronavirus pandemic. Costco's starting wages now outpace those offered by several other household names, including Target, which raised its starting hourly wage to $15 in July 2020, and Amazon, which boosted its minimum wage to $15 in November 2018. Walmart recently announced it will raise its average pay to above $15 by giving some 425,000 workers a raise. Its starting wage will remain at $11 per hour, according to CNBC.

It's worth noting that President Joe Biden has repeatedly pledged to back a $15 federal minimum wage. While some states and localities have taken it upon themselves to mandate higher minimum wages, the federal minimum wage, as defined by the Fair Labor Standards Act, remains at $7.25 per hour.