Costco Vs Walmart. This paper will discuss the viability of increasing wages to attain higher productivity rates in the workplace. I will argue that implementing a wage increase for current employees will not necessarily result in higher productivity and
Gouveia
Increase Wages for Productivity
Kaelynd Gouveia
Philosophy 2074
Alex Beldan
This paper will discuss the viability of increasing wages to attain higher productivity rates in the workplace. I will argue that implementing a wage increase for current employees will not necessarily result in higher productivity and that productivity is more so a function of innate skills and abilities than pay rate. Costco claims they receive high productivity rates in return for paying their employees high wages. This does not necessarily mean that implementing a wage increase at a chain like Sam’s Club, owned by Wal-Mart, for current employees will provide the same productivity results.
Currently Wal-Mart and its subsidiaries operate on the mission of “Always Low Prices, Always” (81). Wal-Mart achieves these low prices through “low wages for its employees, unrelenting pressure on suppliers, products cheap in quality as well as price, (and) offshoring jobs”(81). Cascio argues that there may be an alternative to the way that Wal-Mart runs it’s business where they are able to offer low prices while paying employees well and providing desirable returns for shareholders (81). Cascio bases this argument on the premises that Costco, a store with similar objectives to Sam’s Club, is able to successfully run a profitable business not at the cost of employee wages, quality of product, return to shareholders, or profits (81). Costco believes that providing higher wages results in higher productivity (82). On average they pay their employees $6.89 higher than Wal-Mart employees and provide above average benefits yet most agree that they are still the lowest cost provider (82). Costco is also very concerned with quality of product; when purchasing merchandise they seek out value that they measure by the product quality rather than the price, a differing tactic from that of Wal-Mart (84). Even with higher than average wages and benefits to shareholders Costco provides good returns to it’s shareholders where in a 5 year comparison between Wal-Mart and Costco, Costco saw 45% more growth than Wal-Mart and traded at 24.8 times expected earnings, 7.4 times higher than Wal-Mart (84). Lastly, in providing good wages and benefits to employees, low costs to customers on quality products, and creating value for shareholders, Costco saw revenues of $43.05 billion, 5.95 billion higher than Sam’s Club with 38% less employees (87).