Canada Kicks Ass
Costco CEO supports a minimum wage hike


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Khar @ Tue Jan 28, 2014 12:08 am

andyt andyt:
Got any evidence for your contention? So far the new min wage has been in place for over a year, and not a peep about what a disaster it's been.

Which contention? So far it's been in place for a year, and it's not been a wild success either. Considering my stance is that pretty much shit all should happen as a result of the current increases, it's not really my burden to demonstrate a consistent status quo. Most of my other contentions come into play when we begin discussing your usual assertions; mainly, that the minimum wage should be increased to the LICO, which is pretty different than what happened here. That includes my concerns over making us more dependent on larger corporations, and the debate over how minimum wage works in a monopolistic or monopsonistic situation has been a growing one in the economics community because of that connection. Even a quick run through recent stuff on Google would have provided that evidence. Some of the papers below discuss that distinction.

Sadly, the only way to make minimum wage work in any way depends on us existing in an oligopsonistic market, one where very few, or even only one, company has buying power, or the likewise oligopolistic one where few have selling power. I don't know about you, but I don't want to entrench private companies to make a questionable panacea have any effect on labour... there are a lot of issues with having few companies in the first place.

As I've said, I have linked you time and again to articles, sources, and experts who have come out to state specifically that the minimum wage hasn't done much more Canada. Given that this minimum wage increase is no different than others, let's so you some of the more recent research:

We estimate the effect of minimum wages on poverty for Canada using data from the Survey of Labour and Income Dynamics (SLID) for 1997 to 2007 and find that minimum wages do not have a statistically significant effect on poverty and this finding is robust across a number of specifications. Our simulation results, based on the March 2008 Labour Force Survey (LFS), find that only about 30% of the net earnings gain from minimum wage increases goes to the poor while about 70% "spill over" into the hands of the non-poor. Furthermore, we find that job losses are disproportionately concentrated on the poor. Our results highlight that, political rhetoric not-withstanding, minimum wages are poorly targeted as an anti-poverty device and are at best an exceedingly blunt instrument for dealing with poverty.

Campolieti, M, Gunderson, M, & Lee, B 2012, 'The (Non) Impact of Minimum Wages on Poverty: Regression and Simulation Evidence for Canada', Journal Of Labor Research, 33, 3, pp. 287-302, EconLit with Full Text, EBSCOhost, viewed 28 January 2014.

A series of papers have established that minimum wages have negative employment effects on teenagers in Canada. Most of these papers assume identical coefficients across provinces, though some allow for province-specific effects--either for the minimum wage or other control variables. This paper systematically tests for province-specific effects. We not only find that these effects cannot be rejected, but that omitting them causes the model to fail Ramsey's test for specification error. Including only some province-specific effects appears to weaken the argument that minimum wages have adverse employment effects. However, this model is dominated by another that includes the full array of province-specific effects, and this latter model--on balance--supports the mainstream view.

Myatt, T, & McDonald, J 2010, 'The Robustness of Provincial Panel-Data Studies of Minimum Wages in Canada', Canadian Journal Of Regional Science, 33, 3, pp. 77-88, EconLit with Full Text, EBSCOhost, viewed 28 January 2014.

In May 2007, the U.S. Congress enacted legislation, which increased the Federal minimum hourly wage from $5.15 to $7.25, over a two year time period. This increase to the minimum wage was the first in nearly a decade and was approved with the objective of alleviating poverty among low-income households. However, a higher minimum wage may result in more unemployment and poverty. We exploit time-series variation in minimum wages set by Canadian provinces between 1981 and 2004. OLS and IV results suggest that a 10% increase in the minimum wage is significantly correlated with a 3%-5% drop in teen employment. Further, a 10% rise in the minimum wage is also significantly associated with a 4%-6% increase in the percentage of families living under Low Income Cut Offs (LICOs). Difference-in-difference estimates from the 1993, 1995, and 1998 waves of the Survey of Consumer Finances (SCF) support these findings as they suggest that income earned by teens constitutes a non-trivial portion of household income for families beneath Low Income Cut Offs. Therefore, a higher minimum wage may paradoxically result in a significant negative shock to household income among low-income families.

Sen, A, Rybczynski, K, & Van De Waal, C 2011, 'Teen Employment, Poverty, and the Minimum Wage: Evidence from Canada', Labour Economics, 18, 1, pp. 36-47, EconLit with Full Text, EBSCOhost, viewed 28 January 2014.

Based on longitudinal data from the Master File of the Survey of Labour and Income Dynamics (SLID) for Canada for 199346A1999, we provide multinomial logit estimates of the effect of minimum wages on the probability of being in one of four schooling-employment states as well as transitions across the states. We find that minimum wage increases led to large and statistically significant reductions in the employment of teenagers but had no net effect on their school enrollment or on the individual transition probabilities. We also find no substantial substitution of students for nonstudents or students leaving school to queue for the higher minimum wage jobs.

Campolieti, M, Fang, T, & Gunderson, M 2005, 'How Minimum Wages Affect Schooling-Employment Outcomes in Canada, 1993-1999', Journal Of Labor Research, 26, 3, pp. 533-545, EconLit with Full Text, EBSCOhost, viewed 28 January 2014.

In this article, we consider the possibility of alleviating poverty in Ontario through minimum wage increases. Using survey data from 2004 to profile low wage earners and poor households, we find two important results. First, over 80 percent of low wage earners are not members of poor households and, second, over 75 percent of poor households do not have a member who is a low wage earner. We also present simulation results which suggest that, even without any negative employment effects, planned increases in Ontario's minimum wage will lead to virtually no reduction in the level of poverty.

Mascella, A, Teja, S, & Thompson, B 2009, 'Minimum Wage Increases as an Anti-poverty Policy in Ontario', Canadian Public Policy, 35, 3, pp. 373-379, EconLit with Full Text, EBSCOhost, viewed 28 January 2014.

This paper considers whether the minimum wage is a well-targeted antipoverty policy by examining the backgrounds of minimum-wage workers. Whether raising the minimum wage reduces employment for unskilled workers is also investigated. An examination of micro data from a large-scale government household survey, the Employment Structure Survey (Shugyo Kozo Kihon Chosa), reveals that approximately half of minimum-wage workers belong to households with annual incomes of more than 5 million yen as a non-head of household. A regression analysis indicates that an increase in the minimum wage moderately reduces the employment of male teenagers and middle-aged married women, while it encourages the employment of high-school age youth.

Kawaguchi, D, & Mori, Y 2009, 'Is Minimum Wage an Effective Anti-poverty Policy in Japan?', Pacific Economic Review, 14, 4, pp. 532-554, EconLit with Full Text, EBSCOhost, viewed 28 January 2014.

We formulate a two-country model with monopolistic competition and heterogeneous firms to reconsider labor market linkages in open economies. Labor market imperfections arise by virtue of country-specific real minimum wages. Abstracting from selection of just the best firms into export status, standard effects on marginal and average firm productivity are reversed in our model, yet there are significant gains from trade arising from employment expansion. In addition, we show that with firm heterogeneity an increase in one country's minimum wage triggers firm exit in both countries and thus harms workers at home and abroad.

Egger, H, Egger, P, & Markusen, J 2012, 'International Welfare and Employment Linkages Arising from Minimum Wages', International Economic Review, 53, 3, pp. 771-789, EconLit with Full Text, EBSCOhost, viewed 28 January 2014.

The paper studies the effects of a one-sided minimum wage in a two-country model of intra-industry trade, in which multinational firms arise endogenously. With positive levels of intra-industry trade the adverse employment and welfare effects of an asymmetric minimum wage are significantly larger than in a non-trading economy. Multinational firms generally mitigate the effect somewhat. Even though factor prices are not equalized across countries, a (binding) wage floor in one country will prop up wages in the other. The flexible-wage country is insulated from shocks caused by factor accumulation in the rigid-wage country, while an increase in the labor supply of the latter economy may have profound impacts on labor market outcomes in both countries.

Braun, S 2010, 'Foreign Competition, Multinational Firms, and One-Sided Wage Rigidity', Global Economy Journal, 10, 2, EconLit with Full Text, EBSCOhost, viewed 28 January 2014.

We infer the employment response to a minimum wage change by calibrating a model of employment for the restaurant industry. Whereas perfect competition implies that employment falls and prices rise after a minimum wage increase, the monopsony model potentially implies the opposite. We show that estimated price responses are consistent with the competitive model. We place fairly tight bounds on the employment response, with the most plausible parameter values suggesting that a 10% increase in the minimum wage lowers low-skill employment by 2%-4% and total restaurant employment by 1%-3%.

Aaronson, D, & French, E 2007, 'Product Market Evidence on the Employment Effects of the Minimum Wage', Journal Of Labor Economics, 25, 1, pp. 167-200, EconLit with Full Text, EBSCOhost, viewed 28 January 2014.

andyt andyt:
As for inflation, it's very low, to the point the bank of Canada is worried about deflation and actually wants inflation to rise a bit - no worries about any inflation raising min wage.

The BoC tries to maintain an even inflation rate, actually, close to 2, typically 2.2%. They do it through primarily quantitative method; controlling the money supply and setting interest rates, etc. As for it's relation here, your argument is kind of irrelevant. It A) ignores what I just told you, that it's not overall inflation, but low-end good inflation, that is the issue here, and B) that whatever wage increase occurs won't just correct for a few year's worth of inflation at best.

andyt andyt:
And what Iv'e never understood is why wage increases for others (ie the people arguing against min wage) are a good thing, and they persue them eagerly, only min wage increases cost inflation? Hell, Boots et all get all bent out of shape when some union busting firm lowers wages - surely you all should be cheering about the deflationary effect and the huge increase in jobs opened up by the lower wages.

It's "Boots et al."

Nope. The problem is that minimum wages are ineffectual. They have literally no net benefit, and if overdone can have significant harms. Unions, on the other hand, protect worker rights and maintain wages to levels that are economically viable yet still not exploitative, a practice they don't do often. It also ensures that well paid, long term people in careers (not just jobs) are protected, and have a chance to have their voice said. These workers tend to have specific skills that give them bargaining power, and are overwhelmingly paid more than the minimum wage at an individual level (at least, the effect unions are). Some fairly clear distinctions are hence already done here.

Further, those jobs don't impact the low-end CPI as much. Simply put, when the poorest of us get a "raise" through the minimum wage, the low-end goods like toothpaste and pop experience a larger increase then they should, as businesses take advantage of that buying power. Stores also tend to raise prices as a response to their workers having to be paid more. Those in higher paying jobs tend to be customers who are not at the low-end, and hence don't see this sudden rise of prices eradicating their earning power, and also tend not to work at these stores as well.

It should be noted as well that unions actually do and can lead to an increased cost of end goods. The idea is that you will support the workers since they are in a union, expecting higher quality from experienced craftsmen or workers, and generally expect more out of the company. Expectations rise when a good is union made. Look to the hordes of people who bought Ford. Objectively, there are cars out there that were often better than Ford models, but they were bought because they were made American, had a union under them, and there was an expectation of quality.

Further, minimum wages have what is called a "spillover" effect, which brings other wages up above them to reflect the changing market structure. It's one of the reasons I dislike minimum wages, because a lot of the change goes towards groups who don't need it; it's not focused like the welfare programs I support on here. These spillover effects are far more restrained, less extensive AND less common under union wage models.

Empirical and experimental research suggests that minimum wages cause spill-overs to wages higher up in the wage distribution, i.e., they may even raise wages that were already above the new minimum wage. In this paper, we analyze how these findings can be explained by theoretical wage bargaining models between unions and firms. While the Nash bargaining solution is unaffected by minimum wages below initially bargained wages, we show that such minimum wages can drive up wages--and be harmful to employment--when bargaining follows the Kalai-Smorodinsky solution.

Dittrich, M, & Knabe, A 2013, 'Spillover Effects of Minimum Wages under Union Wage Bargaining', Journal Of Institutional And Theoretical Economics, 169, 3, pp. 506-518, EconLit with Full Text, EBSCOhost, viewed 28 January 2014.

The arguments for unions and minimum wages are quite different. So much so that both Lemmy and myself have repeatedly had to explain to you why we support unions and not minimum wages as a way of mass wage negotiation, so again, this isn't something I could not link you to time and again. I'm trying to get out of that habit because I've been told my constant linking of people back to previous conversations has been irritating some of our more forgetful (and hence somewhat inconsistent) members.

Finally, there are some out there, such as Bart and several others, who do not like unions anymore than they like minimum wage. My own support for unions is for reasons separate from wages. Nor do I think they have the same impact on wages anyways. In fact, the ability to defend unions separate from minimum wage is a big selling point for them, and one of the reasons why the union-oriented model in Germany has been so successful. Unfortunately, it's hard to have both... and even when we could (ignoring the paper below), the harms (large increase) or non-effect of minimum wage (small increase) make it irrelevant. Pro-union makes sense, pro-minimum wage does not.

In a cross-section of countries, state regulation of labor markets is strongly negatively correlated with the quality of labor relations. In this paper, we argue that these facts reflect different ways to regulate labor markets, either through the state or through the civil society, depending on the degree of cooperation in the economy. We rationalize these facts with a model of learning of the quality of labor relations. Distrustful labor relations lead to low unionization and high demand for direct state regulation of wages. In turn, state regulation crowds out the possibility for workers to experiment negotiation and learn about the potential cooperative nature of labor relations. This crowding out effect can give rise to multiple equilibria: a "good" equilibrium characterized by cooperative labor relations and high union density, leading to low state regulation; and a "bad" equilibrium, characterized by distrustful labor relations, low union density and strong state regulation of the minimum wage.

Aghion, P, Algan, Y, & Cahuc, P 2011, 'Civil Society and the State: The Interplay between Cooperation and Minimum Wage Regulation', Journal Of The European Economic Association, 9, 1, pp. 3-42, EconLit with Full Text, EBSCOhost, viewed 28 January 2014.

In a two-country duopoly model with integrated product markets, this paper investigates the incentives for unions to coordinate wage demands in the presence of transaction costs, and the sustainability of unions' wage collusion. Contrary to conventional wisdom that wage collusion is always welfare-detrimental, this work shows that wage coordination in the presence of low minimum wages may lead, from a social point of view, to a Pareto superior outcome with respect to separate wage settings with relatively high minimum wages.

Buccella, D 2013, 'The Sustainability of Unions' Wage Coordination in an Integrated Economy', International Journal Of Sustainable Economy, 5, 1, pp. 53-75, EconLit with Full Text, EBSCOhost, viewed 28 January 2014.

andyt andyt:
I'll go with the Costco CEO, who manages to pay high wages voluntarily and still manages to turn a good profit. He's got real world experience in all this. If he can do it, so can others.

Others can, but don't have to. That's the problem. There's a lot of people out there who look at Costco and go "yeah, he's doing something good," and I'm one of them. A lot of others, some of them the same people, don't see the same need to pay someone for doing pretty much nothing in their store, or something as simple as putting fries in a cup or making all the stock on the shelves face the same direction. You aren't really irreplaceable. As much as people can point to Costco doing a rational, smart thing, and I don't disagree, I do have to point out that they aren't really gaining much bang for their buck; others simply look at it and don't see the point at paying more for loyalty for what is a very low-level, easily-transitive position.

Unions HAVE to protect members, and governments have a duty to their citizens. There are reasons they are superior to minimum wage, either in providing protection or welfare programs. We can't force businesses to hire people, or to keep people on for years. We can't force this through to stop poverty. Simply put, there are better ways. You still haven't sold me on this... and in fact, I have yet to see you show me anywhere that this has a firm positive effect on society as a whole. Whereas I, on the other hand, came here with the Scandinavian model of poverty reduction that you yourself have since been espousing through the years since.

He should be lauded, but lauding him doesn't give him omniscience over all economic matters. I'll personally depend on statistically derived analysis to see what happens. Good on him for making it work for Costco.


Centre @ Thu Jan 30, 2014 6:00 am

PublicAnimalNo9 PublicAnimalNo9:
Centre Centre:
PublicAnimalNo9 PublicAnimalNo9:
Yeah, cuz COSTCO is so generous with what looks like an average hourly wage of around $12.00/hr.


I personally know someone who has worked at COSTCO (in Canada) for likely close to 20 years now and they are around $25.00 an hour.

Costco is known for paying its workers wages that are generally above average for the retail industry. An average Costco worker made about $45,000 in 2011, according to Fortune. That’s compared to an average of about $17,486 per year for a worker at comparable Walmart-owned Sam’s Club.

Costco reported a profit of $537 million last quarter, up from $394 million during the same period last year, according to the Wall Street Journal. The healthy earnings report comes just six days after [CEO Craig] Jelinik urged lawmakers to raise the minimum wage to $10.10 an hour. [...]
Costco is known for paying its workers wages that are generally above average for the retail industry. An average Costco worker made about $45,000 in 2011, according to Fortune. That’s compared to an average of about $17,486 per year for a worker at comparable Walmart-owned Sam’s Club.

I'm not wrong.

Cashier-Hourly $14.21

Merchandiser-hourly $11.75

Night Merchandiser-hourly $11.88

Front end assistant-hourly $11.69

Stocker-hourly $12.17

Major sales associate-hourly $12.17

Pharmacy Tech-hourly $18.75

Produce stocker-hourly $19.23

Stock clerk-hourly $15.15

Cashier assistant-hourly $11.63

Supervisor-hourly $20.74

Dept.Manager-salary $68,880

Electronics sales associate-hourly $12.20

Front end lead-hourly $22.68 ... 23_IN3.htm

I talked to the person I know who works at their warehouse and he is now making $24.00 an hr, in Canada and cashiers and other store workers are around $21.00.

That website seems to be outdated entry level.

“I guarantee you if workers have a little more money in their pocket, they’ll spend more at Costco,” Obama said to applause from the workers surrounding him in blue and red vests.

Obama said entry-level Costco employees start at $11.50 an hour, with average wages more than $20 an hour before overtime ... nd-costco/



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