It is surprisingly hard for many people to understand that government regulation is often more of a boon to big business than it is a burden to them, but the current debate on minimum wage serves as a simple illustration.
When I saw a recent headline: Costco CEO: Raise The Minimum Wage To More Than $10 Per Hour, my first thought was, “How does this guy benefit from a higher minimum wage?”, and my second thought was, “Aha!” I cracked the code in an instant. Costco I thought, must pay more than $10 per hour already, while its competitors must pay less. That means Costco would not be affected at all by an increase in the minimum wage to $10, while any of its competitors that pay below $10 per hour could see their business models severely impaired. And so it is.
Costco’s minimum salary is $11.50 per hour while Wal-Mart pays new workers only $8. Costco is very light on service and very high on efficiency, with each customer spending much more per visit than Wal-Mart customers. A skillful, efficient workforce is integral to Costco’s business model. On the other hand, Wal-Mart has myriad employees, some of whom do nothing but greet customers, and with lower priced items and higher customer volume, each employee-customer interaction generates only modest revenue to the company. Its larger but lower-cost sales force is the only way for Wal-Mart to keep volume up and prices low.
Costco’s current CEO, Craig Jelinek, as well as its former CEO and founder, James Sinegal, claim that they pay more to their employees because it’s the right thing to do, and it is, but not morally right as they imply, just right for their business model.
Here are the numbers that prove my point
CISPA, Social Security & FBI's Terror Net
There was so much news this week that I didn’t have time to follow up on everything on air. Here a few articles that should answer the biggest questions raised on this week’show. First, What is CISPA? CISPA Isn’t ‘Son of SOPA’ (But That’s Not Saying Much) Second, Is Social Security Fully Funded? Misleading the … Read more