Great Health Care Benefits at Costco

Nurses Activism


Los Angeles

February 15, 2004

Costco Sees Value in Higher Pay

By James Flanigan

Much of corporate America is driven today by the belief that to be

competitive, companies must cut their employees' wages and benefits.

Nowhere is this creed held more devoutly than among the supermarket chains

that are enduring a strike and have locked out their workers in Southern

and Central California. A new kind of labor agreement that cuts pay and

sharply slashes employer contributions to health benefits is imperative, declares Steven Burd, chief executive of Safeway Inc., "if we're going to stay in business."

Jim Sinegal sees things much differently. The chief executive of Costco

Wholesale Corp., a warehouse club retailer with 430 stores, likes to boast

of his company's relatively high pay and benefits for its 92,000


... Costco - where a full-time clerk or warehouse worker earns more than

$41,000 annually after four years, compared with $37,232 at the


Unlike the supermarket workers, Costco employees have always paid a

portion of their health insurance. The co-payment is now 4.5%, or $500 to $1,000 a year. That will rise to 8% in the next four years, to keep up with soaring insurance costs.

But the benefit package that Costco employees get in return is

particularly rich. The company chips in $12,000 to $19,000 per employee (depending on whether they are full- or part-time). In the end, Costco's contribution is at least a third higher than that made by supermarket employers to their workers' health benefit plan.

If Costco has a weak spot, it is on the bottom line. The company earns

about 1.7 cents for each dollar of sales, compared with 2.5 cents or more for

the supermarket chains and 3.5 cents for Wal-Mart.

Wall Street contends that one reason for this shoddy showing is Costco's

generosity to its employees. Above all, as Costco executives have watched the turmoil at the grocery chains, they have been reminded about all that they are doing right.

"I don't see what's wrong," Sinegal says, "with an employee earning enough

to be able to buy a house or having a health plan for the family.",1,7018352.column?coll=la-headlines-business-careers

Comment: The reality? In this instance, a conscientious employer, who

believes that employees should be adequately covered for comprehensive

health care benefits, is paying $19,000 for a $41,000 employee, and that

doesn't even include the employee's contribution. This amounts to about

one-third of compensation being received as health benefits (minus

retirement benefits). Obviously, at that rate, an employer cannot remain

competitive with other businesses that slash health care benefits.

Relinquishment of adequate profits cannot be considered a realistic option

for funding employee health care. Reduction of employee compensation to

below subsistence levels is not satisfactory either. Employer sponsored

coverage inevitably is reflected in higher consumer prices. Inequitable

provision of employee health benefits places the conscientious employer at

an unfair competitive disadvantage with business owners who reduce prices

by depriving employees of adequate compensation packages.

In 2004, we're already spending $1.79 trillion or $6167 per person on

health care. Placed in a single, universal risk pool that would amount to more

than enough to fund a comprehensive benefit package for everyone. Then, instead of relying on the diminishing supply of conscientious employers and the diminishing clout of union negotiators, we should rely on sound tax policy

to establish an equitable method of funding our universal risk pool.

If we fail to change to an equitable system of funding health care, we

will force concerned employers into an untenable position. In order to survive

in a competitive market, they will have to trim their contributions to the

health plans. Then what will we have? Unaffordable care for those who

really do need it.

But the rest of us will be fine... as long as we stay healthy.


56 Posts

Thanks for the post! I don't shop Sams or Walmarts because of their employee unfriendly policies. I had never heard of Costco (I live in a tiny, tiny little town miles from a big city) until a couple of weeks ago on another discussion thread here. I located the nearest Costco which is about 15 minutes from where my son lives. I will join next time I visit him and shop there some. I am still sticking to my small town local merchants as much as possible, but I will also shop Costco for things I use in large amounts.

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