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PeakTrader:

Here’s part of a 2013 article about CostCo:

“The no-frills warehouse chain, Costco, pays its hourly workers an average of just over $20 an hour, compared to just under $13 at competitor Wal-Mart.

Sales at Costco have grown an average of 13% annually since 2009, while profits have risen 15%. Its stock price has more than doubled since 2009. During the same period, discount retailer Wal-Mart’s sales grew an average of 4.5% each year, profits rose 7%, and its stock price increased 70%.

Cesar Martinez, a 37-year-old fork lift operator, has worked at a Costco in North Carolina for 19 years. He makes $22.82 an hour, gets health benefits and a pension plan. He manages to save, and doesn’t worry about hospital bills for his daughter, who suffers from asthma.

“That’s the reason why I’ve been here for so long,” he said. “The company gives you a decent wage and treats you with respect and takes care of you. That’s why we all give 100%.”

Research shows that it pays to pay employees well, because satisfied workers are more productive and motivated, according to MIT Sloan School of Management professor Zeynep Ton, who focuses on operations management.

“How many times have you gone to a store, and the shelves are empty or the checkout line is too long, or employees are rude?,” she said. “At Costco, you see a huge line that disappears in minutes.”

The productivity translates into sales, she said.

According to Ton’s research, sales per employee at Costco were almost double those at Sam’s Club, its direct warehouse competitor owned by Wal-Mart.”

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Two trends over the past 30 years or so are:

U.S. corporate profits increased from 8% of GDP in 1980 to almost 15% of GDP in 2014 (from National Economic Trends by the St Louis Fed), while “Proprietors’ Income” (e.g. smaller businesses) stayed roughly flat at around 9% of GDP.

And:

ABC NEWS Business Unit
July 2, 2010

“We’ve seen, over the past three decades, a tenfold-plus increase in the gap between top executives and average American workers.

CEOs in the country’s S&P 500 companies make, on average, 319 times more than the average American worker…in the 1970s, that ratio was 30 to 1.”

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A minimum wage, and raising the minimum wage, is needed to correct a “market failure.”

It’s ridiculous to reward work with poverty, e.g. because there’s abundant labor.

However, the country also needs more pro-growth or fewer anti-growth policies from politicians.

And, low wages, in itself, can cause low productivity.

Imagine if the minimum wage kept up with low-wage productivity growth, since 1968. The minimum wage would be at least $12.50 an hour today.

Tens of millions of workers would be happier and would’ve chosen work over government benefits or welfare.

They would’ve consumed more goods, saved more for retirement, paid more taxes, and consumed less government services.

Trade deficits would’ve been even greater (because consumption + saving = income would be higher) and there could’ve been budget surpluses instead of huge budget deficits (with appropriate policies from politicians). The national debt could’ve been much smaller.

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Here are some ideas by economists:

Minimum Wage

“The argument that minimum wages decrease employment is based on a simple supply and demand model of the labor market. A number of economists (for example Pierangelo Garegnani, Robert L. Vienneau, and Arrigo Opocher & Ian Steedman), building on the work of Piero Sraffa, argue that that model, even given all its assumptions, is logically incoherent.

Michael Anyadike-Danes and Wyne Godley argue, based on simulation results, that little of the empirical work done with the textbook model constitutes a potentially falsifying test, and, consequently, empirical evidence hardly exists for that model.

Graham White argues, partially on the basis of Sraffianism, that the policy of increased labor market flexibility, including the reduction of minimum wages, does not have an “intellectually coherent” argument in economic theory.

Gary Fields…argues that the standard “textbook model” for the minimum wage is “ambiguous”, and that the standard theoretical arguments incorrectly measure only a one-sector market.

An alternate view of the labor market has low-wage labor markets characterized as monopsonistic competition wherein buyers (employers) have significantly more market power than do sellers (workers)…Such a case is a type of market failure and results in workers being paid less than their marginal value.

Under the monopsonistic assumption, an appropriately set minimum wage could increase both wages and employment, with the optimal level being equal to the marginal productivity of labor.”

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