Low Wages and Benefits vs. Low TurnoverWayne F.Cascio, a professor of management at the University of Colorado at Denver and Health Sciences Center, has published a useful article examining the trade-off companies typically face between paying low wages and benefits, and keeping employee turnover low. Cascio looks specifically at Sam's Club and Costco, warehouse retailers that compete directly as deep discounters.1
A summary of Cascio's findings appears in the December 2006 issue of the Harvard Business Review. In brief, the findings are:
- Despite paying higher wages and benefits, Costco has lower annual turnover costs per employee than Sam's Club.
- Costco has the lowest shrinkage (employee theft) in retailing, an accomplishment Cascio argues is likely linked to employee loyalty.
- Costco's operating profit per hourly employee is 88% higher than Sam's Club's.
1 "Decency Means More than 'Always Low Prices': A Comparison of Costco to Wal-Mart's Sam's Club," by Wayne F. Cascio (Academy of Management Perspectives, August 2006).