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Originally published January 29, 2014 at 12:45 PM | Page modified January 30, 2014 at 4:55 PM

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In store visit, Obama touts the Costco way with pay

On Wednesday, Obama visited a Costco Wholesale warehouse in Maryland, depicting the company as a role model as he presses to reduce income inequality and to raise the federal minimum wage to $10.10 an hour.


Seattle Times business reporter

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President Obama has found a Northwest ally in his call to reduce income inequality: warehouse retailer Costco Wholesale.

On Wednesday, the day after his State of the Union address called for lifting the minimum wage for working Americans, the president chose to speak at a Costco in Maryland.

The Issaquah-based company, he said, is proof that higher wages are “a smart way to boost productivity and to reduce turnover.”

Obama said Costco Chief Executive Craig Jelinek understands the way of business pioneered by Ford Motor founder Henry Ford in the early 20th century, when the car-industry tycoon chose to pay its workers a fair salary.

“He knows that Costco is going to do better, all our businesses do better, when customers have money to spend,” Obama said.

In the State of the Union address, Obama said he would issue an executive order requiring federal contractors with new or renewed contracts to pay their workers at least $10.10 an hour.

The presidential visit underscores how Costco is gaining a prominent role in the growing national debate about income inequality.

The company is known for paying its workers well — an average $20.89 per hour for its hourly employees. Starting salaries at its warehouses amount to $11.50 an hour, said Chief Financial Officer Richard Galanti, well,above the federal minimum of $7.25.

Costco’s executives are also famous for taking home less than those in competing companies at a time when executive salaries have skyrocketed and average wages have stagnated in the face of global competition.

As campaigns to raise minimum wages rage from Seattle to New York City, Costco’s model is increasingly seen as an alternative to bottom-line-focused capitalism.

Many of the company’s shareholders, who saw Costco profits grow even as other retailers suffered through the recession, seem happy with the approach.

In a recent securities filing, shareholder Davis Advisors said Costco’s culture, as led by its board of directors, “has been a core element of the longterm success of the company in part because it inhibits any temptation to take actions (like raising prices or cutting store-employee pay and benefits) that might temporarily boost earnings and stock price” at the expense of long-term value.

It’s not the first time Costco participates in a lovefest with the administration. Vice President Joe Biden did some of his holiday shopping at a Washington, D.C., Costco in November 2012. At the time he talked about extending middle-class tax cuts.

In February 2012, Obama attended a private fundraiser at Costco co-founder Jeff Brotman’s house in Medina.

Retired Costco CEO Jim Sinegal spoke at the 2012 Democratic National Convention, where he said job creation and shareholder satisfaction could be reconciled with relatively high wages for unskilled workers. “We’re proud that Costco pays the highest wages among our peers,” Sinegal said.

In the 2012 election cycle, individuals associated with Costco contributed $43,860 to the Obama campaign, according to Opensecrets.org.

In his Wednesday remarks, Obama cited Sinegal, whom he called a “great friend.”

“And before I grab a 10-pound barrel of pretzels and 500 golf balls, let me just leave you with something I heard from Costco’s founder,” the president said. “ ‘Here’s the thing about the Costco story. We did not build our company in a vacuum. We built it in the greatest country on Earth.’ ”

Ángel González; 206-464-2250 or agonzalez@seattletimes.com. On Twitter: @gonzalezseattle



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