Lessons from Costco: Tranforming Hourly Jobs or Simply Making Them More Tolerable?
The conditions of work at the low end of the American labor market are worsening, characterized by poor wages, few fringe benefits, and growing instability of work hours. These trends have arisen within a context of limited regulation that allows firms wide discretion over the terms of employment -- and thus relative freedom to implement a focus on short-term cost-cutting. Though it operates in the same cost-minimizing business environment as its competitors, big box retailer Costco represents a novel case of an employer that has chosen to offer better-than-typical wages and benefits. It has also opted to limit its store managers' scheduling flexibility by requiring that warehouses maintain above-average levels of full-time jobs and guaranteeing minimum weekly hours to full-time and part-time workers.
In this paper, we examine how corporate philosophy regarding the employment relationship and company human resource (HR) policies is translated into day-to-day store practices that shape the quality of Costco’s front-line, hourly jobs.
Methods
The paper combines data from in-depth interviews with Costco executives and frontline managers with organizational documentation. We conducted interviews with the CEO and Senior Vice President of HR in Spring 2007 to illuminate the firm’s business strategy, employment relations philosophy and overarching human resource policies. We also interviewed three levels of managers (general, department, and human resource) at seven Costco warehouses to investigate day-to-day, in-store employment practices: four in Seattle (in Spring 2009 and again, at two of those warehouses, in Spring 2012) and three in Chicago in Fall 2012. We complemented these data with printed materials on human resource policies and practices and a review of media coverage of the company.
Results
The paper reveals how an alternative approach to the employer-employee relationship – reflected in Costco's human resource policies that compel the firm to manage costs as a whole rather than minimizing labor costs primarily - distributes business risk across both management and employees, with striking implications for the quality of jobs and employees’ work-life experiences. Costco’s minimum weekly-hour guarantees and investment in cross-training both compel and enable managers to reallocate employees with fluctuations in customer traffic. Unlike other firms that handle declines in consumer demand by substantially reducing the hours of workers with the least seniority and lowest wages, Costco takes an incremental approach characterized by shaving off hours among seasoned workers who volunteer for hour reductions. These practices, combined with Costco’s wage and benefits policies, provide more stable and rewarding employment than observed in many other firms.
Conclusions/Implications
Drawing on our prior research in other retail firms and in restaurants, hospitality, banking, and transportation, we place our findings in the broader context of US hourly service work, and assess the extent to which Costco’s jobs are qualitatively different versus simply more tolerable than those at other firms. We further consider the generalizability of a potentially transformative “Costco approach” to employment at the bottom of the US labor market, as well as the prospects of pursuing such workplace transformation through voluntary employer discretion versus public policy mandates.