How Costco Can Afford To Pay The Best Wages In The Industry

Costco is often praised by politicians and labor activists for paying its employees more than the minimum wage.

The company, which pays new employees $11.50-$4.25 more than the minimum wage-has become a standard bearer in the fight for higher wages at Wal-Mart and other major retail chains.

But Costco's high wages are only made possible because of its annual customer membership fees, which cost as much as $110, argues Michael Saltsman in The Wall Street Journal. Saltsman is the research director of the Washington, D.C.-based Employment Policies Institute.

"The warehouse retailer rakes in what amounts to a more than $10,000 profit per employee, according to data from business research company Hoovers," Saltsman writes. "A casual dining restaurant, on the other hand, earns a roughly $2,000 profit per employee."

President Obama has proposed raising the minimum wage by 40% to $10.10.

To offset an increase in the minimum wage, retailers that don't rely on membership fees would have to raise prices. But not all companies can charge customers more without driving them away, Saltsman argues.

"If McDonald's could raise burger prices by 40% without losing customers, it would have done so already," he writes. "But customers are price sensitive."

Costco ranks second on Glassdoor's list of highest-paying retail companies, coming only behind high-end department store Bloomingdale's.