Effects of High Wages in the Economy

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Table of Contents

Introduction
Costco Background Information
Employee Retention
Increased Purchasing Power
Improved Brand Name
Conclusion
Works Cited

Introduction

Wages and salaries increment have significant impacts on the economy. Costco Company has the one best wages and salaries system in the United States business market. Most employees, whether casual or technical have a better salary than in other organizations. The following discussion indulges in the economic effects of high pay rates in Costco Company.

Costco Background Information

The company provides a broad range of merchandise services to different clients across the market. Costco Company has diversified its market to cover different geographical areas in the global market (Randhawa 13). The company aims to ensure that its products are at a near reach for their consumers, hence improving their shopping experiences. Costco Wholesale Company was opened in 1976, in San Diego. In the beginning, the company only offered wholesale services for small businesses but later increased to other larger organizations, due to the availability of market growth opportunities (Randhawa 19). In 1993, Price Club and Costco merged increasing their market cover hence, generating more sales. The companys fundamental value is to reduce the cost of doing business and distribute its profits to its members (Randhawa 27).

Employee Retention

Costco Company is devoted to employees welfare, which has resulted in salaries and wages increases of its workers. High pay has various economic benefits for both the company and the employees. The application of this strategy has enabled the company to retain its employees and attract more talents from the labor market. The first economic effect of high compensation is low employees turnover (Thomas 137). Costcos company policy on improving the employees welfare by increasing their salaries has ensured that the rate of workers turnover is low. The hiring of new employees is costly for any organization since there are various costs associated with recruitment such as training and orientation fees.

A company has to train new employees in the organizations values and processes to equip them with crucial knowledge of how they should behave for the firm to run its business effectively (Alessandria, George, and Joseph 36). High pay ensures job satisfaction and motivates employees to work harder to retain their positions. An extremely motivated workforce increases its output hence, improving the companys annual profit. Therefore, high salaries do not only benefit the workers but also the organization since, its sales increase (Western 53). Employees are motivated to work harder since the firm recognizes their efforts. High pay also increases an organizations power to attract talented individuals in the labor market (Thomas 98).

The supply of qualified employees in America is high due to the increased education investment by individuals. However, many organizations are seeking skilled individuals making it necessary for organizations to use attractive means to attract talented individuals in the market. A company can attract talented employees by providing high salaries than other organizations could in the same market (Randhawa 219). Eligible employees benefit the organization since; they use their skills to develop appropriate strategies that will ensure the company maintains its competitive edge (Allen and Bryant 87). The white house acknowledged the company for its efforts on ensuring that the welfare of the workers was taken care of by the company. Compared to other major U.S. firms the company has the best employees compensation.

Increased Purchasing Power

Better employees compensation increases their purchasing power in the market. They can buy more goods and live a better life than other workers do in the same job group but in different organizations (Alessandria and Kaboski 117). High purchasing power is beneficial to the economy as it increases the sales level hence, increasing the profits of the businesses. Costco Workers also buy products from the company, which improves their firms rate of stock turnover. Increased pay means that the workers can purchase more from the business hence, benefiting the companys sales (Western 69). Increased purchasing power does not only benefit the employees; but also improves a companys sales. A company needs to consider the fact that if they raise their employees salary they will be able to consume more of the organizations products. A good compensation improves the staff lifestyle since; they can afford better houses and other services that they could not afford if their pay were poor (Allen and Bryant 87). Some of these economic effects are direct or indirect depending on the individual benefiting from the compensation.

Improved Brand Name

Costco Company brand name has improved due to its value to its workers. The company is known worldwide as a firm that respects and honors the workers efforts by providing a better salary than other organizations do in the global market (Randhawa 178). In the areas, that the company has branches the society appreciates how the business rewards its employees, which results in more customers and improves the consumers loyalty. Any organization has a goal of ensuring that it has a positive brand name to increase its sales by improving the customers loyalty (Hope and Mackin 32).

Conclusion

In conclusion, a high salary in Costco Company has reduced the cost of employing new workers since; the rate of employee turnover is low. The three main effects of pay rise in the economy are low employee turnover, increased purchasing power, and improved brand name. Businesses should ensure that their employees are motivated since it increases their output hence, improving organizations profits. High salary also attracts better talents in the labor market since most will be willing to work for a company that rewards employees efforts. A good brand name attracts new customers and retains the existing ones.

Works Cited

Alessandria, George and Joseph Paul Kaboski. Violating Purchasing Power Parity. Philadelphia: Federal Reserve Bank of Philadelphia, 2004. Print.

Allen, David G and Phillip C. Bryant. Managing Employee Turnover: Dispelling Myths and Fostering Evidence-Based Retention Strategies. New York: Business Expert Press, 2012. Print.

Hope, John and Patrick C Mackin. The Relationship Between Employee Turnover and Employee Compensation in Small Business. Washington: SBA Office of Advocacy, 2007. Print.

Randhawa, Gurpreet. Human Resource Management. New Delhi: Atlantic Publishers and Distributors, 2007. Print.

Thomas, Kenneth Wayne. Intrinsic Motivation at Work. San Francisco: Berrett-Koehler Publishers, 2009. Print.

Westeren, Knut I. Foundations of the Knowledge Economy: Innovation, Learning, and Clusters. Cheltenham: Edward Elgar, 2012. Print.

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