At CVS, only the very rich get much richer

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At CVS Caremark, it doesn't pay to be really good at your job.

The nation's second-largest drugstore chain adjusts its annual raises to how much an employee makes. The higher your salary, the lower your raise.

The top workers at CVS stores — those earning the highest hourly wage for their job classification — are "red lined" by the company and receive no raises at all.

I can say that because I have my hands on an internal CVS document — the company's 2014 Wage Management Guidelines — spelling out the pay ranges for different positions and caps on raises.

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FOR THE RECORD:

CVS pay policies: A column in the June 27 Business section about pay policies at CVS Caremark misidentified Los Angeles compensation consultant Mark Lipis as Mike Lipis.
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"If you really think about it, the red-lined employees most likely are the ones that have been around the longest," said one CVS pharmacist who asked that his name be withheld because of fear of retaliation.

"This is quite the underhanded way to get the older employee base to leave," he said. "Would you want to stay somewhere that doesn't give you a raise?"

Probably not. Trouble is: Where are you going to go? So-called red lines or red circles are common among U.S. retail and service companies.

CVS, which gave its chief executive a 26% raise last year to almost $23 million in total compensation, isn't alone in making sure its rank-and-file workers don't make too much money.

And this is why, in any discussion of income inequality, we keep reaching the same point — the rich get richer, while everyone else gets table scraps.

"It's not personal. It's business," said Mike Lipis, a Los Angeles compensation consultant.

"There's a point where no matter how good people are, how friendly they are, it doesn't make sense to pay them beyond a certain amount," he said. "You're trying to make the most of your limited compensation dollars."

That's understandable. If you're selling fast-food hamburgers for $3 apiece, say, you'll go broke paying workers $30 an hour, even if they're the best darn burger makers in the business.

But where's the line? The average fast-food industry employee in this country makes $9 an hour, or just under $19,000 a year. Industry workers have called on McDonald's and other employers to pay $15 an hour, or about $31,000 annually.

Responding to recent protests, the chief executive of McDonald's, Don Thompson, said that he could possibly be open to a minimum wage of maybe $10 an hour. "McDonald's will be fine," he said. "We'll manage through whatever the additional cost implications are."

Considering that McDonald's pocketed $5.6 billion in profit last year, I'm guessing that they'll manage just fine.

But here's the real issue: How can Thompson fret about paying workers something closer to a living wage when he's pulling down total compensation worth $9.5 million a year, or more than $4,500 an hour?

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