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The Costco example [Editorial]

"No one who works full-time should ever have to raise a family in poverty." That was the message President Barack Obama brought from Tuesday night's State of the Union address to a Costco warehouse in Lanham on Wednesday morning, and it's hard to believe that there's much disagreement on that sentiment.

Yet based on the reaction from Congressional Republicans, one would think that President Obama's decision to issue an executive order raising the minimum wage for new federal contractual workers to $10.10 per hour from the current $7.25 was tantamount to socialism. And that's about the nicest thing his Republican critics had to say in the wake of Tuesday's speech, including those who claim he's violating the Constitution (as if offering a modest wage increase was on-par with the internment of Japanese-Americans, the freeing of the slaves or other far more ambitious actions presidents have taken by executive order in the past).

Income inequality exists, and it's been getting worse for decades. That's a fact. There are any number of reasons for this well beyond the scope of government, as Mr. Obama has pointed out, including the loss of jobs that required relatively few skills but paid decent wages. Much of the remedy involves providing better educational opportunities and job training to workers, but part of the solution is to raise the wages of the lowest tier.

The president likely chose a Prince George's County Costco to make his first appearance after his speech for two reasons. The first is that Gov. Martin O'Malley and the General Assembly are now involved in a debate over the Maryland minimum wage with a push to elevate it to the same $10.10 per hour, a cause that has already met some resistance from Democrats and Republicans alike.

But the second — and one that Republican critics should note — is that Costco is prime example of what happens to an employer in the highly competitive, price-sensitive big-box discount retail market when wages are increased. The result is that everybody wins — workers, customers and shareholders.

Costco is not only a highly successful company, but it has prospered by paying higher wages and offering better employee health coverage than its competitors. Hourly workers in its 400 stores reportedly earn not $10.10 per hour but average $20.89 per hour (before any overtime is added in). Meanwhile, employees are expected to contribute a substantially smaller percentage of their health insurance plan's cost than is the norm.

Yet Costco's labor costs are relatively low, at least when compared to total sales. In part, that's because the higher wages attract a more stable, harder working, more responsible and loyal workforce. And that's exactly what advocates for a higher minimum wage have been saying for years — the policy can be a win-win for the economy and for working-class families.

Obviously, business models vary, but this nation has had a minimum wage on the books since the 1930s. It isn't socialism, it isn't communism, it's just a protection to ensure that people are treated fairly. And, unfortunately, it has been allowed to become largely irrelevant because it hasn't kept up with inflation over the years.

America should be home to the American dream. Yet serious questions have been raised recently about how much social mobility exists in this country. If you are born poor today, you are about as likely to remain poor as you were 40 years ago, according to a study released earlier this month that also found that the U.S. lags many other nations in upward mobility (and that includes countries like Denmark, Great Britain and Sweden where there is a much more elaborate — and costly — social safety net).

Will raising the wages of a relatively small percentage of the workforce change all that? Absolutely not. But even Mr. Obama's modest increase that might cover 200,000 workers is a step in the right direction. Small wonder that 21 states and the District of Columbia now require a minimum wage that is higher than the federal standard, too.

How could Maryland, a state with a relatively high cost of living, not raise the minimum wage when so many others have? That's a good question. That some Democratic legislators are already grumbling that $10.10 is too high (that rate would not be effective until the summer of 2016 under the proposal) is a bit of an embarrassment. Polls show most Maryland voters favor it.

President Obama probably can't get a minimum wage through a Congress so dysfunctional that the opposing party offered four separate responses to his single State of the Union address instead of the customary one. His promise to do all that he can to boost economic opportunities, whether by law or by executive order, is about the best that can be offered at the moment. The Maryland General Assembly should heed the president's words and Costco's example.

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Copyright © 2015, The Baltimore Sun
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