Costco and union workers reach temporary agreement to avoid strike

Costco Wholesale, the American retail giant, has reached a new temporary agreement with the union on Saturday, February 1st, averting a potential strike by thousands of employees.

The contract between Costco and its union, “Costco Teamsters,” was originally set to expire on Friday, January 31st. With approximately 219,000 employees in the United States, the union represents less than 10% of Costco’s workforce.

On Saturday, the Negotiation Committee of the union announced on the social media platform X that they have reached a new temporary agreement and will soon release more details. The committee added that the temporary agreement will be submitted to union members for voting.

Negotiations between Costco and the union have been ongoing for several weeks, with union members voting in early January to authorize a strike. Employees have demanded better benefits and wages from the company to address inflation and rising living costs. Costco, on the other hand, has emphasized that its employee benefits are more generous than those offered by other retail chains and highlighted a tradition of fair cooperation between the company and the union.

Meanwhile, Costco’s headquarters in Issaquah, Washington announced on Friday that starting in March, hourly wages for non-union employees will increase, with the highest-paid employees earning over $30 per hour and further raises planned over the next two years. Additionally, the lowest-paid employees will receive a $0.50 per hour raise, bringing their starting pay to $20 per hour. This information was revealed in an internal memo from Costco’s CEO, Ron Vachris.

Costco is known for providing relatively higher wages and benefits compared to other retailers. According to the company’s annual report, Costco’s philosophy is not to depress employee wages and benefits but to maintain compensation levels above industry averages to reduce employee turnover, increase productivity, and enhance employee satisfaction in the long term.

The “Costco Teamsters” union represents over 18,000 employees across six states, originating from the union of former Price Club employees. Following Costco’s acquisition of Price Club in the 1990s, this union evolved into “Costco Teamsters” and has since expanded. It currently falls under the International Brotherhood of Teamsters, with a membership of 1.3 million in the United States, Canada, and Puerto Rico.

A strike would disrupt operations for the large retailer, especially during times of increased sales and customer traffic. However, Costco has stated that even if negotiations fail, all stores will remain open over the weekend.

Costco’s bulk packaging products appeal to value-conscious consumers. Due to its membership model, Costco’s business is usually better equipped to handle macroeconomic challenges, with a relatively affluent customer base. Over the past decade, Costco’s stock price has risen by nearly 600%, nearly triple the growth of the S&P 500 Index, making it a favored long-term investment choice.

While a temporary agreement has been reached, it does not completely eliminate the threat of a strike. The agreement still requires approval from Costco union members to take effect officially. Last fall, Boeing union members rejected a preliminary agreement reached with the company and initiated a two-month strike. Therefore, although most temporary agreements are ultimately approved, there are still variables to be considered.

In recent times, several consumer goods companies’ employees have initiated strikes. Starbucks employees closed around 170 stores on the eve of Christmas, while Amazon warehouse staff also went on strike during the holiday season.

Last year, a five-day strike took place at Amazon, ending the day after Christmas. Unlike Costco’s situation, Amazon refuses to acknowledge the union representing its employees, refuses to negotiate, and has no intention of signing a contract. Amazon even denies formal employment relationships with many striking workers, claiming they are contractors working for third-party logistics companies rather than official Amazon employees.