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Wednesday, August 7, 2013

Are living wages bad for companies (and investors)?

Feeding into the debate of living wages, a recent article from CNN money shows the great disparity in entry level wages at flagship companies. The contrast seems to be between miserly Wendy's & Walmart ($7.35 and $9.40 per hour respectively) versus generous Costco with almost $23 per hour on top of benefits.

Paying more than double for something can't be good. Can it?  If I pay double I expect double. Over the last five years Costco employees have been able to generate twice as much revenue than their Walmart counterparts. However, these higher sales have not translated into profits... What do investors think? Forward PE ratios seem to say that Costco will do just fine...

What do you think?

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