Sam’s Club will raise pay to catch up with Costco

By Nathaniel Meyersohn, CNN

New York (CNN) — Sam’s Club will raise pay to incentivize workers to stay with the company — and not jump ship to Costco.

Sam’s Club, the membership club arm of Walmart, will increase its minimum wage to $16 starting in November from $15 an hour. It will also raise wages for its nearly 100,000 employees, ranging from 3% to 6% depending on their tenure.

Sam’s Club charges customers $50 for a regular membership. To keep and grow its membership, Sam’s Club must meet a higher bar for customer service than retailers open to everyone. Sam’s Club hopes a steady workforce of higher-paid employees with financial incentives to stay with the company will lead to improved service. Its main competitor is Costco, which pays among the highest wages in retail — a minimum of $19.50 an hour, and Sam’s Club needs to raise its pay to stay competitive with Costco and other chains that have raised wages.

“The thing that we’re trying to do here is create good jobs that turn into great careers,” Sam’s Club CEO Chris Nicholas told CNN. “Stability matters more for a club model than anywhere else.”

Wages have climbed in the retail industry in recent years as employers boosted pay to staff stores and warehouses in a tight labor market. Since April 2020, average hourly wages for retail employees have increased around 16% — from $21.18 an hour to $24.48 in August.

“Sam’s Club’s announcement follows a trend of companies adopting voluntary wage standards,” said Daniel Schneider, a sociologist at Harvard University who studies service industry work as co-director of The Shift Project. “That reflects the realization that these firms need to reduce turnover to manageable levels.”

Still, $16 an hour doesn’t pay the bills everywhere: The minimum wage in nearly every location in the United States does not cover the cost of living, according to MIT’s living wage calculator, which estimates what workers across the country need to earn to meet the costs of basic needs,

Previously, Sam’s Club hourly employees got annual raises of 3% a year until they reached their maximum pay. (Some jobs at Sam’s Club max out at $36 an hour.) Under the new plan, employees who stay at the company for longer can receive raises up to 6% a year until they hit the maximum rate. After they hit their maximum, they get an additional lump-sum payment of 6% of their annual salary.

“Meaningful guaranteed annual raises that rise with tenure would be a big change and positive for workers,” at Sam’s Club, Schneider said. Costco, he said, has stood out from Sam’s Club and other retailers for its industry-leading wages and wage growth for employees who stay at the company for longer.

Sam’s Club’s pay raises and new wage structure are its latest moves to make the company more attractive to employees. Over the past five years, Sam’s Club’s has increased starting pay from $11 an hour, offered annual stock grants and implemented block schedules to give employees more consistent schedules.

Warehouse clubs have also boomed since the pandemic in 2020, and Sam’s Club, Costco and BJ’s Wholesale Club have added millions of new members. Many customers see buying in bulk at warehouse clubs as good value and are willing to dish out for the annual fees.

Sales at Sam’s Club’s stores open at least one year increased 2.3% in its latest fiscal year and 14.6% the year prior.

“Because we’re growing so much, we just need more people,” Nicholas said.

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