Efficiency Wages at Costco

In Ec 10 we have been studying efficiency wage theories of the labor market, according to which firms sometimes pay above-equilibrium wages to boost worker productivity. One of the students emails me a relevant story about Costco CEO Jim Sinegal:

Sinegal says he's also built a loyal work force. In fact, Costco has the lowest employee turnover rate in retailing. Its turnover is five times lower than its chief rival, Wal-Mart. And Costco pays higher than average wages — $17 an hour — 40 percent more than Sam's Club, the warehouse chain owned by Wal-Mart. And it offers better-than-average benefits, including health care coverage to more than 90 percent of its work force.