He's Been a Costco Cashier for 40 Years. Now He's a Millionaire.

0:10How are you? That's the voice of Tony Barzar, at work as a cashier at Costco. What's up? How you doing, man?

0:21Tony is 60, and he's been working at one particular Costco store in Tucson, Arizona for 40 years. He started working there in the 1980s. I came down, fell on the application, and put it in. Within a week, I got a call for an interview. He started at Costco really almost as a kid. At first, you know, he was pushing carts in the parking lot. Do you remember what you started at when you were a cart worker? Yes, 585. Wow. A few years later, Tony became a cashier, and he's been doing that ever since. In retail, it's incredibly rare for workers like Tony to stick with the same job and the same company for such a long time.

1:07But our colleague Sarah Nassauer says that at Costco, there are thousands of employees like him who've been working at the company for years and years. So she went to Tucson to meet Tony and to find out why he stayed. Over the course of those four decades, even though he hasn't been promoted, right, he's not a manager, he's remained, you know, a rank and file hourly employee. He has earned over a million dollars in his 401k account. He has really good health insurance. He earns about three dollars an hour. And for him, it has felt like a really gratifying career. Part of why that was interesting to us is because that doesn't happen that often at American companies or companies in general these days.

1:57The conventional wisdom in much of corporate America is that labor is an expense that's best kept as low as possible. But Sarah says that Costco is different. The company sees long-term employees like Tony as good for business. These employees earn more, but lower turnover saves on hiring costs. They can also use their experience to solve problems quickly, which makes for happier customers. Over time, that leads to more sales. Barzars' story and how Costco in particular approaches pay and benefits for workers shows that it's still possible in corporate America to have a good job that doesn't involve, you know, becoming the CEO of a company or, you know, a high -level executive.

2:43and you can be a rank-and-file worker and have a good job. And the company can also be successful at the same time.

2:52Welcome to The Journal, our show about money, business, and power. I'm Jessica Mendoza. It's Tuesday, August 18th.

3:05Coming up on the show, why paying workers well is paying off for Costco.

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4:54In many ways, Costco is an unusual company. There's a really long history at Costco that sort of established the base for this kind of pay and benefits package for an hourly worker. So it goes back to the company's founding The precursors to Costco, which were these companies called FedMart and Price Club, were started by a guy named Saul Price. He just believed that there was going to be this virtuous cycle. If you paid workers more than competitors, so you would hire better people and you would engender more loyalty, your labor costs would actually go down. The founders of Costco were very influenced by Saul Price's thinking.

5:34They adopted the same approach of paying workers well. and that idea has stayed with Costco throughout the decades. Today, the company offers some of the highest wages in the retail industry and has a package of good benefits too, like retirement accounts and health insurance. This approach has helped keep employee turnover at Costco very, very low. Turnover among employees after a year of work is just 7%. By comparison, some reports say that turnover across the retail industry as a whole could be as high as 60%. You know, there's a lot of research that sort of solidifies this idea that if you pay people more and you treat them well, they're going to treat your customers better and stick around.

6:15Right, it's like not the most original idea, right? Like we've heard that before. It's not rocket science. It's not rocket science, right? Sticking with Costco has been a no-brainer for Tony Barzar, the employee Sarah hung out with in Tucson.

6:33Thanks to his steady job at Costco, Tony's family bought a home with a pool in 2009 and have been able to go on a number of international vacations. And all those years doing the same job have made Tony really good at what he does. Sarah saw that when she met him that day. Once, you know, Tony got going, as soon as he was told by his manager, like, you're going to be in the self-checkout for the day, he kind of, like, whipped into action. He grabbed the little self-checkout gun, which at Costco, the workers scan for you. And he was greeting people. He has kind of like a boisterous voice. And he's telling people, come, you know, this register's open.

7:14He's like a traffic cop, but he's also kind of making nice small talk with people. Like the woman that you gave a hug to over here. I've been knowing her for a long time. And she's always giving me prayers and stuff. He knows a lot of people that are his shoppers because he's worked there for so long. So he's like, he's running around their carts and he's scanning their things. But he's also like asking them how they're doing and how their kids are and trying to get them on their way as quickly as possible. That was incredible. Like a machine. Costco's benefits have also helped Tony get through some tough times in his personal life.

7:53Early last year, Tony's son-in-law died. Just a few months later, his wife was diagnosed with stage 3 brain cancer. It was a huge crisis for me. I was like, I'm trying to function, but I'm not going to lie, I can't. A serious health diagnosis like this could spell financial ruin for many families in America today. But Tony used Costco's paid family leave program to take time off to care for his wife. How long were you off for? Almost a year. And Costco, it was no problem. And his health insurance covered all of her treatment. It also covered therapy for Tony to help him cope. I was just like, wow, wow, wow.

8:36And the doctor's like, you guys got really good health. The doctor's like, I'm going to go get a job. So I think that it gets to the point of it goes beyond pay, right? Like there's a humanity to that, right? There's a like, I can count on this as a stable part of my life, and therefore I'm going to stick with it and give my all when I go to work. So all of this has been good for Tony. But how does it work out for Costco? That's next.

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10:21So switching perspective, you know, we've been talking about how good this is for the worker. Can you talk about what this means for Costco, the company? I mean, does this work for Costco as a business? It has. Costco's stock price has been on a tear, not just for a little while, but for many years in a row. Some of that's driven by how much people seem to love shopping at Costco. Let's pull up to my favorite place, Costco. I haven't been here in a minute, so let's go get all our Costco essentials. Costco is the best to buy all of my grocery staples because, honestly, I fly through fruits and veggies.

10:53I freaking love me some Costco. I am an executive member there. Like, I love me some Costco. Every company wants happy customers, but Costco isn't like most other stores. It operates a membership system, which means you have to sign up to shop there. Selling memberships is more profitable for Costco than selling products in its stores. This gives the company an extra incentive to provide a good in-store experience. Longtime workers help with that. They can answer shoppers' questions and solve their problems. And happy shoppers are more likely to renew their memberships. Still, Costco has had to convince shareholders of the importance of paying workers as well as it does to keep them around.

11:35And there was a lot of skepticism over the decades from investors about that. You know, because obviously, if you pay a little less, your profits are going to go up in the short term. But in the long term, Costco's sales has been very steady almost every year for decades. Their ability to sort of like consistently have this drumbeat of growth has been pretty unique in the retail industry. And I think people then have sort of come around to the fact that like, well, a few people stick around and you don't have turnover and they do a good job with customers. That can be a virtuous cycle. Are there any downsides for Costco?

12:13I mean, it all sounds so great. Everybody's happy. The workers are happy. The company is happy. um what's the catch oh i don't know that there's a catch but one challenge of this model is that some employees you know they do get very wealthy and they retire before costco would like them to retire right they're like i'm a millionaire and i'm gonna retire and now you have to hire someone else and so they are working actually to keep people longer so that this sort of culture persists How much of a cost is that for Costco? Like how much of a challenge is it for them? I don't think it's like a huge strategic problem for them.

12:56And they've done things to try to keep folks around a little longer. They've offered like more vacation to folks that are long-tenured employees, for example. Some of the stores have started talking about folks like Tony that aren't managers, but that are mentors to workers anyway, like pass down the culture of the company to newer workers. So is that the main challenge for Costco then, early retirement? I mean, the main challenge is that it is expensive, right? If Costco's results were to take a turn, investors would very quickly turn back to, wait a second, maybe we should question this way of doing business.

13:37It works when it works. When everything is going well, it's fantastic, right? But if that changes ever in the future, I think we could be having a different kind of conversation. But things haven't gone badly for Costco. They've managed to continue these labor practices while doing well. And Costco's competition has taken note. I think there has been versions of this that have sort of reached out into lots of different retailers at different times. I think most retailers and employers of hourly workers, over the last 10 years, they've turned to seeing workers more as an important investment, right?

14:14One big box competitor that has borrowed some of this ethos from Costco is Walmart. Starting like 2015, they started to raise their hourly wage. And they felt they were paying too little. And they were not seeing sort of the virtuous cycle that we've been discussing. Workers were unhappy. Stores were a mess. They started to raise their wages. They've added benefits. And their pay has gotten much better. On top of improving wages, Sarah has reported in the past about other perks, like company stock, that Walmart now offers to some employees. Though Walmart hasn't gone as far as Costco. Why not just do what Costco does?

14:56Because it's really hard to stick to it over a long period of time because it's so expensive. You know, Costco, I've reported on them now for years. I know enough about them to know that it's not just with wages, but there's lots of things where they have this sort of, this is the core of who we are and how we do things. And if we vary from that, the formula doesn't work. And so we should never vary from that. There's lots of that in their culture. And I think that is the unique thing, actually. And that is what is hard to replicate over time. Sarah, do you think this is a story about one unusual company?

15:34Or does it say something bigger about how retailers, large retailers, run their company and think about hourly workers? To me, it says something bigger in the sense that Costco has been able to do this for such a long time that it really is sort of an irrefutable example of the fact that it's possible. And I will say, I got a lot of reader response to this story. and I would describe the core of that reader response from lots of different kinds of people from lots of different walks of life was just feeling like wow it's refreshing to see that someone can do sort of a straightforward job and that it's a good job you know I heard from nurses I heard from software engineers it wasn't like in one industry or another but there was this kind of yearning for like a good straightforward job and so to me part of like the big takeaway almost after the fact because of the response is that that feels very elusive to people and that there's a lot of curiosity about how a company can do that.

16:55That's all for today, Tuesday, August 18th. The Journal is a co-production of Spotify and The Wall Street Journal. If you like our show, follow us on Spotify or wherever you get your podcasts. We're out every weekday afternoon. Thanks for listening. See you tomorrow.

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