Wal-mart: Penny-wise and pound-foolish

A Forbes article explains why short-changing workers actually increases costs for employers. I'm not convinced Wal-Mart's poor stock performance is solely a matter of labor costs; once a company hits a certain size, the law of large numbers begins to take its toll and dampens the growth shareholders demand. But it is nice to see that sometimes, it pays to do the right thing.

In almost all industries, productive, higher-paid workers can more than cover the costs of their salaries and benefits, if they are managed appropriately. For example, Costco Wholesale (nasdaq: COST - news - people ) pays its workers $17 an hour on average, while its competitor, Wal-Mart's Sam's Club, pays only $10 an hour on average; 85% of Costco employees enjoy company-provided health insurance, compared with less than half of the workers at Sam's Club. Significantly, these high wages and benefits do not come out of the pockets of Costco's shareholders. In fact, Costco has outperformed Wal-Mart on the stock market over the last five years. The real reason for the difference in compensation and benefits is that Costco employees have much lower turnover, better interaction with customers and are more productive than Wal-Mart's workers.

Source: Forbes.com