Costco’s Wages Go Beyond What Icelandic Unions Demand

There’s been a lot of hype lately about the arrival of American low-price retailers Costco in Iceland. Icelanders have been practically over the moon about the things they sell that you can’t buy here, the lower prices at Costco for things that you can buy elsewhere in Iceland (including petrol), and the fact that their bottled water costs less than the per-bottle money you get from waste management company Sorpa when you recycle with them. What hasn’t been discussed in Iceland is what Costco employees in this country are being paid.

Costco has a great reputation in the US when it comes to workers’ rights. In a country largely absent of a national healthcare system and with a weakened federal pension fund, Costco employees enjoy both health insurance and a 401k. The average hourly wage of a Costco employee in the US is also over $20 per hour. Iceland already has national health and several pension funds (for now), but what are the Icelandic Costco employees getting paid?

The short answer: more than our own unions require, which raises questions about how much our unions fight for their workers.

Our unions don’t demand much

Iceland does not have a minimum wage; rather, wages are decided by collective bargaining negotiations between the respective labour union for a profession and management. VR is the labour union which Costco employees in Iceland belong to, as the union confirmed for us by phone. They also confirmed that Costco employees are paid in accordance with the existing collective bargaining agreement (CBA) for workers in their field, and we were directed to a copy of this agreement.

According to this agreement, as of May 1 2017, beginning full-time workers aged 20 and up to 22 receive a monthly salary of 262,532 ISK. Divided by 172.15 hours for a full time month, we get an hourly wage of 1,525 ISK per hour, the equivalent of $15.13 USD per hour (at a time when the króna is particularly strong, mind you), or about five dollars an hour less than what Costco employees make in the US.

Purchasing power is also lower here

Employees aged 22 or older, those that have special training, and those working for the company for six months or more get paid more, but they still don’t get the equivalent of over $20. In fact, workers aged 18 or 19 only make 95% of the starting full-time wage, and a Costco employee in Iceland who receives special training and stays with the company for five years will still not achieve the equivalent of over $20 per hour.

“We pay above the CBA minimum by at least 10% and this percentage can be higher based on experience.”

Of course, wages aren’t the only thing that matters; what you can get for your money does, and that’s where cost of living comes into play. As it turns out, by 2017 figures, Iceland has the third highest cost of living in the world; the United States, by contrast, is 18th. This effectively means that even if Icelandic Costco employees were being paid the króna equivalent of $20 per hour, they would still get far less for that money than an American Costco employee would.

And this is without even touching the tax question: Americans tend to pay a lower percentage of their income into taxes than Icelanders do.

Rewarding long service

Companies can, but very rarely do, pay their workers more than what the collective bargaining agreement establishes. So we reached out to three separate people representing Costco management in Iceland for comment.

Brett Vigelskas, the warehouse director for Costco in Iceland, told us that in fact the company goes beyond what they are legally required to pay.

“It is not our practice to disclose specific pay information beyond what is required by the financial reporting authority. However we pay above the CBA minimum by at least 10% and this percentage can be higher based on experience,” Brett told us by e-mail. “We reward long service with increased summer and Christmas bonuses after five years. In addition we offer Optical vouchers for employees with more than twelve months service to be utilized in our warehouse Optical department. The company ethos has always been to hire good people, pay them good wages, give them good jobs or careers and good things will happen!”

As such, the management of a private company is actually paying its employees more than what the labour unions representing Icelanders requires of them.

Our spineless unions

It bears emphasising here that we are currently in the midst of a “worker’s market.” Unemployment in the first quarter of 2017 was at 2.9%, according to Statistics Iceland, and has been below 5% for at least the past two years now. This should put unions at a distinct negotiating advantage: a smaller pool of available workers means unions can and ought to be making greater wage demands.

Instead, workers from unions ranging from seamen to teachers to healthcare workers have consistently criticised their unions over the past couple of years for not fighting harder for higher wages. On top of this, many of the bosses of Iceland’s major unions pull in a salary going beyond 1 million ISK per month — VR is actually the exception here, as their new director Ragnar Þór Ingólfsson actually asked for a pay cut, a request that made headlines in itself.

In fact, the conventional wisdom lately has been that our unions do their best to please management, rather than fight for their workers. This situation has contributed to the formation of the Socialist Party of Iceland, as well as increasing internal struggles between labour unions and their workers.

Perhaps Iceland’s labour unions would do well to take a page from Costco’s playbook. Just as the company bargains for lower prices from their suppliers, our unions could demand higher wages, especially as they’re in a position to do so, and “good things will happen.”

Correction: This article originally stated that a fulltime work month was 160 hours, i.e., 40 hours per week times four. However, VR’s own guidelines defines a fulltime work month as 172.15 hours per month, making the equivalent hourly wage for the monthly salary even lower.