Sunday, November 13, 2022

that' why they pay you the big bucks

 

On the evening of November 12, we joined Brian, Kim, and the 2 grandkids at an employee (and family) function at the GEICO office where Kim works.

In addition to an amazing Mexican catered dinner, there were numerous electronic games, the largest fun house I have seen in my life, and a free movie for the kids








What I learned last night is that GEICO is owned by Berkshire Hathaway, the investment firm owned by Warren Buffett. Unlike venture capitalists like Carl Icahn, Buffett is far more interested in investing in great companies, and holding on to them for a long time. As a result, Berkshire Hathaway has a market capitalization of $730 billion.

https://en.wikipedia.org/wiki/GEICO 

GEICO was founded in 1936 by Leo Goodwin Sr. and his wife Lillian Goodwin to provide auto insurance directly to federal government employees and their families. Since 1925, Goodwin had worked for USAA, an insurer that specialized in insuring only military personnel. He decided to start his own company after rising as far as a civilian could go in USAA's military-dominated hierarchy. The Goodwins funded the creation of GEICO with $25,000 of their own money and $75,000 from Fort Worth, Texas-based banker Cleaves Rhea, with legal assistance from future GEICO CEO Lorimer Davidson. Based on Goodwin's experience at USAA, GEICO's original business model was predicated on the assumption that federal employees, as a group, would constitute a less risky and more financially stable pool of insureds compared to the general public.

In 1996, after many years as a publicly traded firm, GEICO became a wholly owned subsidiary of Berkshire Hathaway.

Berkshire Hathaway Inc.is an American multinational conglomerate holding company headquartered in Omaha, Nebraska, United States. The company wholly owns GEICODuracellDairy QueenBNSF RailwayLubrizolFruit of the LoomHelzberg DiamondsLong & FosterFlightSafety InternationalShaw IndustriesPampered ChefForest River, and NetJets, and also owns 38.6% of Pilot Flying J and significant minority holdings in public companies Kraft Heinz Company , American Express (18.8%), Bank of America (11.9%), The Coca-Cola Company (9.32%), and Apple (5.57%).

From 2016, the company acquired large holdings in the major US airlines United AirlinesDelta Air LinesSouthwest Airlines, and American Airlines, but these were sold early in 2020 in the wake of the COVID-19 pandemic. Berkshire Hathaway has averaged an annual growth in book value of 19.0% to its shareholders since 1965 (compared to 9.7% from the S&P 500 with dividends included for the same period), while employing large amounts of capital, and minimal debt.

 

According to the Forbes Global 2000 list and formula, Berkshire Hathaway is the largest public company in the world. As of August 2020, Berkshire's Class B stock is the seventh-largest component of the S&P 500 Index (which is based on free-float market capitalization) and the company is famous for having the most expensive share price in history with Class A shares costing around $500,000 each. This is because there has never been a stock split in its Class A shares and Buffett stated in a 1984 letter to shareholders that he does not intend to split the stock. On 16 March 2022, Berkshire Hathaway Class A shares closed above record $500,000 a share, resulting in company's market cap above $730 billion.

 https://en.wikipedia.org/wiki/Berkshire_Hathaway

 GEICO, and (by extension) Berkshire Hathaway are examples of companies that prospered because they treat their employees well.

Walmart is the largest employer in the United States, but the company is not noted for being overly generous to their employers. In contrast, Costco (with fewer employees) is much more profitable than Walmart, in spite of the fact that their employee benefits that are far more generous.

 Walmart was one of the top four employers of SNAP and Medicaid beneficiaries in every state. McDonald’s was in the top five of employers with employees receiving federal benefits in at least nine states.

https://www.sanders.senate.gov/in-the-news/walmart-and-mcdonalds-have-the-most-workers-on-food-stamps-and-medicaid-new-study-shows/

Meanwhile, the net worth of the Walton family is $250 billion.

https://www.affiliatebay.net/walton-family-net-worth/

  • Walmart has posted four straight years of declining profits.
  • Costco posted over triple the revenue growth of Walmart for 2018 and saw its stock gain 42 percent in the last 12 months compared to 10.9 percent for Walmart.
  • Costco’s profit margins of 2.21 percent are better than double Walmart’s 1.02 percent.
  • The return on equity of 26.29 percent would indicate management is leveraging assets efficiently.

 

https://www.gobankingrates.com/investing/stocks/walmart-vs-costco-which-retailer-stock-invest/#:~:text=Walmart%20has%20posted%20four%20straight%20years%20of%20declining,percent%20are%20better%20than%20double%20Walmart%E2%80%99s%201.02%20percent.

Costco employees have much better benefits than Walmart employees. Here are some examples:

https://finance.yahoo.com/news/11-costco-employee-benefits-want-234600618.html?fr=yhssrp_catchall

Free memberships to the store

Yes, that is plural. Costco has plenty of savings, but first customers must pay to become a member. Membership itself starts at $60 per year. While that's not extravagant when stretched out over 365 days, it's still an upfront cost before a single item is purchased.

Although Costco employees don't get discounts on items in each store, all employees do get four free memberships, one for themselves and three for people of their choosing. Each membership is good for a year.

Variety of health benefits

Employees who have worked for 180 consecutive days at the company for more than 23 hours a week, according to Glassdoor, qualify for Costco's health benefits plan. And it's a solid one.

Health insurance is affordable and includes dental and vision (and remember, there are optometrists in Costco stores) and co-pays are low. Employees may also use the company's pharmacies for any prescriptions that need to be filled.

Seasonal work options

Although many of the perks go to full-time employees, Costco also needs seasonal employees each year. The holidays demand more people on the floor and in the warehouse as demand picks up. That's good news for anyone trying to find short-term work. The seasonal hiring period generally starts in October and ends in January, with new employees on a 90-day probationary period.

Extra pay on Sundays

Base pay at Costco is good, but there are weekly chances for employees to make more. Costco operates on a time-and-a-half pay structure on Sundays. That means each hour an employee works they earn 50% more. No matter how many hours an employee works during the week, they earn more per hour when working on a Sunday, so any employees you see there on one of the busiest days of the week are earning extra.

Turkey time

Beyond year-round benefits like health insurance, Costco also offers employees part of a holiday meal. Business Insider reported in 2019 that all employees get a free turkey in the holiday season, available from “mid-November through Christmas,” according to an employee. That starts the holiday shopping season off right. Employees not in need of a turkey can also donate theirs to charities.

Bonuses, bonuses

Speaking of additional benefits, there are bonuses available for employees paid both annually and every six months. Reports on Indeed.com mention bonuses of $2,000 or more semi-annually, depending on how long an employee has been with the company. The annual bonuses may be even higher, again depending on experience and department.

Retirement options

Costco matches 50% of an employee's annual 401(k) contributions up to $500 per year. If you're working there, that could be as much as $1,500 added to your 401(k) plan each year. And for employees with 10 or more years of service, health insurance is included in retirement benefits, according to Glassdoor.

Promotion chances

While many positions at Costco are entry level, employees aren't limited to that role. Staff have several options to advance in their various departments. Reports on Indeed and Glassdoor mention an employee mentorship program and opportunities to train and learn new roles higher up in the company.

While some departments require specialized education or certification for certain roles, such as the optical and pharmacy sections, not every department does. How long it takes to advance varies by position and other factors, but employees can move up the ranks. The company itself notes that 70% of its warehouse managers started out as hourly employees.

Time off

The company offers several time-off policies for staff. Staff at Costco are eligible for paid time off, paid sick leave, and vacation hours as well. It requires working 90 days before you can start accruing paid time off. Vacation hours, to a certain extent, can roll over to the next calendar year.

For new mothers, there are six weeks of paid maternity leave as well. The company also pays employees for the time they serve on a jury.

Holidays

Beyond the company's paid time off and vacation policies for employees, Costco guarantees its staff seven paid holidays off, including the big ones of Thanksgiving, Christmas, Memorial Day, and Labor Day. There's also a floating paid holiday for Martin Luther King Jr. Day that can be taken before or after the day itself.

Bottom line

Costco offers plenty of immediate and long-term benefits to its employees. Anyone considering applying for a job at Costco should take into consideration all that the store offers, even if it's just for a seasonal job around the holidays. Looking to see what positions are hiring? The company's careers page is regularly updated with new roles.

Regardless of where you look for work, job hunters should keep some common red flags about new jobs in mind as they talk to a potential employer. But taking into consideration salary, benefits, and company culture can help you find the best jobs for your situation.

I’ve heard Kim talk with customers on the phone, and she is very good at what she does – and she loves working at GEICO.

The unemployment rate in the United States averaged 5.74 percent from 1948 until 2022, reaching an all-time high of 14.7 percent in April of 2020, and a record low of 2.5% in May of 1953.

https://tradingeconomics.com/united-states/unemployment-rate

 1953 was the peak year for union membership in the United States, and the 1956 Republican National platform strongly supported union membership.


https://www.presidency.ucsb.edu/documents/republican-party-platform-1956

Ironically, the lowest unemployment percentage happened when a Republican (Eisenhower) was president, and it was the highest when ANOTHER Republican (Trump) was president.

Unions are once again gaining in prominence because companies have recognized that they need to offer good wages and benefits in order to attract employees.

In 1953, over 30% of the jobs in America were union jobs, and my dad (as a postal worker) had one of those jobs. Today, the union membership is 10.8%, a slight increase from 2019. Within the public sector, the local government sector, which includes police officers, firefighters, teachers, etc., had the highest union membership rate of 41.7%. The union membership rate in the private sector increased by 0.1% to reach 6.3% in 2020. This was a result of the drop in the overall employment rate

https://callhub.io/union-membership-trends/

In case you are wondering, our insurance company for our car and our renter’s insurance is GEICO, in part because I like their ads.

In closing, the message that was brought home last night applies to business, as well as to life.

If you treat people right, you’ll do very well.

 

 

 

 

 


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