Here's something you don't hear every day: a big-box retailer opening up shop and actually making things better for everyone around it. The Costco Effect, as researchers have dubbed it, describes what happens when Costco (COST) rolls into a new area—and it's almost the exact opposite of what you'd expect from a retail giant.

According to analysis by the "Micro" YouTube channel, surrounding businesses raise wages up to 40% more after a Costco opens nearby. That's not a typo. Forty percent.

Two Retailers, Two Completely Different Stories

The contrast with Walmart (WMT) couldn't be starker. While "Micro" explores the Costco Effect, they also examine its evil twin: the Walmart Effect, which shows how big-box retail can devastate local economies.

"The rate of business closures materially increases on blocks surrounding a new Walmart location," the video explains. "When they become the only employer in town, it also pushes local wages down."

But Costco? Different playbook entirely.

"The recorded effect of a Costco opening is almost exactly the opposite," "Micro" notes. "Costco pays even its entry-level floor staff very well."

When Costco sets a high wage floor, surrounding businesses have to compete for workers. That means raising their own pay scales. You'd think those extra labor costs would hurt local shops, but here's where it gets interesting.

Why Higher Wages Don't Crush Local Businesses

"Most [surrounding businesses] saw a significant increase in foot traffic and revenue after the center opened," "Micro" said, citing Reuters. "Costco stores become a destination attracting shoppers from a much wider area rather than just serving the community that was already there."

Think about how you shop at Costco versus how you run into Walmart. Costco trips require planning—you're making a journey, not just popping in for milk. That difference in shopping behavior creates economic ripples.

"Costco shoppers went to the store half as often as Walmart shoppers," "Micro" explains, citing Business Insider. "But when they were there, they spent more than twice as much on average."

Some of that spending spills over into nearby businesses. Costco locations typically sit just outside city centers, pulling in customers from wider geographic areas. Many of those shoppers turn their Costco run into a whole outing, hitting up local restaurants and stores while they're in the area.

The Economics of Demand Surge

When Costco brings more customers into an area, it creates a sudden surge in demand for local businesses. And basic economics tells us what happens next: those businesses can raise prices.

Higher prices offset the increased labor costs from competing with Costco's wages. In many cases, local businesses end up more profitable than before, even with their new higher payroll expenses.

"A Costco raises the floor on wages, but it makes up for it by bringing in more customers to an area," "Micro" summarizes.

The whole dynamic has built Costco an enviable reputation among customers and created a virtuous cycle internally. High salaries reduce turnover, which saves money on training and hiring. Local businesses discover the same effect when they raise wages to compete—and their ability to charge premium prices in a higher-traffic environment helps them keep those workers around.

It's rare to find a major retailer that genuinely improves the economic landscape around its locations. Most big-box stores extract value from local economies. Costco seems to have figured out how to do the opposite—it doesn't devour the local business ecosystem but strengthens it instead.

That's the Costco Effect: proof that retail expansion doesn't have to be a zero-sum game where corporate giants win and everyone else loses. Sometimes, when you pay people well and draw in customers, everyone benefits. Who knew?