October 25, 2005

Wal-Mart Taken Over by Liberals?

Filed under: Random Stuff — Bob Gifford @ 9:27 pm

Lee Scott, the CEO of discount retailer and evil empire Wal-Mart, has come out in favor of an increase in the minimum wage:

Scott told Wal-Mart directors and executives in a speech Monday that he believes “it is time for Congress to take a look at the minimum wage and other legislation that can help working families.”

“The U.S. minimum wage of $5.15 an hour has not been raised in nearly a decade and we believe it is out of date with the times,” Scott said. “We can see first-hand at Wal-Mart how many of our customers are struggling to get by. Our customers simply don’t have the money to buy basic necessities between pay checks.”

And yesterday Wal-Mart announced cheaper health insurance for employees:

Wal-Mart, which has long been criticized for the benefits it offers to its workers, is introducing a cheaper health insurance plan, with monthly premiums as low as $11, that the company hopes will greatly increase the number of its employees who can afford coverage.

[…]

“We are lowering the costs to make health insurance more affordable,” said a Wal-Mart spokesman, Dan Fogleman, who declined to comment on how much the plan would cost the company. Asked if the new insurance plan was in response to growing criticism, he said, “It’s fair to say we are listening, but more so to our associates than anyone else.”

And on top of this, Wal-Mart is going green! So what’s happening? Has the evil empire got religion all of a sudden?

The New York Times has an article in Wednesday’s edition on an internal memo to the Wal-Mart board:

An internal memo sent to Wal-Mart’s board of directors proposes numerous ways to hold down spending on health care and other benefits while seeking to minimize damage to the retailer’s reputation. Among the recommendations are hiring more part-time workers and discouraging unhealthy people from working at Wal-Mart.

So the change to its employee health insurance is one measure designed to allay critics, while the remaining (unpublicized) measures will reduce its health insurance costs.

Now before you get righteously indignant at Wal-Mart, stop to consider the impact the U.S. health care system has on any large employer. Our wacky health care industry is based on the expectation that employers provide health insurance. Any employer that employs more unhealthy workers than its competitors, say older or poorer workers, must pay the higher health care costs. There are competitive pressures to let the sick employees go and hire healthy employees! The culprit here is a system that puts employers at risk for their employees’ health care costs. They can only manage this risk by cutting benefits, hiring healthier workers, or incentivizing employees to forgo medical care.

Of course businesses can choose whether to react to this pressure to reduce health care costs. But companies that behave ethically will face a competitive disadvantage in the market. That’s not right.

So what about Scott’s support for environmentalism? It’s really about reducing energy costs. And an increase in the minimum wage? Could there also be more to this than meets the eye?

I’m just speculating, but it seems an increase in the minimum wage is in Wal-Mart’s interest because their customers will spend a lot of the extra money in their stores. I believe Scott when he says their customers struggle to get by on the minimum wage. Wal-Mart wants more money in the pockets of the poorest in the U.S. because they will likely spend some of it at Wal-Mart.

Wal-Mart could unilaterally increase the wages they pay their workers, but again there is the competitive issue. An increase in the minimum wage would mean that their competitors have to increase wages too, so Wal-Mart isn’t alone.

This self-interest doesn’t make Wal-Mart’s support for the minimum wage immoral, or even disingenuous. It does mean that Wal-Mart is watching out for its shareholders as well as its customers.

So I have a solution that will make Wal-Mart shareholders really happy: revamp the U.S. health care system to take the burden off employers, and raise the minimum wage to a living wage.

Oh, and guarantee worker and environmental protections with international suppliers. And implement community partnership programs to protect locally owned businesses.

Then buy some Wal-Mart stock, and stand back!

7 Comments

  1. It’s funny how they don’t just decide to raise the pay of WalMart
    employees themselves, but are asking the government to make them
    do it by raising the minimum wage. What happened to this free-
    market, government-is-the-problem ideology?

    Comment by wildwest — October 26, 2005 @ 4:25 am

  2. It is well-established by economists that an increase in minimum wage inhibits job creation. Often the net effect is a reduction in the number of workers employed. At the very least, employers become reluctant to hire new workers. A perfect example is the city of Santa Monica, California, which passed a “living wage” ordinance for hospitality workers several years ago. While it was a boost to those who received an increase, some were laid off for a net job loss. Furthermore, the increased costs made some hotels less competitive and business growth was stymied.

    Let’s also remember that Wal-Mart, a public company, has among its shareholders pension plan, mutual fund and other investors whose participants depend upon the success of their investments for a not insignificant portion of their retirement income.

    Finally, Wal-Mart, like many other companies, reduces the prices that consumers pay at retail for food, sundries, clothing and other goods. This helps all consumers and the less wealthy most of all. I, for one, see no advantage to paying more for a tube of toothpaste than I have to do.

    Comment by Herman O. — October 26, 2005 @ 12:31 pm

  3. Herman –

    I certainly agree with you regarding the value of Wal-Mart’s low prices, especially for their poorer customers. And I am absolutely a capitalist, and believe that Wal-Mart has an obligation to their shareholders. I’m not one to bash Wal-Mart merely for its size or financial success (and I’m not really a big Wal-Mart basherin general.)

    Having said all that, I disagree with you on the minimum wage, solely based on the empirical studies I’ve seen. This is a big enough topic that I’ll post on it, so stay tuned.

    Comment by Bob — October 26, 2005 @ 4:45 pm

  4. Hmmm. What’s this?

    http://blog.wakeupwalmart.com/

    Comment by wildwest — October 27, 2005 @ 7:30 am

  5. It just gets weirder all the time.

    http://www.commondreams.org/headlines05/1027-05.htm

    Comment by wildwest — October 27, 2005 @ 12:56 pm

  6. […] d and Public Policy — Bob @ 1:44 pm

    A commenter to my last post raised an important objection to raising the minimum wage: its impact on unemployment and job growth for lo […]

    Pingback by I am a Christian Too » On Raising the Minimum Wage — October 29, 2005 @ 2:11 pm

  7. People point to Walmart and cry “anti-union”.
    Unions enable disfavored people to live satisfactorly without addressing their disfavor. This way their family’s problems are never resolved. Without the union they would have to accept the heirarchy, their own inferiority.
    Unions serve to empower.
    Walmart is anti-union because they are good. They try to help people address and resolve their problems by creating an enviornment where there are fewer hurdles.

    Media ridicule and lawsuits are creations to reinforce people’s belief that Walmart is evil in a subsegment of the industry dominated by the middle and lower classes.
    Low-cost disfavored Chinese labor is utilized by corporate america to maximize margins. They all do it. Only WalMart gets fingered because they are the ones who help, and those who seek to create confusion in the marketplace want to eliminate the vast middle class who have a real chance and instead stick with lower classes who may not work otherwise. So they dirty him up while allowing the others to appear clean.

    The coining of the term “Uncle Sam” was a clue alluding to this::Sam Walton’s WalMart is one of few saviors of the peasant class.

    Comment by Uncle Sam — November 21, 2005 @ 12:20 am

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