Wal-Mart: America’s Company

Earlier this week, Quint Carriere’s blog, Cenla Antics, hosted a lively and insightful conversation concerning the implications of Wal-Mart and the so-called growth corridor of Alexandria, Highway 28 West.

On August 17, Tom Bonnette of The Town Talk reported that the mega-retailer will be opening up its third store in Rapides Parish by 2008, a 185,000 square foot facility to be built on Highway 28 West. The new store is expected to employ nearly 250 people and generate millions of dollars in sales.

It should go without saying that Wal-Mart has many detractors; there are numerous watchdog organizations who believe that Wal-Mart takes advantage of economic development incentives in order to continue unchecked expansion and that it fails its employees (and the communities in which it locates) by refusing to pay living wages. Indeed, during the past ten years, there have been countless, successful employment lawsuits filed against Wal-Mart related to overtime pay and gender discrimination, among other things.

I should probably say this upfront: I am one of those people who believes that Wal-Mart fails in its civic duty and moral responsibility to provide decent living wages and adequate health care coverage to its employees. Not only is Wal-Mart America’s second most profitable company, it is also our largest employer.

In 2005, Wal-Mart paid its full-time “associates” an average of $17, 114 a year– more than $10,000 less than it takes to provide for a typical American family. Wal-Mart’s part-time employees, those who work less than 40 hours a week, made an average of around $12,000 a year. And if you want to buy into Wal-Mart’s health care plan, good luck. You’ll probably have to wait around 180 days to find out if you’re approved (more than three times the national average), and once you are, you should be willing to fork over between 7%-25% of your annual income to pay for this coverage. Those who don’t apply for this plan or can’t afford it (over 60% of Wal-Mart employees) rely on government programs for their coverage, which essentially passes the burden of paying for these services onto the taxpayer. State governments across the nation, including Maryland, New Jersey, Illinois, California, and Pennsylvannia, have conducted studies that prove Wal-Mart has one of (if not the) highest number of employees enrolled in government medical assistance programs (Someone else referrenced this study earlier today on Cenla Antics).

Because of this, the typical Wal-Mart store costs taxpayers an average of $450,000 a year on things like school lunches, housing assistance, and health care.

In addition, Wal-Mart uses economic development incentives and local tax dollars to help subsidize the costs of expansion. Frequently, Wal-Mart buys up undevelopment land at the edge of a city and convinces local governments to foot the bill for infrastructure costs (and perhaps even a few tax abatements).

A blogger who calls himself “Sammy Walton” pointed out that when Wal-Mart locates in a town with less than 50,000 people, the per capita income somtimes drops between 2%-4% (and I’ve checked the sources, and it’s true). Sammy contended that this was because low-paying jobs at Wal-Mart actually have a negative net effect on wages, but it’s probably a little more complicated than that. As evidenced countless times throughout America, Wal-Mart also drives locally-owned retailers out of business, and this, I believe, is part of the dynamic. (And despite arguments to the contrary, locally-owned retailers do, in fact, provide their employees with benefits and living wages at far greater rates).

Some people like to argue that Wal-Mart is just taking advantage of the Great American Free Market Economy. They say that outsourcing has become a necessity, as Americans are demanding lower prices for goods and services. And they mistakenly assume that anyone who is arguing that Wal-Mart should live up to its responsibilities as America’s top employer is somehow implicitly suggesting that Wal-Mart should be run out of business. This simply isn’t the case. Certainly, there are communities all across the nation, even right here in the Deep South, who have used legislation to prevent Wal-Mart from opening in their cities. But, for the most part, Wal-Mart detractors are not seeking to put anyone out of business; that would be completely counter-intuitive. They’re simply asking Wal-Mart to reform its policies and treat its workers better.

Responses

Drew Ward

December 29, 2006

I hope no one minds, but I posted this comment earlier under the Edwards story, and I wanted to repost it here as I believe this is probably the best place for the discussion:

Often when we talk about Wal-mart the first issue that comes to mind is their treatment of employees, especially in the areas of wages and benefits. I would like to argue that while they are the biggest nation-wide culpret in this arena, they are not the only company doing this. In fact, I would say that at least in Central Louisiana nearly all companies national, chain, and local use these same practices. if you are a business owner, investor, or manager and you have a single minimum-wage employee or an employee withour benefits, you are just as guilty as Wal-Mart!

I know that EVERY company I have ever worked for in the Alexandria area was guilty of underpaying most of their employees and keeping benefits just out of most of their reach. So anyway…here’s the comment. I hope this generates a constructive conversation:

The levels of wages in Central Louisiana are deplorable, always have been. I am like so many people from the area, I have left and moved elsewhere just because I cannot make enough money in my field if I were to stay in Cenla. The majority of our workers make the bare minimum — minimum wage, $5.15 per hour. And, once the democrats raise it to the still unliveable $7.00 per hour, most of them will make only that.

I did an economics study a few years back that found that the actual liveable wage throughout most of Louisiana (the minimum you need just to live and work) is actually above $10 per hour ($15 in New Orleans). Unfortunately, very very few people earn that.

In that same study I looked at the effects of raising the minimum wage and found that as a local or state government it wasn’t feasable. For us to be able to have the sort of wage increase we need, we would have to get Texas, Mississippi, and Arkansas to do it as well. Otherwise companies would just move across the borders.

What this study showed, was that although we do desparately need a sturdy increase in wages in all sectors, what we need more than anything is to make an immediate improvement to the value of existing wages.

This Value of Wages means simply what you can buy / how well you can live on what you make. In Louisiana we have one of the worst value of wages in the civilized world. Most workers have no health insurance, no dental coverage, get no paid vacations, and recieve no training/educational benefits (so they can one day better their position economically).

Not only Wal-Mart, but all national companies, and many local businesses too, rely on this worker profiteering to boost their bottom lines. Some of them have great PR platforms where they do offer insurance and benefits to their full-time employees, or even their part-timers…granted they work enough hours (which is usually not permitted).

The over abundance of part-time employment in our economy has been the achilles heel of our area;s development prospects for decades (if the people don’t have money, they can’t go downtown to spend it). Under current law, classifying an employee as part-time frees the employer from providing any benefits to its employees.

I would propose that we first at a local level, and then at a state and regional post – demand that our local elected representatives pass a law that provides for mandatory health/dental insurance, a yearly education bonus, regular pay raises, and a 401k.

There’s a simple way of making this work for even hourly clerks at McDonald’s or Wal-Mart: Base it on a 40-hour work week.

In the US a standard work-week is considered 40 hours. Most employers make it a point to schedule their employees for between 25-39 hours per week to make sure they don’t have to pay benefits. So fine…make these standard benefits part of the hourly wage.

If a full-time employee with benefits works 40 hours per week to get his insurance and such, that means that for every hour he works, he is earning 1/40th of his benefits.

So, mandate that ALL employers have to pay 1/40th the cost of those same benefits to their employees for each hour worked. So if an employee works 25 hours at one job, that employer has to cover 25/40th of the costs of his benefits.

This does two things: for one, it gives the majority of hour region’s workers something they’ll never get otherwise – benefits. Two, it takes away the incentive of employers not to have full-time workers. If they are having to provide all workers with the same benefits, it lessens the financial apeal of hiring some poor local to work 6 hours a night at 3 in the mornint for Wal-mart versus having a full-time worker with a steady income.

This proposal would value to wages — all wages, no matter what level they are. And, it would improve the lives of everyone in the region. Afterall, how insane is it that in the most advanced society in the world, the average worker can’t afford to go to the doctor if he needs to.

This is really the easiest and most logical approach to improving our local wage crisis. But, it would require us to demand, not just request something of our elected officials, hold them to our wishes (and not those of lobbies like LABI), and make change happen.

And afterall, what’s Wal-Mart going to do…pack up and leave? Not likely…

Reply
Drew Ward

December 29, 2006

A quick note on how much Wal-Mart’s policies are costing you (yeah, you the Alexandria guy in particular):

One 200-employee Wal-Mart store may cost federal taxpayers $420,750 per year. This cost comes from the following, on average:

$36,000 a year for free and reduced lunches for just 50 qualifying Wal-Mart families.

$42,000 a year for low-income housing assistance.

$125,000 a year for federal tax credits and deductions for low-income families.

$100,000 a year for the additional expenses for programs for students.

$108,000 a year for the additional federal health care costs of moving into state children’s health insurance programs (S-CHIP)

$9,750 a year for the additional costs for low income energy assistance.

[source: The Hidden Price We All Pay For Wal-Mart, A Report By The Democratic Staff Of The Committee On Education And The Workforce, 2/16/04]

Now we have (or will have) 3 Wal-Mart Supercentres in Rapides Parish.

(I will include the new store because these numbers do not account for the Rapides Parish residents working the the Marksville, Leesville, or Allen Parish stores).

At $420,750 per store, that’s $1,262,250 in taxpayer costs in Rapides Parish.

There are approximately 95,000 taxpayers in Rapides Parish

(total population 128,000 minus the 26% under age 18 — source 2005 US Census).

There are 47,120 households in the parish (perhaps a better reference since many possible taxpayers carry no tax-burden.

So, by dividing that total $1,262,250 by the number of potential taxpayers or households we get the following cost that you in particular are paying to fund Wal-Mart’s cost-savings:

per Taxpayer: $13.29

per Household: $26.79

So…

if you live alone or are the only worker in your family, take 2 dollars out of your wallet each month and give it to Wal-Mart…you already do.

Also, keep in mind that these numbers don’t account for the added costs of infrastructure, environmental damage, or city services consumed each year by a Wal-Mart store. The total is much higher.

But, you don’t mind paying for it…do you?

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atownshakedown

December 30, 2006

This is great news….I mean the one in Pineville just isn’t enough. Give me “more, more, more” says Billy Idol in Rebel Yell.

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business friendly

December 31, 2006

Drew, have you priced the costs of healthcare in the state of Louisiana? And the state has implied a “No exclusions” policy. Therefore, limiting insurance carriers when exclude items from being covered by a policy. (i.e. heart problems… deny whole policy instead of just a heart related condition.) For a small to medium business this could make the cost of insuring employees more than the total wages.

I am not against convincing employers (like Wal-mart) to be responsible for providing employee insurance, but it needs to make it business-friendly, affordable, and a benefit for the employee. Currently, this is not the case.

Besides, the better businesses use the insurance to attract better qualified employees. I consider insurance (single person medical coverage at about $450 a month) as part of my compensation package.

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Drew Ward

December 31, 2006

I agree that the costs of insurance are absurd. But, I also know from living in various parts of the US and in different countries that the same businesses we have here sell the same products in other places for the same prices while paying their employees considerably more and providing benefits.

My experiences and both government and ngo research has shown that raising wages and laws requiring employers to provide insurance have very little effect on consumer prices and on businesses’ ability to make a profit and be successful.

The costs of providing health insurance is prohibitive. But, with so few of our population actually having insurance we have had no power to fight for lower rates. The sad part is that our legislators get more money from the insurance industry than they do from their constituents, so that is who they truely represent in government.

But, saying it’s empensive is no acceptable justification for denying our residents the simple basic human right of healthcare. It’s simply our responsibility, instead of saying it would be too expensive we should be working together. First mandate health insurance, then create a cumulative buying group to act a clearinghouse for basic insurance. With enough people buying it, we could negotiate our own pricing. Afterall, that’s what Wal-Mart does, they control enough of the market for their products that they can tell the companies what THEY will pay, take it or leave it.

The fact is that there is no reason for employers to provide benefits to employees. I’ve owned my own busines, and I know how expensive it is. And I also know that employers won’t treat their employees right on their own. We’ll have to have government regulations that force them to do it. But then, they will adjust, change their business model, and still come out with a healthy bottom line.

Change is difficult, it always is. But changes like this to business are much less difficult than living on $200 per week with no benefits…try it.

We need change. Our area is notoriously lazy when it comes to doing what it takes to bring about positive change. That’s probably why the tallest building in the area is stil the tallest building we had in 1940 (Capital One building downtown)!!

Changing the way we pay and care for employees will eventually have a massive net-positive effecton our community and the businesses that serve. The people who work here will be happier, healthier andhave more money to spend. And they will spend it with those same businesses who bo the right thing, go to the plate, and treat them they way any human being should be treated.

Business friendly…of course…but business karma…definitely!

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Steve

October 25, 2007

Wal Mart can more readily afford to pay higher wages than many local companies since there is a greater disparity in the profits of WalMart and local companies. Take a look at Million Air at England Air Park. Very few of their employees have health insurance paid for by the company.

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