Tuesday, January 24, 2006

MAKING AN EXAMPLE OF WAL-MART

Thoughts on a pickle we made for ourselves

We have two competing perspectives on the employee compensation policies of Wal-Mart, the largest employer in the US.

George Will approaches the issue philosophically, using Maryland’s recently enacted mandates for health insurance coverage as a springboard:

“Robbing Wal-Mart”

http://www.townhall.com/opinion/columns/georgewill/2006/01/19/182959.html

The tone of the editorial is well set early on:

“Something not easily distinguished from theft recently occurred in Annapolis. In legislation ostensibly concerned with any company with 10,000 employees but pertaining only to one, Maryland has said Wal-Mart must spend 8 percent of its payroll on health care, or must give the difference to the state.”

Approaching the question differently is The Seattle Times, which reports the results of two heretofore confidential Washington State analyses on the number of private-sector employees who receive government healthcare aid of one kind or another:

“Over 3,100 Wal-Mart workers got state health aid”

http://seattletimes.nwsource.com/html/localnews/2002758209_report24m.html

The reports detail the top ten employers by number of employees who receive aid. In both, Wal-Mart is number one.

The matter becomes significant because the Washington State Legislature is considering legislation similar to Maryland’s…

Wal-Mart is on record insisting the older numbers are obsolete in light of new company programs enacted since the reports were written.

For society as a whole, this is what’s known as being between a rock and a hard place…

Dr Will champions the rock:

“Wal-Mart's supposed sin is this: One way it holds down prices (when it enters a market, retail prices decline 5 percent to 8 percent; nationally, it saves consumers $16 billion annually) is by not being a welfare state. That is, by not offering higher wages and benefits than the labor market requires.”

The hard place is the Federal government’s poverty line, which has become a yardstick for the safety net. From the Times:

“Medicaid is a state-federal program that provides health coverage to families on welfare and children in low-income families. The Basic Health Plan (BHP), funded entirely by the state, mostly covers low-income adults. Both programs are aimed primarily at people in families with incomes below 200 percent of the federal poverty level. That would mean a family of four with an income of about $38,000 would be eligible.”

Recall, those are cutoff numbers.

A little math: The two-earner average wage for the family above is about $9.40 an hour. If those guidelines were applied to a single parent with three kids, the wage is $18.80 an hour – well over the national average wage of $16.40 an hour…

I find it somehow Karmic that Wal-Mart, arguably the Nation’s most successful business in the last fifty years, opened its doors three years before the enactment of the Great Society programs, including Medicaid, in 1965.

Before and during that same period of time, labor unions fought for, initially won, and then lost the battle to provide their members lucrative wages and generous benefits…

Between 1960 and 2003, per capita medical expenses, measured in constant dollars, increased 1232%, while costs of goods in general increased 515%. Medical expenses rose from 5.1% of the GDP to 15.3%.

In 1960, 75% of the Nation’s medical expenses were covered privately. In 2003, that figure was down to 54%. That’s before the new prescription drug benefit passed in 2003, a related issue for another day.

In 1960, medical insurance was a coveted benefit provided by the better employers that covered about 55% of all medical expenses. Today, private insurance only picks up about a third of the total.

Rising healthcare costs are complex to be sure. We not only have more care today than in 1960 but far better and more sophisticated care. We also have far higher expectations of success, which helps to fuel the malpractice mess.

Yet there is a growing public consensus a minimum of medical insurance should be a universal “right,” as demonstrated by the existence of programs like Washington’s “Basic Health” plan. In an entitled society, if the working poor can’t provide for themselves, or their employers won’t provide for them, only the State remains.

And that’s where Dr. Will’s analysis fails. He is certainly familiar with the arguments concerning the economic impact of subsidy. I would ask Dr. Will and those who accept his argument: Is not Wal-Mart’s success in applying the low wage = low price equation at least partly attributable to  the public coffers’ support of their workforce in critical albeit “off-books” ways, providing incentive to and in fact enabling workers to accept employment they would –or could - otherwise not?

And I would ask Dr Will: Is this a proper role of government?

Collaterally, what protections from economic debasement should ordinary citizens expect as part of government’s role of promotion of the general welfare? You decry Maryland’s mandate of a minimum benefit. Is it proper to protect workers with a “living wage” minimum wage? Any minimum wage?

Or to protect industries which provide living wages?

Or should “we the people” accept economic crucifixion on the cross of laissez-faire enterprise?

It’s not just Wal-Mart; never lose sight of that. Wal-Mart is merely the most visible example in an entire segment of the economy: The Times’ “top ten” includes other retailers like Target, fast food giants, grocers, temporary service providers, and agricultural firms.

And it’s not just medical benefits. Wal-Mart and its industry has become the Nation’s experimental laboratory in purchase outsourcing. Most of the goods found in a Wal-Mart or a Target are made overseas, principally in China.

Those are some of the jobs the unions fought for and lost – lost forever in the race to the bottom between prices, expenses and corporate profits.

Certainly deference is owed to the capitalist system which is the original and best source of our mutual wealth. But a thought must be given to Churchill’s axiom: The greatest enemy of capitalism is capitalists.

In the medical insurance controversy we see an example of where shortsighted capitalist greed has probably destroyed a branch of capitalism. It’s no longer a question of if but when. The government on one level or another is already paying the freight for most bad risks, most of the most expensive cases, those who society judges “worthy,” and its own workforce. Private industry picks up an increasingly smaller share of the costs for the remaining profitable markets.

It can’t go on. Wal-Mart isn’t a disease; it’s a symptom. The disease is the race to the bottom. Eventually, barring a frankly astonishing outbreak of Corporate conscience, government will be forced by an increasingly impoverished working class back toward the socialist model.

For medical insurance, eventually is now. This issue must be removed from the private arena. It’s time for National Health Care.

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