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October 26, 2005

US Out of WalMart

Does any small fraction of our population understand that WalMart is a scourge not because it offers low prices, but because it's destroying our healthcare system?

The company has 1.33 million employees. According to a leaked memo in today's NY Times on reducing health-care costs, 46 percent of those employees children are uninsured or on Medicaid. Because WalMart pays essentially poverty wages (legally), when they replace jobs in communities through their predatory practices that first drive out businesses through underpricing, they do the following:

• Reduce money going into the community. They don't grow jobs, they replace them, typically higher-paid jobs within a town or city with lower-paid jobs often outside the tax boundaries.
• Reduce tax revenue. Despite selling lots of merchandise, they often replace revenue rather than increasing it. Because people are paid less and the owners aren't local so that profit is spent local, money is sucked to Bentonville instead of spent in the area.
• Burden the health-care system. Poverty wages and no health insurance guarantees offset health care costs to the local community, sucking more money away. The memo states bluntly, "Specifically, our coverage is expensive for low-income families, and Wal-Mart has a significant percentage of associates and their children on public assistance."
• Tenure is a problem for them. They note that productivity doesn't increase with seniority and they don't like paying people more over time. This seems like a strange problem: hiring new workers incurs costs, and the longer someone works, the better they should perform on average, if not fired. Thus this "compensation" problem is a management problem.

This is sort of free-market capitalism at its worst: Because we as a country don't require health-care insurance for all employees of large companies, this allows a firm to offload its health-care burden. It's easy to argue that predatory underpricing shouldn't be regulated because the market will take care of it--and it often does--it's very hard to say that a company should force local communities to lose tax revenue and pay for health care.

This is not to say, by the way, that WalMart isn't paying anything for health care: 45 percent of their employees are covered. They spent $4.2 billion last year. Even so, a $17,500 per year job has a limit of $2,500 in out-of-pocket expenses or more, according to the Times article.

But it's another key to the broken health-care system that the increases in costs outpace inflation by a factor of three to five per year, and that this leaves more people behind instead of prompting massive reform by the affected businesses.

Posted by Glennf at October 26, 2005 7:41 AM

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