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Published: December, 2005; Vol 2, Num 7

 

Wal-Mart Under Gun for Health Care Failures

It has been a tough year for the Wal-Mart public relations department.

After four decades of spectacular growth that made the company the largest employer and one of the most profitable businesses in the United States, the Wal-Mart business plan was hauled before the court of public opinion in 2005.

“Basically, Wal-Mart achieved its financial success by getting federal and state government to pay its health care costs,” says LIUNA General Secretary Treasurer and LHSFNA Labor Co-Chairman Armand E. Sabitoni. “Only its senior managers were offered company health care while the vast majority of its employees worked part time at low wages with no health benefits at all.”

Wal-Mart got its start in rural, small town America. At the time, in these markets, consumers still shopped in small businesses on Main Street. Because the shops were small, they didn't get any price breaks from suppliers, so consumers paid top prices for limited product selections. Wal-Mart’s early appeal derived from its ability to open large, one-stop, discount stores – known today as “big box” stores – on the cheap land at the outskirts of small towns.

Though the small town shopkeepers were driven out of business, customers liked the lower prices and broadened product line of Wal-Mart as well as the new part-time jobs the store provided for local housewives and students. It was only slowly that the community came to realize the impact of an obsolete and dying downtown.

Today, Wal-Mart has more than 5,000 stores worldwide, and it has long since broadened its reach into the suburbs of all major American cities. However, as it moved away from the isolation of its rural roots, the company encountered increasing competition and growing opposition to its business model.

Over the last two years, that resistance has crystallized in an unprecedented alliance among some of Wal-Mart’s corporate competitors, a variety of retail workers’ unions, concerned health care cost activists and fiscally-responsible state and local legislators. Together, they are demanding that Wal-Mart pay its fair share for the health care costs of its employees.

“If an employer does not provide reasonably priced health insurance options for its employees,” says Sabitoni, “they either do without or buy it at much higher prices on an individual basis. Inevitably, part-time, low-wage employees do without. Unfortunately, those employees and their families still get sick and injured. And when they do, someone else has to pick up the tab.”

Health economists know who makes the actual payments. Some low-wage families qualify for Medicaid, the federal government’s health program for poor people which is administered under guidelines adopted by the various states. Those who do not qualify for Medicaid go to hospital emergency rooms where their unpaid bills are eventually shared – in the form of higher prices – among all the payers of insured patients.

In a growing crescendo, a variety of critics have pointed out that the bulk of Wal-Mart employees get health coverage at the expense of the taxpayers or other insured groups. Indeed, in a recently leaked internal memo, a Wal-Mart executive wrote that “our critics are correct in some of their observations. Specifically, our coverage is expensive for low-income families, and Wal-Mart has a significant percentage of associates and their children on public assistance.”

Reacting to this injustice last summer, Maryland lawmakers passed legislation that would require all large employers in the state (10,000 or more workers) to spend at least eight percent of their payroll on health benefits for their employees or make a comparable contribution to Maryland’s health insurance program for the poor.

Wal-Mart has 52 stores and more than 15,000 employees in Maryland. Apparently, it is the only large employer in the state that does not fund health care for its employees. Nevertheless, Republican Governor Robert L. Ehrlich, Jr. vetoed the bill, saying it singled-out Wal-Mart and was bad for business in the state.

Maryland delegates say they will attempt to override the veto in January, when the next session of the General Assembly opens. A three-fifths majority is required to override. In last summer’s vote, the Senate was one vote above this threshold while the House was one vote below. Several legislators who back the bill were not present for that vote.

Meanwhile, in New York City, the City Council voted in August to establish a pilot program in the grocery industry that requires large employers to contribute $2.50 to $3.00 per hour for each employee for health care coverage. The required contribution is the average paid by grocery employers who already provide health care coverage. The law was driven by the move into the city of Wal-Mart and BJ’s Wholesale Club and a number of high-end gourmet grocers such as Whole Foods and Balducci’s, all of which typically provide few health care benefits for their employees.

In New York, many grocery chains welcomed the new law. Nicholas D’Agostino, Jr., the CEO of D’Agostino Supermarkets Inc. said, “I do like the idea of trying to have a level playing field. We pay a lot for health care, so if we weren’t paying for health care, we could price things differently or run things differently.”

Even the Greater New York Chamber of Commerce chimed in. Its president said, “We would advocate to (employers) they need to do this. I think our members are smart enough to realize this is good for business.”

Because the Maryland legislation is backed by Giant Food, the United Food and Commercial Workers Union, the Service Employees International Union and a number of health care advocacy groups, the upcoming battle to override the Governor’s veto has national implications. In particular, the unions and the health advocates are seeking avenues to introduce similar legislation in other states.

Thus, Wal-Mart has launched an all-out effort to defeat the override bid. Since the bill passed, the company has hired 12 new lobbyists in Maryland, nine in October alone. Several are among the best paid lobbyists in the state.

“We understand that this kind of legislation undermines Wal-Mart’s basic business model,” says Sabitoni, who as a top LIUNA official is well aware of parallel efforts by the labor movement to target Wal-Mart as the consummate symbol of corporate irresponsibility and to organize its workforce. Anticipating the complaint of anti-union critics, he says, “Sure, a level playing field will benefit Wal-Mart’s union competitors and help efforts to organize the company, but that doesn’t mean the complaint about its lack of a health care program isn’t valid and important. Far from it. Wal-Mart is profiting at the expense of American taxpayers and the nation’s health care insurers. That’s not fair to the company’s competitors, and, if left alone, will only result in more expensive health care for all Americans.”

More information about “fair share health care” legislation is available at Wake Up Wal-Mart.

[Steve Clark]