WORKING AT WAL-MART

Kevin Drum compares a recent Wal-Mart advertising campaign extolling its virtues as a family friendly company with the reality that Wal-Mart does everything it can to keep its costs down, including providing poor health benefits. Indeed, the WSJ report Kevin cites doesn’t even mention that Wal-Mart keeps most of its “associates” part-time so as to escape paying benefits. Kevin argues,

For better or worse, part of the social contract in America since World War II has been that large corporations provide decent healthcare for their workers. Refusing to do so is a core part of Wal-Mart’s strategy for squeezing every last nickel out of its workforce, and they deserve all the scorn they get for their efforts to force an entire industry down to their subterranean level.

There’s certainly something to this argument.

How has Wal-Mart managed to get away with this? Shopping at their stores is a horrible experience: there’s no one to knowledgeably answer questions about products, the stocking isn’t particularly efficient, the aesthetics are awful, the stores are gigantic, making finding things difficult, and yet they’re almost always crowded. Why do people put up with this? Because Wal-Mart sells commodity goods for which people are incredibly price sensitive. Their prices are almost always lower than those of their competitors–and not just the vaunted “mom and pop” stores but the other giant chains. Wal-Mart sells hammers cheaper than Ace Hardware, CDs for less than Tower Records, books for less than Borders or Barnes and Noble, tires cheaper than Firestone, and groceries cheaper than Safeway. Far less in most cases. Indeed, even comparing apples to apples, they undercut Target and K-Mart.

Wal-Mart provides mostly entry level, no skill jobs. Being a cashier or shelf stocker isn’t a career, it’s a means to pay the rent while you’re putting yourself through school or for housewives and retirees to supplement their household income for a few hours a week. Or, as is the case locally, for new immigrants to get a foot in the door. Indeed, the WSJ report showing how lousy the benefits are bears this out, noting that the annual turnover rate is a whopping 50%. It also makes clear that Wal-Mart provides cheap catastrophic coverage for even these part-time workers, which is something they’d be unlikely to get elsewhere. The article doesn’t mention the benefits available for its career employees–store managers and up. I’d wager they’re quite competitive.

Wal-Mart should rightly be criticized–indeed, punished–when it breaks the law by hiring illegal immigrants or uses illicit tactics to prevent workers from unionizing, keeping people just under the 40-hour threshold, and so forth. But I’m not sure that it’s a problem that they provide pay and benefits at the level the market will bear. That’s a reality we all face. It’s why, for example, universities routinely get over a hundred applicants with PhD’s for one job paying $40,000 a year or less. People work at Wal-Mart because they can’t find another employer willing to provide them a more attractive wage, benefit, and flexibility package. Once they can get a better offer, they leave. Half of their entire workforce–and presumably, more than half of their non-managerial employees–apparently does that within a year.

Update (1133): By virtually any measure, our standard of living is much higher now than in the pre-Wal Mart era. The market is brutal in the individual case but damned efficient in the aggregate.

The function of Wal-Mart is to generate profits for its ownership. Otherwise, there would be no incentive to run the stores. They’d prefer to simply have people donate money to them, saving the capital-intensive costs of buildings, warehouses, and employees but, alas, that model only works for Andrew Sullivan. So, they instead are forced to provide thousands of jobs for low-skilled people and sell products that people desire to purchase at a price lower than any of their competitors. The consumers are apparently satisfied, in that they flock to Wal-Mart in droves. The employees are apparently better off as well, in that they don the blue vest in preference to the other firms lining up to hire unskilled workers.

Update (1644): OBE posits that most of the students hired by Wal-Mart are likely covered by their parents’ insurance. That’s a valid point. Indeed–while I’ve got no numbers whatsoever and doubt any would be publically available–it’s not unreasonable to presume that some significant portion of Wal-Mart’s employees, like those of other companies, are covered by health insurance through some means other than their employer. Many are certainly covered under their parents’ or spouses’ plans.

FILED UNDER: Economics and Business,
James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. Jay Solo says:

    Heh. Wal-Mart healthcare is a hot topic for my wife to expound upon, but in favorable terms. Must make sure she sees this…

    This is a good post to enter in CotC, in case you hadn’t thought of it or already entered another. In effect, you are saying labor is a part of the market too, and subject to things like supply, demand, and type being offered by the seller. The type may be dependent on when and where in their lives people are. Hooray for capitalism!

  2. RicK DeMent says:

    Indeed, hooray for capitalism. It is good that we abandon the naive promise of the social contract in favor of the much more efficient and impartial judgment of the free market. After all the metrics of growth and profit are have a seductive appeal as they are objective and quantifiable, whereas “quality of life” is soft, imprecise and prone to subjective evaluations.

    It is only muddled thinking that would suggest that our systems and institutions be designed to serve people. It is only the rigorous mind that understands we exist only to serve these systems and institutions with a slavish devotion to the metrics of profit and growth for if we do not, then what is their function?

  3. sym says:

    Walmart still shouldn’t be making ads featuring people saying “It’s nice to know that I work for a company that would take care of everything we went through,” if it’s not really true. The ads aren’t saying “we provide low-paying entry jobs for students and immigrants! we have a huge turnonver rate! shop at Walmart’s!” Walmart themselves see the need to advertise their allegiance to the Social Contract. They don’t have the balls to justify their treatment of workers through arguments about the overall standard of living or the free market.

  4. Dean Esmay says:

    I believe that if Kevin Drum did some research, he would find that more people–both in total and as a percentage of the population–have health insurance today through their employers than they did 20, 30, 40, 50, or 60 years ago. That being the case, he is mistaken; the “social contract” he speaks of applied only to workers in very large corporations in decades past. Due to changes in the law and tax structure, and the demands that workers made on employers, more and more employers have found ways to offer health insurance, so that now a majority of workers do in fact get it.

    We now consider it a “crisis” that “an entire third” of America is without health insurance. I believe that if he checked the figures for 1950 or 1960, he’d find that less than half of them were so covered.

    This is, of course, no reason not to advocate for reforms that make it easier to arrange coverage for even more people. Although I am an advocate for a voucherized system that allows everyone at any income level to choose among a list of private insurers, I must admit that the latest Bush proposal is excellent. Small employers and organizations, and the self-employed, right now are forbidden to pool together collectively to offer joint insurance packages, and Bush wants to change that. It’s really not a bad idea at all, and would move us incrementally further to the goal of getting all Americans covered.

    The real issue is what happens to you if you lose your job, or switch jobs, and either become injured or have some long-term medical care need. That still hasn’t been sufficiently addressed.

  5. James Joyner says:

    Dean,

    Well, Wal-Mart is a pretty big company. 🙂

    But I agree that the solution is some sort of pooled system. I’d like to give something like the Bush plan a try. If that doesn’t work, it may be that a government-sponsored pool is the logical alternative.

  6. Dean, your beliefs aside, I believe the burden of proof is on you for those statements, not Kevin. On what source are you basing your assertion that fewer people had health care coverage in the 1950s and 60s, or even in the 80s? Gut feelings don’t count. Evidence does.

    “I believe that if he checked the figures for 1950 or 1960, he’d find that less than half of them were so covered.”

    Feel free to make as many suppositions as you like. But don’t expect us to accept them as factual citations.

    Got a cite for that statement?

  7. Mithras says:

    We have 44 million people in this country who have no health insurance. When they get really ill, they get uncompensated care from hospital ERs. As a result, we pay more for treating them after they’re sick than if they got preventative care, they’re suffering, and the hospitals are teetering on financial collapse. We do worse on health care metrics like lifespan and infant mortality than other industrialized countries. At the same time, we spend more per capita on health care than countries with socialized medicine.

    Our market-based system is clearly broken. Making it more market-driven will make it worse.

  8. Anonymous says:

    From here (a quick overview of the history of health insurance):
    “During the 1950s, health insurance protection expanded rapidly and by the middle of the decade 77 million people had hospital expense insurance in either the indemnity form or under a major medical plan.”
    Since there wasn’t a census in the mid-50s, I checked the population figures for 1950 and 1960. Respectively, the were: 149895183 and 178554916. Even taking the lower of the two numbers, That makes only about 51% of the population covered (taking the midpoint between the two, it’s about 47%). Since the quote also says that protection rose rapidly in the 50’s, I suspect the figures in 1950 were way below half.
    You will also please note that they were talking about hospitalization insurance, not what we call ‘health insurance’ today. I can’t find anything definitive on when that became popular but I suspect it was probably after medicare was instituted (mid-60’s if I recall).

  9. Retail stores have always employed their hourly workers at part-time to avoid providing benefits, and just as importantly, to avoid paying overtime. When I worked at Sears in high school and college, not a single person in my department (paint and hardware) was full-time. In fact, they hated to schedule people more than 30 hours a week, because there was always a chance you’d have to switch shifts with someone due to an emergency and end up working more than 40 hours a week, thus costing the company overtime. They also consistently underscheduled busy days like the 4th of July Paint Sale, leaving customers standing around for hours. Sometimes we’d have so many customers we’d have to go on helping them after the store closed, which most of us were actually glad to do until maintenance turned the power off and we had to stop. My point is, Wal-Mart is doing nothing new to keep labor costs down, nothing that no other retailer hasn’t done for time immemorial. And you would do exactly the same if you ran a retail store, because if you didn’t you wouldn’t stay in business long. Wal-Mart’s real innovation was and continues to be squeezing their supply chain for cheaper and cheaper goods. This has its own effects on labor rates and product quality at these companies, although it has also improved efficiency in many cases, so it’s not unadulterated evil either.

  10. Dean Esmay says:

    Hmm. Interesting position. Meryl, who treats me like dirt and not really a human being who simply disagrees with her now and then, now wants me to take her questions seriously. I find that fascinating. At least she’s not mocking and distorting me anymore.

    That said, the above person who mentioned some health-insurance statistics above has posted data matching what I’ve seen. I have several sources on what health insurance looked like in the 1950s, 1960s, and 1970s. When Meryl decides that I’m not a less-than-dirt scumbag, I’ll choose to answer her. Otherwise, I’ll leave it to others who’ve already posted data that matches what I have already seen. There are more people covered by health insurance today than ever before in our history, and now we act as if this is a new “crisis” rather than a progressive improvement in the human condition.

    Meanwhile, Mithras, who obviously knows nothing about the historical figures, cannot be taken seriously. Neither can Kevin Drum, until he can demonstrate that he actually knows what the actual historical data suggests. My only observation there being that you can prove anything you want if you simply make up your data.

    That and the fact than when I grew up in the 1970s, most people didn’t have health insurance, and having it was considered a luxury rather than a birthright.

    Cheers.

  11. Dean Esmay says:

    By the way, anyone want a list of weblogs written by females who have been known to use both the terms “feminazi” and “c***” that Meryl is known to frequent, and to be highly friendly with?

    Just shoot me a note and I’ll give you proof of same. I’ve already done the research, and can provide multiple hyperlink examples of same.

    Just for the curious. 😉

  12. McGehee says:

    There are more people covered by health insurance today than ever before in our history, and now we act as if this is a new “crisis” rather than a progressive improvement in the human condition.

    This is SOP among the agenda-driven. The closer the underlying problem gets to being solved, the harder it is for the activists to get traction for new demands for more and still more “progress” as they define it. So the rhetoric becomes more strident and the forecasts more apocalyptic if the rest of their agenda isn’t adopted.

    Perspective is not only lacking, those who have it are denounced as reactionaries.

  13. FWIW, when I worked at Wal-Mart back in 1996, the more critical thing was avoiding paying overtime (and managers would get in trouble if they did). But, the cutoff for “full time” benefits was 30 hrs/week, and almost everyone in my department worked at least that much–so I don’t think they were trying to avoid giving out benefits. It’s not like the benefits were costing Wal-Mart much of anything anyway, once you figure that they’re taking a tax deduction on whatever employer match they do on the insurance. (The only benefits I took advantage of were the 10% employee discount and the 15% ESOP match on WMT shares, since I was still entitled to my dad’s CHAMPUS military retiree health coverage at the time.)

    My suspicion is that most WMT workers wouldn’t benefit from a union, anyway–they’d see whatever marginal benefit eaten up by dues. The bottom line is that nobody’s going to pay completely unskilled labor a living wage, because the economics make no sense–they’ll have robots in stocking the shelves before that happens.

  14. C.J. says:

    One thing raging liberals forget when they blast Walmart is that many people work there for the healthcare benefits. I have no statistics, but of the three people I know who work at a Walmart, two do so for the healthcare.

    Not everyone in our society can be highly educated pundits. Other members of the low-skilled workforce have been locked out of their jobs for several months for stating their desire to maintain their healthcare benefits. I’m talking about the grocery workers on strike here in California. The impasse is caused by owners’ fear of competition from Walmart.

    It seems to me that healthcare is a concern of a lot of people in this country. I know I’m not the best capitalist in the room, but why do people make money on whether a person lives or dies?

  15. Peg K says:

    I think that people are comparing apples with pineapples.

    Half a century ago, people might have had health insurance. But it wasn’t the same animal that it is today. It was catastrophic health care. If you needed surgery, or care for cancer; you were insured.

    But if your child needed polio shots, or you were due for your annual check-up, you called the doctor, made an appointment – and paid him (they were usually “hims” back then) what you owed him.

    A large part of what has created the health care monster we know today is that people do not have the same responsibility that they had then for their own health care.

    Somehow, if we could return to the days when insurance meant insurance for unusual, unexpected needs – and people had to manage their normal care – I think that overall, we’d be vastly better off.

  16. But then… even small overnight stays in the hospital can cost in the tens and thousands of dollars. Beyond mammograms and flu shots, healthcare is way beyond the means of most people.

  17. Ken says:

    “Retail stores have always employed their hourly workers at part-time to avoid providing benefits, and just as importantly, to avoid paying overtime. ”

    Seems to me like those hourly workers would be better off if they could work more hours without their employers having to pay benefits or extra overtime charges on top of the pay rate for those extra hours. If they’re worth $X per hour, and they’re required to charge their employers $X + $Y for extra hours, then they’re not going to get to sell those extra hours, and they’ll suffer as a result.

  18. Ken says:

    “Retail stores have always employed their hourly workers at part-time to avoid providing benefits, and just as importantly, to avoid paying overtime. ”

    Seems to me like those hourly workers would be better off if they could work more hours without their employers having to pay benefits or extra overtime charges on top of the pay rate for those extra hours. If they’re worth $X per hour, and they’re required to charge their employers $X + $Y for extra hours, then they’re not going to get to sell those extra hours, and they’ll suffer as a result.

  19. TM Lutas says:

    KG Schneider – The catastrophic care policies you’re talking about just got put into law. They’re called HSAs and came on line at the beginning of the month.

    On the subject of paying for health care. You can take a couple of tylenol to tide you over ’till morning and see a doctor at the office or you can go to the emergency room and be seen for 5x the cost and get the same treatment. There are people who use the emergency room like a doctor’s office. There are people who incur huge costs in various other ways who only do so because they don’t perceive themselves as paying for it (and sometimes they’re right). There is a lot of unnecessary medicine out there that cost accountability would fix.

  20. All of this shows how stupid and lame our labor laws are. Does it really benefit people to have to work two part-time jobs because they are kept at less than 40 or less than 30 hours a week at their jobs because of the cost of benefits and overtime? That benefits neither the employer nor, especially, the employee. It’s moronic. As is the difficulty of obtaining health insurance other than through a full-time employer.

    We can thank the unions and the socialists for that. Why is it that the socialists, of all people, have the hardest time coming to grips with the notion that neither the government nor the corporation holds, or should hold, the power and the responsibility for the protection of the individual?

  21. KG Schneider: I’m 41 years old, and I’ ve never spent the night in a hospital. I definitely see anything having to do with a hospital as an “unusual” event.

    A lot of people seem to have lost sight of the fact that flexible part-time work can be difficult to come by–there are a lot of students and housewives who prefer to work at Wal-Mart. And most of them have health insurance through other means.

  22. Paul says:

    Actually, the overtime issue is more complex than that. In my experience with skilled employees in manufacturing, companies routinely pay overtime during periods of high demand rather than hiring because the 1.5x on 10 hrs per week over 4 workers (~22K annual premium where I was) isn’t that much higher than the annual benifits package of a new worker. Add in the costs of hiring and training a new employee, and possible serverance benifits if you’re wrong and have to lay him off, and you can understand why our operators and mechanics routinely averaged 45 hrs/week over most of the year.

    In effect, this means that the desired impact of the 40 hr work week law has been eliminated over time as industry shifted enough compensation into indirect channels to roughly balance out the 50% overtime premium, leaving out the unskilled workers by sharply capping benifits and OT. As has been mentioned earlier, these workers can opt-out of the system by taking multiple jobs.

    And so in the long run, the market reasserts itself. Since the US law doesn’t mandate an outcome, the system adapts and in the end largely nullifies the law.

  23. aaron wall says:

    I think I would consider many respectable illegal job ops before I would work at Wal Mart…

    I guess because I am not a shareholder my opinion should not matter much…I should just enjoy my low prices and move on

  24. Peg K says:

    Solutions to our health care mess aren’t simple and are many. Correcting just one aspect (returning to insurance being for “catastrophic care”) and nothing else won’t cut it.

    Other difficulties: HUGE expenditures for docs practising “defensive” medicine to plan for potential lawsuits lurking. People who do use the emergency room for regular care – instead of emergencies, as was the original intent. Vast bureaucracy involved with health care … because no one pays their own doctor directly any longer for normal care!

    Plenty more, too.

  25. I recently blogged in response to a Wsj.com article on Wal-Mart that the company has one of the smartest health benefit designs in the country. See: http://www.businessword.com/pMachine/comments/517_0_1_0_C/.

    Here”s the whole post:

    Wal-Mart offers its 1.16 million employees one of the smartest and most cost effective health insurance plans, but it still has some rough edges because it doesn’t cover bariatric surgery for the obese or some other needed services, according to this must-read report in the Sept. 30, 03, issue of The Wall Street Journal (sub req).

    All employers should focus on providing coverage of catastrophic losses, not the so-called preventive care that consumers should pay for out of their pockets. And by offering plans with high deductibles, the company let’s the market work. That is, premiums are reduced to affordable levels for employees so that relatively more of them sign up for the insurance, compared with most $8 per hour workers.

    Making employees wait six months to become eligible for health insurance reduces paper work caused by high turnover employees and reduces the chances that sick people will try to work at Wal-Mart just to get catastrophic coverage and then quit after they are well again.

    The company seems to fight procedures recommended by multiple physicians too much, which will invite unionization and state and federal mandated care legislation.

    If many other large employers, not to mention small ones, follow Wal-Mart’s example, the use of primary care, wellness and alternative providers will shrink, and hospitals will see their uncollectibles continue to climb.

    Point is, Wal-Mart isn’t the only company using this strategy. Many municipalities and smaller private employers are doing the same thing because they want to make sure that most of their employees have catastrophic insurance.

  26. Muriha says:

    Any new ideas?

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