Tuesday, May 09, 2006 Wal-Mart: possibly a force for good
The current issue of the Atlantic Monthly has a fascinating article on how Wal-Mart by itself may bring national health care (at last) to the US. A few facts: Wal-Mart has 1.7 million employees, the largest company (by that measure) in history. Wal-Mart lives and dies by a very slim margin: its profits in 2005 were 4 cents per dollar of revenue, and though that amounts to $11.2 billion profit (a nice sum, to be sure), it comes out to $6,000 per employee (compared to $300,000 per employee profit for Exxon Mobile). So any small increase in costs per employee have a drastic effect on the bottom line.
This is why Wal-Mart attempts to externalize health-care costs by providing so little health insurance for its employees that many must turn to Medicare and state programs. States, tired of picking up the tab for Wal-Mart's health-care costs ("their" costs only because of the weird US system of health insurance) have begun to revolt, beginning with the passage of a law in Maryland that requires companies with 10,000 or more employees in the state to spend at least 8% of the total payroll amount on health care. This law, as it happens, would affect only Wal-Mart. Similar bills are underway in 30 more states.
But Wal-Mart cannot afford (because of their slim margins) to markedly increase their per-employee costs. As the article notes:
Just how big a problem this poses was brought to light last October, when someone leaked an internal memo written by the company's executive vice president for benefits, Susan Chambers, to Wal-Mart Watch. The Chambers memo reported that the company's cost of benefits was outpacing its profits. "Growth in benefits is unsustainable," it warned, going on to recommend fourteen measures of containment: nine "limited-risk initiatives" and five "bold steps." These ranged from such benign ideas as giving employees discounts on healthy foods to highly controversial ones like thinning the number of unhealthy (and thus more expensive) workers by adding physical tasks, like collecting carts, to jobs that currently don't require them.
The uproar that ensued focused on the practice of discriminating against unhealthy workers—a potential violation of federal law. But the truly startling thing is the memo's estimate of how little even the most extreme "steps" could accomplish. Enact every proposal, and Wal-Mart will still merely maintain its current ratio of benefit costs to profits for five more years. That's it.
The significance of the Chambers memo isn't that a major company is plotting to scale back health-care coverage; it's that employer health-care costs are growing so sharply that the apotheosis of American capitalism is frantically digging in its heels merely to slow their rate of growth. The alarming implication for a company whose greatness rests upon squeezing a few pennies out of every dollar in sales is a microcosm of the health-care issues beating against American business. As employers are hit with spiraling benefits bills, economic rationality leads them to want to dump their most costly employees. This pushes those most in need of care into the ranks of the uninsured or onto the dole.
The result: Wal-Mart may push for national health insurance, and if it does, it offers cover for all other large businesses to join the push--finally getting health insurance out of their cost structure so they can better compete with companies in most other countries (which already have national health insurance).
The big mover in this is Wal-Mart Watch. Read the whole article. Fascinating stuff--union jujitsu against a business giant for the sake of the general welfare.
UPDATE: And the quality of health care in the US has continued to decline.
posted by LeisureGuy at 5/09/2006 07:55:00 AM
http://leisureguy.blogspot.com/2006/05/wal-mart-possibly-force-for-good.html
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Colin Brace
Amsterdam