Wal-Mart: Always High Costs...Always

7-30-05, 8:25 am

According to a report authored by the staff of the House Committee on Education and Workforce, because of Wal-Mart's low wages, any one of its employees might be forced to seek public assistance estimated at $2,103 to the US taxpayers for health care and other assistance. With approximately 1.3 million US employees and growing, this amounts to a total of $2.7 billion a year.

By paying sub-standard wages and benefits in order to increase profitability, large corporations are shifting costs onto taxpayers by forcing employees to rely on publicly funded health care programs and for other public assistance services. While public services are an important safety net, large companies have a responsibility to pay living wages and provide adequate benefits to workers. Wal-Mart's benefits package is so expensive that most of its employees cannot afford it. Wal-Mart officials have even been caught encouraging employees to apply for state benefits to cover health care costs.

Wal-Mart CEO Lee Scott reportedly admitted, 'In some of our states, the public program may actually be a better value [than Wal-Mart's health care options].' Wal-Mart spokesperson Ron Bracy recently told the Arkansas Democrat Gazette, 'Yeah, we have a lot of people on state rolls. We wish it wasn’t so.' Wal-Mart took in $10 billion in profits last year alone and has offered no comprehensive and affordable health care plan for its employees that would allow them to leave public assistance rolls.

In fact, their strategy to remedy a situation they claim to regret is not to boost wages or benefits, but to deny there is a problem and spend millions that could go to benefit workers on a public relations campaign to improve their image.

The House Committee's report estimated that for every 200 person store Wal-Mart opens additional public costs being passed along to taxpayers for an average 200-employee store include: $36,000 a year for free and reduced lunches for just 50 qualifying Wal-Mart families; $42,000 a year for low income housing assistance, assuming 3 percent of store employees qualify; $125,000 a year for federal tax credits and deductions for low-income families; $100,000 a year for the additional Title I expenses; $108,000 a year for the additional federal health care costs of moving into state children’s health insurance programs (S-CHIP); $9,750 a year for the additional costs for low income energy assistance. California taxpayers pay $86 million annually for such public programs as health care and subsidized housing just to help out low-wage Wal-Mart workers, according to an August 2004 report from the Institute for Labor and Employment at the University of California, Berkeley.

Arkansas, Georgia, Tennessee, Washington, Massachusetts, Wisconsin, West Virginia and Connecticut—report Wal-Mart as the leading beneficiary or among the top corporate beneficiaries of its public health program for children's health care. In other words, Wal-Mart's low wages drive its employees to seek public assistance in these states more than any other major employer in the state.

Employees seeking public assistance isn't the only cost to taxpayers Wal-Mart demands. When the company looks at building a store in a new area, the first thing it does is ask for tax subsidies. According to nonprofit research group Good Jobs First, over the past 20 years, taxpayers have shelled out at least $1 billion in subsidies to Wal-Mart, as well as to real estate developers who build strip malls for Wal-Mart. While Wal-Mart convinces many local governments to go along with this on the promise that new jobs will offset tax subsidies (in other words, working people will make up for the lost revenue), one study commissioned by the city of Barnstable, Massachusetts actually found that the town's revenues lost an average of $794 per 1,000 square feet developed by Wal-Mart. The losses arose due to greater need for road maintenance and public safety services.

Cathedral City, California also reported losses due to its tax deal with Wal-Mart. In 1995, the city gave Wal-Mart a tax subsidy worth $1.8 million to build two stores. Last year, after the city collected its first check for $800,000 from the stores’ sales taxes (charged to its customers, not out of Wal-Mart's pocket), the store closed down.

After losing a cool million just on the up-front deal and millions more over the decade of not paying taxes, Wal-Mart moved the stores to a neighboring city, where, no doubt, they stoked the flames of competition and collected a similar tax break. Meanwhile Cathedral City’s encounter with Wal-Mart has put the city in hock for $3 million altogether.

Many states are considering remedies to the crisis for local governments caused by corporate subsidies. Close to 30 states have introduced or passed legislation requiring states to disclose which employers are shifting health care costs to taxpayers by forcing working to pay for health care out of pocket or by pushing them to seek public assistance. The legislation is designed to help measure the costs to state health care programs when large and profitable employers such as Wal-Mart skimp on coverage.

While this legislation isn’t aimed just at Wal-Mart, it does result from Wal-Mart style policies. And Wal-Mart has taken it personally, fighting the legislation every step of the way.

Another remedy is organizing unions. Wal-Mart denies publicly that it opposes unions, but it forces new employees to take anti-union classes. When workers do try to organize they are threatened and harassed until they give it up. In two recent situations in Colorado and Canada, Wal-Mart’s response to store workers that voted to join a union was to close the stores.

While large numbers of Wal-Mart workers earn at or less than the federal poverty level and fewer than half actually get Wal-Mart’s meager health benefits, union workers on the whole earn an average of close to 30 percent more than non-union workers, are more than 4 times more likely to have a pensions, and almost always have some health care benefits. Unions have been instrumental in fighting and eliminating job and promotion discrimination based on race or gender.

So, while Wal-Mart’s claims that its policies lead to low prices, let’s ask who really pays to keep their prices low and their profits high? Workers and taxpayers. If Wal-Mart ever took full responsibility for its employees (not to mention the low-wage workers in other countries it relies on to manufacture the majority of the products sold in its stores) and paid a fair share into the communities it operates in, it would continue to earn large profits and would likely be welcomed by communities rather than see a growing number of local communities campaign to block it from opening new stores.

So why does the company spend millions to spruce up its image rather than fixing the problems everyone knows it has? Wal-Mart CEO Lee Scott, if he were honest, would be the first to admit that the capitalist system forces the company to operate the way it does. Capitalism is driven by the need to increase profits, not by service to the community or responsibility for the welfare of employees, despite the fact that it is their work that makes the company successful. This means, unfortunately, that working people really cannot rely on Wal-Mart to improve its behavior on its own. They have to continue to fight Wal-Martization in their legislatures by demanding passage of legislation that will expose corporate misbehavior and by joining campaigns to pressure Wal-Mart in a new direction, such as the Send Wal-Mart ‘back to school’ campaign being led by the United Food and Commercial Workers Union.

--Joel Wendland may be reached at jwendland@politicalaffairs.net.