[mgj-discuss] BBC NEWS | Business | Wal-Mart calls for higher
cpardew at soaw.org
Wed Oct 26 17:20:02 GMT 2005
Yeah, the same day the New York Times breaks this story:
October 26, 2005
Wal-Mart Memo Suggests Ways to Cut Employee Benefit Costs
By STEVEN GREENHOUSE
and MICHAEL BARBARO
An internal memo
<http://www.nytimes.com/packages/pdf/business/26walmart.pdf> sent to
board of directors proposes numerous ways to hold down spending on
health care and other benefits while seeking to minimize damage to the
retailer's reputation. Among the recommendations are hiring more
part-time workers and discouraging unhealthy people from working at
In the memorandum, M. Susan Chambers, Wal-Mart's executive vice
president for benefits, also recommends reducing 401(k) contributions
and wooing younger, and presumably healthier, workers by offering
education benefits. The memo voices concern that workers with seven
years' seniority earn more than workers with one year's seniority, but
are no more productive.
To discourage unhealthy job applicants, Ms. Chambers suggests that
Wal-Mart arrange for "all jobs to include some physical activity (e.g.,
all cashiers do some cart-gathering)."
The memo acknowledged that Wal-Mart, the world's largest retailer, had
to walk a fine line in restraining benefit costs because critics had
attacked it for being stingy on wages and health coverage. Ms. Chambers
acknowledged that 46 percent of the children of Wal-Mart's 1.33 million
United States employees were uninsured or on Medicaid.
Wal-Mart executives said the memo was part of an effort to rein in
benefit costs, which to Wall Street's dismay have soared by 15 percent a
year on average since 2002. Like much of corporate America, Wal-Mart has
been squeezed by soaring health costs. The proposed plan, if approved,
would save the company more than $1 billion a year by 2011.
In an interview, Ms. Chambers said she was focusing not on cutting
costs, but on serving employees better by giving them more choices on
"We are investing in our benefits that will take even better care of our
associates," she said. "Our benefit plan is known today as being generous."
Ms. Chambers also said that she made her recommendations after surveying
employees about how they felt about the benefits plan. "This is not
about cutting," she said. "This is about redirecting savings to another
part of their benefit plans."
One proposal would reduce the amount of time, from two years to one,
that part-time employees would have to wait before qualifying for health
insurance. Another would put health clinics in stores, in part to reduce
expensive employee visits to emergency rooms. Wal-Mart's benefit costs
jumped to $4.2 billion last year, from $2.8 billion three years earlier,
causing concern within the company because benefits represented an
increasing share of sales. Last year, Wal-Mart earned $10.5 billion on
sales of $285 billion.
A draft memo to Wal-Mart's board was obtained from Wal-Mart Watch, a
nonprofit group, allied with labor unions, that asserts that Wal-Mart's
pay and benefits are too low. Tracy Sefl, a spokeswoman for Wal-Mart
Watch, said someone mailed the document anonymously to her group last
month. When asked about the memo, Wal-Mart officials made available the
updated copy that actually went to the board.
Under fire because less than 45 percent of its workers receive company
health insurance, Wal-Mart announced a new plan on Monday that seeks to
increase participation by allowing some employees to pay just $11 a
month in premiums. Some health experts praised the plan for making
coverage more affordable, but others criticized it, noting that
full-time Wal-Mart employees, who earn on average around $17,500 a year,
could face out-of-pocket expenses of $2,500 a year or more.
Eager to burnish Wal-Mart's image as it faces opposition in trying to
expand into New York, Chicago and Los Angeles, Wal-Mart's chief
executive, H. Lee Scott Jr., also announced on Monday a sweeping plan to
conserve energy. He also said that Wal-Mart supported raising the
minimum wage to help Wal-Mart's customers.
The theme throughout the memo was how to slow the increase in benefit
costs without giving more ammunition to critics who contend that
Wal-Mart's wages and benefits are dragging down those of other American
Ms. Chambers proposed that employees pay more for their spouses' health
insurance. She called for cutting 401(k) contributions to 3 percent of
wages from 4 percent and cutting company-paid life insurance policies to
$12,000 from the current level, equal to an employee's annual earnings.
Life insurance, she said, was "a high-satisfaction, low-importance
benefit, which suggests an opportunity to trim the offering without
substantial impact on associate satisfaction." Wal-Mart refers to its
employees as associates.
Acknowledging that Wal-Mart has image problems, Ms. Chambers wrote:
"Wal-Mart's critics can easily exploit some aspects of our benefits
offering to make their case; in other words, 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."
Her memo stated that 5 percent of Wal-Mart's workers were on Medicaid,
compared with 4 percent for other national employers. She said that
Wal-Mart spent $1.5 billion a year on health insurance, which amounts to
$2,660 per insured worker.
The memo, prepared with the help of McKinsey & Company, said the board
was to consider the recommendations in November. But the memo said that
three top Wal-Mart officials - its chief financial officer, its top
human relations executive and its executive vice president for legal and
corporate affairs - had "received the recommendations enthusiastically."
Ms. Chambers's memo voiced concern that workers were staying with the
company longer, pushing up wage costs, although she stopped short of
calling for efforts to push out more senior workers.
She wrote that "the cost of an associate with seven years of tenure is
almost 55 percent more than the cost of an associate with one year of
tenure, yet there is no difference in his or her productivity. Moreover,
because we pay an associate more in salary and benefits as his or her
tenure increases, we are pricing that associate out of the labor market,
increasing the likelihood that he or she will stay with Wal-Mart."
The memo noted that Wal-Mart workers "are getting sicker than the
national population, particularly in obesity-related diseases,"
including diabetes and coronary artery disease. The memo said Wal-Mart
workers tended to overuse emergency rooms and underuse prescriptions and
doctor visits, perhaps from previous experience with Medicaid.
The memo noted, "The least healthy, least productive associates are more
satisfied with their benefits than other segments and are interested in
longer careers with Wal-Mart."
The memo proposed incorporating physical activity in all jobs and
promoting health savings accounts. Such accounts are financed with
pretax dollars and allow workers to divert their contributions into
retirement savings if they are not all spent on health care. Health
experts say these accounts will be more attractive to younger, healthier
"It will be far easier to attract and retain a healthier work force than
it will be to change behavior in an existing one," the memo said. "These
moves would also dissuade unhealthy people from coming to work at
Ron Pollack, executive director of Families U.S.A., a health care
consumer-advocacy group, criticized the memo for recommending that more
workers move into health plans with high deductibles.
"Their people are paying a very substantial portion of their earnings
out of pocket for health care," he said. "These plans will cause these
workers and their families to defer or refrain from getting needed care."
The memo noted that 38 percent of Wal-Mart workers spent more than
one-sixth of their Wal-Mart income on health care last year.
By reducing the amount of time part-timers must work to qualify for
health insurance, Wal-Mart is hoping to allay some of its critics.
One proposal under consideration would offer new employees "limited
funding" so they could "gain access to the private insurance market"
after 30 days of employment while waiting to join Wal-Mart's plan.
Such assistance, the memo stated, "would give us a powerful set of
messages to use in combating critics. (For instance, 'Wal-Mart offers
associates access to health insurance after they've worked with us for
just 30 days.')"
Steven Greenhouse reported from New York for this article, and Michael
Barbaro from Bentonville, Ark.
Sameer Dossani wrote:
> Wal Mart calling for an increase in minimum wage. Hilarious...
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School of the Americas Watch
www.SOAW.org; cpardew at soaw.org
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