[mgj-discuss] BBC NEWS | Business | Wal-Mart calls for higher wages

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 
<http://query.nytimes.com/search/query?ppds=bylL&v1=STEVEN%20GREENHOUSE&fdq=19960101&td=sysdate&sort=newest&ac=STEVEN%20GREENHOUSE&inline=nyt-per>
and MICHAEL BARBARO

An internal memo 
<http://www.nytimes.com/packages/pdf/business/26walmart.pdf> sent to 
Wal-Mart's 
<http://www.nytimes.com/redirect/marketwatch/redirect.ctx?MW=http://custom.marketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=WMT> 
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 
Wal-Mart.

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 
their benefits.

"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 
workers.

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 
workers.

"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 
Wal-Mart."

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.

----
Amazing.
Christy

Sameer Dossani wrote:

> Wal Mart calling for an increase in minimum wage. Hilarious...
>
> http://news.bbc.co.uk/2/hi/business/4377344.stm
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-- 
Christy Pardew
School of the Americas Watch
202-234-3440
www.SOAW.org; cpardew at soaw.org

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