Wal-Mart's Strategy

| Thu Oct. 27, 2005 5:22 PM EDT

In the New Republic today, Clay Risen has a good analysis of the Wal-Mart memo—describing ways to reduce the company might reduce its health care costs while appearing to care more about its workers—that surfaced yesterday:

The memo is the result of a study carried out in coordination with McKinsey, the elite consulting firm--and it shows in its fantastic grasp of [Wal-Mart's] numbers and abysmal conception of the workers who make them possible. One proposal would replace the current 401(k) program, into which the company puts a fixed percentage of the employee's wage, with a matching program, in which the company's contribution is equal to the employee's (this on top of the proposed cut in company contributions, from 4 percent to 3 percent). From a cost-savings point of view, this is a brutally efficient strategy--after all, the average Wal-Mart employee makes $17,500 a year. How many are going to set aside 3 percent of that for retirement? What's amazing, though, is that the memo's author, Susan Chambers, seems to believe that employees would actually like this reduction in benefits, because, for those who can somehow afford to take full advantage, it "would help Associates better prepare for retirement."

 

Then there is the proposal to shift all employees into health-savings plans, replacing traditional insurance with tax-free bank accounts in which both employees and the company set aside money; they then use that money to pay for doctor visits, prescriptions, and so on. Again, from a coldly rational point of view, this makes certain sense: The more financial responsibility employees bear in their health-care costs, the less they are likely to spend. The problem is that, again, poorly paid employees are unlikely to make the sort of contributions necessary to cover expenses. Moreover, it's much easier for the company to quietly adjust its own contributions to employee health downward, a fact sneakily acknowledged by the memo (though instead of proposing a check it merely recommends more p.r.: "Wal-Mart will have to be sophisticated and forceful in communicating this change").

That's the crux of it: Wal-Mart will use some nifty gimmicks to slash its workers' health and retirement benefits and then just pretend that this counts as an improvement. Ultimately, of course, this won't work. Wal-Mart's critics have bullshit detectors like few other groups of people on the planet, and always, always, always assume the worst about the store. The company will never appease its "well-funded and well-organized" attackers until it actually starts offering substantial benefits for workers. Although, do note, Wal-Mart executives are probably paranoid that the critics want to destroy the company altogether, rather than merely improve the lives of its workers, so maybe Wal-Mart thinks that there are no steps ever worth taking—because its enemies will never be appeased. Surely it doesn't help when lunatic lefties start writing posts like "Abolish the Corporation," either.

 

Alternatively, of course, Wal-Mart could solve its problems by lobbying for some sort of government-run health insurance, which would relieve the company of the burden of covering workers in the first place. It probably will end up doing this, although it won't lobby for single-payer, but rather the GOP's plans for government-financed Health Savings Accounts, high-deductible insurance, and tax credits, along with a phase-out of the employer-health deduction; two steps that I think would be awful for actual people, but would let Wal-Mart and other big companies wash their hands of handling health insurance without having to pay taxes for some sort of single-payer system.

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