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“Wal-Mart Returning To Full-Time Workers”: Obamacare Not Such A Job Killer After All

Wal-Mart, the nation’s largest employer, announced Monday that 35,000 part-time employees will soon be moved to full-time status, entitling them to the full healthcare benefits that were scheduled to be denied them as a result of Wal-Mart’s efforts to avoid the requirements of Obamacare.

While some analysts believe that the move comes as Wal-Mart is attempting to deal with the negative view many Americans have of its worker benefits program, a closer look reveals the real reason for the shift—

Wal-Mart’s business is going south due to the company’s penchant for putting politics and the squeeze on Wal-Mart employees ahead of the kind of customer satisfaction that produces prosperity over the long-term.

In fact, Wal-Mart’s unwillingness to pay most of their workers a livable wage, while avoiding enough full-time employees to properly run a retail outlet, has led to the company placing dead last among department and discount stores in the most recent  American Customer Satisfaction Index—a position that should now be all to familiar to the nation’s largest retailer given that Wal-Mart has either held or shared the bottom spot on the index for six years running.

For anyone who has not been following the Wal-Mart saga, sales have been sinking dramatically at the retailer as the company has turned to hiring mostly temporary workers (those who must reapply for a job every 180 days) to staff their stores while cutting full-time employees’ hours down to part-time status in order to avoid providing workers with healthcare benefits.

The result?

Empty shelves, ridiculously long check-out lines, helpless customers wandering through the electronics section and general disorganization at Wal-Mart store locations.

This is hardly a recipe for success.

A recent description of a Wal-Mart store in Newark, New Jersey published by Bloomberg, says it all—

“Three days earlier, about 10 people waited in a customer service line at a Wal-Mart in Secaucus, New Jersey, across the Hudson River from New York, the nation’s largest city. Twelve of 30 registers were open and the lines were about five deep. There were empty spaces on shelves large enough for a grown man to lie down, and a woman wandered around vainly seeking a frying pan.”

The description pretty much sums up what you will find at the typical Wal-Mart store in the United States these days.

While the company’s trend toward temporary employees has allowed the retailer to avoid its responsibilities under the Affordable Care Act—a law that Wal-Mart publicly supported only to turn around after passage and work to avoid providing health care benefits to employees—they’ve managed to tank their store sales in the process.

Who would have guessed that a well-staffed store filled with competent and reasonably paid employees might actually have an impact on the success of a company?

Home Depot—that’s who.

According to Zeynep Ton, a retail researcher and associate professor of operations management at the MIT Sloan School of Management, in the early 2000s, Home Depot’s CEO, Robert Nardelli, moved to cut full-time staffing levels while increasing part-time employees in an effort to boost profits by trimming the expense that comes with employing full-time workers. It worked for a short while. However, as Ton notes, eventually customer service declined—and with it, customer satisfaction—leading to a severe decline of same-store sales.

Wal-Mart’s penny wise-pound foolish approach to its business was further well documented in the Bloomberg article referenced earlier where they told the story of Margaret Hancock, a retired accountant from Newark, Delaware, who has always viewed Wal-Mart as her “one stop shopping destination”.

While Ms. Hancock had, for years, been able to get everything she needed at her local Wal-Mart store, recent visits resulted in her failing to locate numerous items as the products were simply not out on the shelves and available for purchase.

As Hancock explained it, “If it’s not on the shelf, I can’t buy it. You hate to see a company self-destruct, but there are other places to go.”

And ‘go’ is exactly what Ms. Hancock did—no doubt to Wal-Mart’s competitor, Costco, a company that experienced a 19 percent increase in profits in Q2 2013 while paying its employees 40 percent more on average (the average Costco wage is $21.96 per hour) than what a Wal-Mart worker can earn. In that same quarter, Wal-Mart numbers revealed the company is going nowhere fast given its current state of operations.

So, where is all that product that once filled Wal-Mart shelves?

Oh, the goods are in the store—either in the back room or in the unopened boxes lining the aisles as they await the availability of a store clerk to get to the rather critical job of moving the merchandise from the box to the shelf where a customer can actually purchase it. But when there are insufficient numbers of store clerks available—due to Wal-Mart’s commitment to using temporary workers or busting its full-time employees down to part-time so as to avoid worker benefit—the products Wal-Mart sells stay off the shelves and unavailable for customers to purchase.

Of course, Wal-Mart’s efforts to keep its workers from earning a decent living while achieving health care benefits has created some full-time work for some.

The company now hires people to work with its employees to help them sign up for Medicaid, the government program that makes healthcare available to Americans who neither get coverage at work or are able to afford it without public assistance.

What that means is that you and I are subsidizing Wal-Mart’s poor treatment of its employees as we pay for their workers health care coverage with our tax dollars and all so Wal-Mart can feather and mask its sinking profits by allowing you and I to pay for their responsibilities, whether we shop at Wal-Mart or not.

The moral to the story?

Wal-Mart is finally learning what all American businesses who seek to avoid their health care responsibilities to employees will soon learn.

It may be a clever enough dodge to cut employees below the 30 hours per week in order to avoid the expectations of Obamacare, but the move comes at a substantial price to be paid in lost revenue and profits. Given that the entire point of business is to show a profit, it is only a matter of time before employers learn what Home Depot learned some years ago and what Wal-Mart is slowly beginning to figure out—you get what you pay for.

Cut back on employees and you will, eventually, cut back on your profits as the savings a business creates by cutting worker hours leads to greatly decreased sales as customer satisfaction disappears.

While there are no shortage of Americans who enjoy deriding the Affordable Care Act as a ‘job killer’, what will soon emerge—and sooner than you may think—is an understanding that the losses experienced by businesses that cut worker hours will far exceed whatever is gained by avoiding giving employees the healthcare benefits their families so badly require.

Don’t believe it?

Just ask Wal-Mart.

 

By: Rick Ungar, Op-Ed Contributor, Forbes, September 25, 2013

September 26, 2013 - Posted by | Affordable Care Act | , , , , , , , ,

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