“Really, Really Free Enterprise”: California To Wal-Mart, No More Taxpayer Subsidized Profits For You
For years, Wal-Mart—and other large retail operators—have been piling up huge profits by controlling their labor costs through paying employees sub-poverty level wages. As a result, it has long been left to the taxpayer to provide healthcare and other subsidized benefits to the many Wal-Mart employees who are dependent on Medicaid, food stamp programs and subsidized housing in order to keep their families from going under.
With Medicaid eligibility about to be expanded in some 30 states, as a result of the Affordable Care Act, Wal-Mart has responded by cutting employee hours—and thereby wages—even further in order to push more of their workers into state Medicaid programs and increase Wal-Mart profits. Good news for Wal-Mart shareholders and senior management earning the big bucks—not so good for the taxpayers who will now be expected to contribute even larger amounts of money to subsidize Wal-Mart’s burgeoning profits.
But, at long last and in a move gaining popularity around the nation, the State of California is attempting to say ‘enough’ to Wal-Mart and the other large retailers who are looking to the taxpayers to take on the responsibility for the company’s employees—a responsibility Wal-Mart has long refused to accept.
It’s about time.
Legislation is now making its way through the California legislature—with the support of consumer groups, unions and, interestingly, physicians—that would levy a fine of up to $6,000 on employers like Wal-Mart for every full-time employee that ends up on the state’s Medi-Cal program—the California incarnation of Medicaid.
The amount of the fine is no coincidence.
A report released last week by the Democratic staff of the U.S. House Committee on Education and the Workforce, estimates that the cost of Wal-Mart’s failure to adequately pay its employees could total about $5,815 per employee each and every year of employment.
“Accurate and timely data on Wal-Mart’s wage and employment practices is not always readily available. However, occasional releases of demographic data from public assistance programs can provide useful windows into the scope of taxpayer subsidization of Wal-Mart. After analyzing data released by Wisconsin’s Medicaid program, the Democratic staff of the U.S. House Committee on Education and the Workforce estimates that a single 300- person Wal-Mart Supercenter store in Wisconsin likely costs taxpayers at least $904,542 per year and could cost taxpayers up to $1,744,590 per year – about $5,815 per employee.”
Says Sonya Schwartz, program director at the National Academy for State Academy for State Health Policy, “There are concerns that employers will be gaming this new system and taking less and less responsibility for their workers. This may make employers think twice.”
Of course, the California Retailers Association, where Wal-Mart Stores, Inc. is listed as a board member company, is not quite so pleased with the legislation. According to Bill Dombrowski, chief executive of the Association, ”It’s one of the worst job-killer bills I’ve seen in my 20 years in Sacramento, and that says a lot. The unions are fixated on Wal-Mart, but that’s not the issue here. It’s a monster project to implement the Affordable Care Act, and having this thrown on top is not helpful.”
One wonders if we will ever see the day when Americans will stop falling for the hostage-taking narrative consistently put forward by those whose job it is to defend the indefensible. At the first suggestion of finally putting a chink in Wal-Mart’s policy of profiting at the taxpayers’ expense—a practice that should have every American thinking about what passes for free-enterprise in the United States today—the response is to always threaten to take away jobs if we dare to challenge their business practices, even if those practices cost us billions.
While the unions may, indeed, be “fixated” on Wal-Mart, it is hard to miss the fact that Mr. Dombrowski did not even attempt to explain why it is acceptable policy for taxpayers to continue subsidizing Wal-Mart’s ever expanding profits. Nor does Dombrowski attempt to deal with the fact that, according to a Los Angeles Times report, an additional 130,000 people working for large and profitable firms will go onto California’s Medi-Cal rolls over the next few years, bringing the total number of Medicaid recipients in the Golden State who are employed by large companies to just under 400,000 people.
Note that these are not people who rely on ‘government handouts’ because they do not wish to work. Rather, these are people who show up to do their jobs for as many hours a week as their employer will permit them to work.
Interestingly, the federal law imposes a penalty on companies with more than 50 employees who do not provide health insurance to an employee working over 30 hours per week. The feds also penalize a company when its workers buy their own healthcare coverage on an exchange and receives a government subsidy to do so.
However, there is no penalty imposed by the federal government on a company when a company’s workers become eligible for Medicaid.
Think that this ‘oversight’ had anything to do with Wal-Mart’s early support of the Affordable Care Act?
The result is that companies like Wal-Mart are actually encouraged by the federal policy to pay their workers even smaller sums without providing healthcare benefits so that even more of their workers will qualify for Medicaid.
What I always find fascinating is that the very people who are so critical of the subsidies provided by Obamacare to lower-earning Americans (how many times have these people reminded us that “someone is paying for these subsidies”) never seem to have much of a problem with the subsidies we pay to support Wal-Mart’s massive profits by picking up the healthcare tab for so many of the company’s employees. But then, those who support taxpayers doing the job that Wal-Mart should be doing tend to be the same folks who are quick to suggest that nobody is forcing workers to take a job at Wal-Mart. Apparently, these people are operating under the opinion that a Wal-Mart worker earning below the federal poverty level wouldn’t readily move to a better paying job if such a job were available to that worker.
The good news is that the proposed California legislation has a very good chance of becoming law. While the proposed legislation will require a 2/3 vote in both the Senate and Assembly, Democrats currently have supermajorities in both legislative bodies in the state.
Let’s hope that California gets this done and other states are quick to follow California’s lead. This is legislative action whose time is long overdue.
By: Rick Ungar, Op-Ed Contributor, Forbes, June 3, 2013
The American economy is still, by most measures, deeply depressed. But corporate profits are at a record high. How is that possible? It’s simple: profits have surged as a share of national income, while wages and other labor compensation are down. The pie isn’t growing the way it should — but capital is doing fine by grabbing an ever-larger slice, at labor’s expense.
Wait — are we really back to talking about capital versus labor? Isn’t that an old-fashioned, almost Marxist sort of discussion, out of date in our modern information economy? Well, that’s what many people thought; for the past generation discussions of inequality have focused overwhelmingly not on capital versus labor but on distributional issues between workers, either on the gap between more- and less-educated workers or on the soaring incomes of a handful of superstars in finance and other fields. But that may be yesterday’s story.
More specifically, while it’s true that the finance guys are still making out like bandits — in part because, as we now know, some of them actually are bandits — the wage gap between workers with a college education and those without, which grew a lot in the 1980s and early 1990s, hasn’t changed much since then. Indeed, recent college graduates had stagnant incomes even before the financial crisis struck. Increasingly, profits have been rising at the expense of workers in general, including workers with the skills that were supposed to lead to success in today’s economy.
Why is this happening? As best as I can tell, there are two plausible explanations, both of which could be true to some extent. One is that technology has taken a turn that places labor at a disadvantage; the other is that we’re looking at the effects of a sharp increase in monopoly power. Think of these two stories as emphasizing robots on one side, robber barons on the other.
About the robots: there’s no question that in some high-profile industries, technology is displacing workers of all, or almost all, kinds. For example, one of the reasons some high-technology manufacturing has lately been moving back to the United States is that these days the most valuable piece of a computer, the motherboard, is basically made by robots, so cheap Asian labor is no longer a reason to produce them abroad.
In a recent book, “Race Against the Machine,” M.I.T.’s Erik Brynjolfsson and Andrew McAfee argue that similar stories are playing out in many fields, including services like translation and legal research. What’s striking about their examples is that many of the jobs being displaced are high-skill and high-wage; the downside of technology isn’t limited to menial workers.
Still, can innovation and progress really hurt large numbers of workers, maybe even workers in general? I often encounter assertions that this can’t happen. But the truth is that it can, and serious economists have been aware of this possibility for almost two centuries. The early-19th-century economist David Ricardo is best known for the theory of comparative advantage, which makes the case for free trade; but the same 1817 book in which he presented that theory also included a chapter on how the new, capital-intensive technologies of the Industrial Revolution could actually make workers worse off, at least for a while — which modern scholarship suggests may indeed have happened for several decades.
What about robber barons? We don’t talk much about monopoly power these days; antitrust enforcement largely collapsed during the Reagan years and has never really recovered. Yet Barry Lynn and Phillip Longman of the New America Foundation argue, persuasively in my view, that increasing business concentration could be an important factor in stagnating demand for labor, as corporations use their growing monopoly power to raise prices without passing the gains on to their employees.
I don’t know how much of the devaluation of labor either technology or monopoly explains, in part because there has been so little discussion of what’s going on. I think it’s fair to say that the shift of income from labor to capital has not yet made it into our national discourse.
Yet that shift is happening — and it has major implications. For example, there is a big, lavishly financed push to reduce corporate tax rates; is this really what we want to be doing at a time when profits are surging at workers’ expense? Or what about the push to reduce or eliminate inheritance taxes; if we’re moving back to a world in which financial capital, not skill or education, determines income, do we really want to make it even easier to inherit wealth?
As I said, this is a discussion that has barely begun — but it’s time to get started, before the robots and the robber barons turn our society into something unrecognizable.
By: Paul Krugman, Op-Ed Columnist, The New York Times, December 9, 2012
The nation’s largest private employer, Walmart, has announced that beginning in 2013 it will begin drastically reducing the number of new hires who receive health insurance coverage, according to The Huffington Post.
However, its planned policy of not offering new employees health insurance if their hours dip below 30 a week indicates that they intend to take advantage of Obamacare’s new obligation to provide coverage for those who cannot afford it. And with several Republican governors promising to deny the funds for Medicaid expansion, the new policy could lead to a swift increase in the uninsured.
In several states, Walmart tops the list of employers whose employees seek government-funded health care and food assistance for their families, forcing taxpayers to subsidize its low prices and low wages.
Former Secretary of Labor Robert Reich points out that despite the incredible wealth of Walmart’s primary stockholders, the Walton family, its employees earn wages that may not even keep them out of poverty.
“The average Walmart employee earns $8.81 an hour. A third of Walmart’s employees work less than 28 hours per week and don’t qualify for benefits,” Reich wrote in one of his recent columns encouraging the retail giant’s employees to organize. Across the country a small percentage of Walmart’s employees walked out on Black Friday, protesting the company’s alleged retaliation against workers who speak out for better working conditions.
“Organizing makes economic sense,” Reich wrote.
In 2006, Walmart responded to criticism by greatly expanding the number of employees to whom it offered health insurance. They reduced the number receiving coverage in 2011.
“This is another example of a tremendous government subsidy to Walmart via its workers,” Nelson Lichtenstein, director of the Center for the Study of Work, Labor and Democracy at the University of California, Santa Barbara told The Huffington Post.
This change in policy will push the number of employees without benefits closer to one half.
Critics have said that Walmart provides a huge benefit to poor consumers by multiplying the value of food stamps with its low prices. But to Doug Henwood, that argument misses the central problem with the impact that Walmart has had on our economy:
And, yeah, it’s nice that Walmart has been able to provide a working class facing at best stagnant wages with lots of cheap stuff, but Walmart has itself had no small effect on dragging average wages down. It’s not just that they’ve been an inspiring business model for the rest for corporate sector, impressed by the chain’s growth and profitability. That’s led to endless rounds of outsourcing and speedup. But also by lowering the cost of reproduction of the working class, to use the old language, they’ve made it easier for employers to keep a lid on wages.
Add into the equation that taxpayers are subsidizing the costs of these wages and you have a formula for a permanent underclass underwritten by a government that can do little else than providing basic health care and sustenance.
By: Jason Sattler, The National Memo, December 3, 2012