“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
Bangladesh is half a world away from Bentonville, the Arkansas city where Wal-Mart is headquartered. This week, Wal-Mart surely wishes it were farther away than that.
Over the weekend, a horrific fire swept through a Bangladesh clothing factory, killing more than 100 workers, many of whose bodies were burnt so badly that they could not be identified. In its gruesome particulars — locked doors, no emergency exits, workers leaping to their deaths — the blaze seems a ghastly centennial reenactment of the Triangle Shirtwaist fire of 1911, when 146 workers similarly jumped to their deaths or were incinerated after they found the exit doors were locked.
The signal difference between the two fires is location. The Triangle building was located directly off New York’s Washington Square. Thousands watched the appalling spectacle of young workers leaping to the sidewalks 10 stories down; reporters and photographers were quickly on the scene. It’s not likely, however, that the Bangladesh disaster was witnessed by anyone from either the United States or Europe — the two markets for which the clothes made inside that factory were destined. For that, at least, Wal-Mart should consider itself fortunate.
The Bangladesh factory supplied clothing to a range of retailers, and officials who have toured the site said they found clothing with a Faded Glory label — a Wal-Mart brand. Wal-Mart says that the factory, which had received at least one bad report for its fire-safety provisions, was no longer authorized to make its clothing but one of the suppliers in the company’s very long supply chain had subcontracted the work there “in direct violation of our policies.”
If this were an isolated incident of Wal-Mart denying responsibility for the conditions under which the people who make and move its products labor, then the Bangladeshi disaster wouldn’t reflect quite so badly on the company. But the very essence of the Wal-Mart system is to employ thousands upon thousands of workers through contractors and subcontractors and sub-subcontractors, who are compelled by Wal-Mart’s market power and its demand for low prices to cut corners and skimp on safety. And because Wal-Mart isn’t the employer of record for these workers, the company can disavow responsibility for their conditions of work.
This system isn’t reserved just for workers in faraway lands: Tens of thousands of American workers labor under similar arrangements. Many are employed at little more than the minimum wage in the massive warehouses in the inland exurbs of Los Angeles, where Wal-Mart’s imports from Asia are trucked from the city’s harbor to be sorted and packaged and put on the trucks and trains that take them to Wal-Mart stores for a thousand miles around.
The warehouses are run by logistics companies with which Wal-Mart contracts, and most of the workers are employed by some of the 200-plus temporary employment companies that have sprung up in the area — even though many of the workers have worked in the same warehouses for close to a decade. Last year, the California Department of Industrial Relations, suspecting that many of these workers were being cheated, charged one logistics company that runs a warehouse for Wal-Mart with failing to provide its employees with pay stubs and other information on their pay rates. Wal-Mart itself was not cited. That’s the beauty of its chain of deniability.
A small band of these warehouse workers has been demonstrating for the past couple of months to bring attention to the bizarrely contingent nature of their employment and the abuses that flow from it. Their numbers were augmented Friday by actual Wal-Mart employees in stores around the nation, calling attention to the everyday low wages and absence of benefits that the vast majority of the company’s 1.4 million U.S. employees receive.
Other discount retailers — notably Costco and Trader Joe’s — pay their workers far more, train them more extensively, have much lower rates of turnover and much higher rates of sales per employee, according to a Harvard Business Review article by Zeynep Ton of the MIT Sloan School of Management. Costco is a very profitable business, but Wal-Mart maintains an even higher profit margin, which it achieves by underpaying its employees. The conservative economic blogger Megan McArdle estimates that if Wal-Mart held its profit margin down to Costco’s level, its average worker would make about $2,850 more each year — a considerable increase in a sector where workers’ earnings average less than $25,000 a year.
But Wal-Mart neither pays its own nor takes responsibility for those who make and move its wares. For America’s largest private-sector employer, the emergency exits are always open.
By: Harold Meyerson, Opinion Writer, The Washington Post, November 27, 2012
Iowa Gov. Terry Branstad (R) has a curious justification for vetoing a tax break last week for 240,000 Iowa families making $45,000 or less a year: the plan didn’t also include a tax break for corporations. Members of both partiesin the Iowa House and Senate agreed to increase the state’s Earned Income Tax Credit (EITC), which reduces the amount of income taxes lower-income families owe:
The change would have saved Iowa families an estimated $28.5 million in taxes over two years.
Branstad vetoed that part of the bill writing that it is his desire to approach tax policy in a more comprehensive and holistic manner. [...]
Branstad additionally campaigned last year to slash Iowa’s corporate income tax rate by 50 percent, which he said would attract businesses while costing the state about $200 million a year in lost revenue. That proposal also failed.
Ironically, given Branstad’s fondness for expensive corporate tax breaks, he said he was concerned about the cost of the measure, estimated at $28.5 million a year. Branstad explained that he would only support “an overall tax reduction package that both fits within our sound budgeting principles while reducing those taxes that are impeding our state’s ability to compete for new business and jobs.”
Tim Albrecht, a spokesman for the governor, reiterated that Branstad would have supported the tax break if it had been part of a “larger effort” that included lower taxes for corporations. But since this tax break was only for poor families, Branstad suddenly abandoned his “strong support for tax relief.”
Sen. Joe Bolkcom (D), the chairman of the Senate Ways and Means Committee, points out that the EITC “is the most effective antipoverty program for working families.” Bolkcom said of Branstad’s veto, “He has again shown that he will only consider tax cuts that benefit Iowa’s wealthiest citizens and corporations.” The tax break for working families would have translated into more money for people to spend in Iowa’s economy, but Branstad apparently prefers “huge, unaffordable tax breaks for Wal-Mart and other wealthy out-of-state corporations.”
Branstad has the authority to veto individual items in spending measures. He also effectively shut down dozens of unemployment offices by vetoing language that would have prohibited the Iowa Workforce Development from closing 37 unemployment field offices across the state.
By: Marie Diamond, Think Progress, August 3, 2011
If you’re a “job creator,” raise your hand. It would be nice to know who you are, exactly.
Republicans negotiating with President Obama over a fix for the nation’s debt problems have been rolling out the heavy buzzwords lately, and there must have been a fresh memo about the sonorous ring of “job creators.” House Speaker John Boehner repeatedly decries tax hikes on job creators, with congressional colleagues such as Paul Ryan and Jeb Hensarling forming a job-creators chorus behind him. House Republicans recently published a “Plan for America’s Job Creators” (but not for everybody else, presumably) and if you’re an aggrieved job creator, you can let House Majority Leader Eric Cantor know what’s bugging you by filling out a brief form at
The trouble is, job creators are an endangered species these days. The biggest problem in the U.S. economy, in fact, is a shortage of job creators to reward and protect. Companies are barely hiring, and there are about 7 million fewer jobs now than there were at the end of 2007, when the Great Recession began. Part of the Republicans’ plan is to lower taxes, streamline regulation, open more trade and take other steps that will stimulate job creation. But we’ve already tried some of that, including several rounds of tax cuts since 2008. Most job creators are still hiding.
Big companies employ a lot of Americans, but over the last few years they’ve been better at job destruction than job creation. Between 2007 and 2010, companies with more than 1,000 employees shed about 2.6 million jobs, according to the latest data from the Labor Department. Many big companies have rebounded sharply from the recession, with impressive profits and a lot of cash on hand. But even some of the most successful big companies aren’t doing much job creation–not in the United States, anyway. Here are a few examples:
General Electric, which is run by the same Jeffrey Immelt who chairs President Obama’s Council on Jobs and Competitiveness, axed 32,000 jobs worldwide between 2007 and 2010, according to information from GE’s annual reports. About 22,000 of those lost jobs were in the United States. No job creation there, even though GE earned about $12 billion in profits in 2010.
Exxon Mobil has added about 2,800 jobs worldwide since 2007, but the giant oil firm doesn’t break out how many of those new hires work in the United States. Since Exxon earns nearly 70 percent of its revenue from overseas, it’s a good bet that’s where most of the new jobs are, too.
Wal-Mart has added about 40,000 jobs in the United States since 2007, largely because the discount retailer has been a beneficiary of pinched consumers desperate to save money. But it has added about 150,000 jobs overseas during the same time–nearly four times the U.S. tally. Still, Wal-Mart seems to be one company that can legitimately call itself a job creator.
IBM has added about 40,000 employees since 2007, but like Exxon, it doesn’t say where. About 65 percent of IBM’s revenue comes from abroad, and that’s where almost all of its revenue growth has come from since 2007. IBM’s U.S. business is actually down from 2007 levels, so it’s possible that most or all of IBM’s new hires have been overseas.
Big companies, in fact, aren’t considered a big source of new jobs. While they generate a lot of profits, they also tend to be mature enterprises more likely to swallow other companies and consolidate market share, which tends to eliminate jobs, not create them. “It’s the job of big firms to shed jobs,” says Carl Schramm, CEO of the Kauffmann Foundation, which promotes entrepreneurship. “Big firms want to lower costs, which means lowering labor costs.”
Young firms, Schramm says, account for virtually all net job creation in the U.S. economy over the last 30 years. That’s because startups that survive their first couple of years tend to be vibrant, fast-growing companies that create new industries and hire a lot of new workers. Think Microsoft and Oracle in the 1980s, and Amazon, eBay, and Google in the 1990s. Today, new technology-based firms like Facebook, Twitter, Groupon, Zynga, and LinkedIn represent one of the fastest-growing sectors of the U.S. economy. However, they’re the last companies that need any kind of tax relief–and they’re not about to ask for special treatment from Washington, either. They became transformative companies without Washington’s help, and they’d like to keep it that way.
Politicians routinely extol the virtues of “small business,” but that’s not really where the job creators are, either. Conventional small businesses–dry cleaners, nail salons, delicatessens, independent professionals like lawyers and doctors–tend to be important pillars of their communities, but they also come and go without generating a lot of new jobs, on balance. During the third quarter of 2010 (the most recent quarter for which there’s data), firms with fewer than 20 employees eliminated 34,000 jobs, according to the Labor Department. The biggest gains were among firms with 500 to 999 employees, which created 37,000 jobs.
So if Republicans want to modify the tax code to reward and encourage job creators, they need to come up with a scheme that offers the lowest tax rates to fast-growing startups, some medium-sized firms, and a few select multinationals. Of course, they might prefer to lower taxes on everybody who could be a job creator–because that includes almost everybody. If you ever spend money, that makes you a job creator, in the most expansive sense of the phrase, since somebody gets paid to provide whatever you buy. But then we’d have to figure out whether to reward American consumers for helping create jobs in China, Japan, Sri Lanka, or wherever the imported goods they purchase come from, or to reward people who spend money that helps create American jobs. So if you buy a Lexus made in Japan or Gucci loafers made in Italy, you’re not really a creator of American jobs and you shouldn’t be eligible for favorable tax treatement. But if you have your kitchen remodeled by a local contractor or go to a chiropractor for back pain, you qualify. It’s not so easy being a job creator. Or locating one.
By: Rick Newman, U. S. News and World Report, July 13, 2011
As Mitt Romney enters the Republican presidential race this week, there will be plenty of attention on his shifting political views. But Romney’s changing positions are not just the tragicomic tale of a man so desperate for the presidency he’ll say anything to get there: they’re also a valuable measure of what it takes to make it in the modern GOP.
Romney’s many breathtaking U-turns — on universal health care, on gay rights, on abortion rights – have been extensively documented and parsed, and have become a reliable punchline. The former governor’s willingness to adopt the position that he thinks will get him the most votes in whatever election he happens to be running in does speak to his own character. But Romney’s ease at shifting also makes him a perfect weathervane for measuring the audiences he is trying to appeal to. And the speed with which Romney has been spinning to the right is an alarming sign of the political winds within the Republican Party.
This weekend, Romney will be making an important appearance among a group that has historically mistrusted him: the Religious Right. Speaking at the annual conference of Ralph Reed’s Faith and Freedom Coalition, Romney can be expected to once again disavow his previously convenient reasonable positions on abortion rights and gay equality. But he is also likely to go a step farther.
At a similar event in 2007, as he tried to shake off his image as a socially moderate Massachusetts Republican in preparation for his first presidential run, Romney spoke at the Values Voter Summit hosted by a coalition of right-wing social issues groups. In his speech, he rattled off Religious Right catchphrases, speaking of the United States’ “Judeo-Christian heritage,” the “breakdown of the family,” and making “out-of-wedlock birth out of fashion again” and passing an anti-gay marriage amendment to “protect marriage from liberal, unelected judges.” He promised a federal “marriage amendment,” funding for vouchers for religious schools and across-the-board anti-choice policies. By earlier that year, he had impressed Ann Coulter enough that she endorsed him in a speech made famous by her use of an anti-gay slur.
At last year’s Values Voter Summit, having done full penance to the Religious Right for his previous statements in favor of gay rights and choice, Romney focused his speech on right-wing economic policies, including an odd tribute comparing Wal-Mart founder Sam Walton to the Founding Fathers. But the company he kept revealed the friends he was hoping to make. The event was sponsored in part by the Family Research Council and the American Family Association, two groups who were soon to be named “hate groups” by the SPLC for their long histories of false anti-gay rhetoric. Romney’s fellow speakers included Religious Right stalwarts Phyllis Schlafly, Tony Perkins, Planned Parenthood scam artist Lila Rose, and the AFA’s Bryan Fischer, who has gained infamy with his vicious rhetoric about gays and lesbians, Muslims, African Americans and progressives. I wrote a letter to Romney warning him about associating himself with Fischer — he didn’t respond.
The Religious Right leaders that Romney is eager to curry favor with aren’t just hostile to gays, Muslims and the social safety net — many have expressed concern or even outright hostility to Romney’s own Mormon faith. Fischer recently confronted Romney’s faith, declaring that there is “a direct contradiction between Mormon theology and the teaching of Jesus Christ.” A writer for a leading Religious Right publication declared, “If Mitt Romney believes what the Mormon Church teaches about the world and how it operates, then he is unfit to serve.” As Romney angles himself into an increasingly extreme GOP, he will have to make nice to those who insult not only his past politics but his core religious beliefs.
At the Faith and Freedom Conference this weekend, Romney will have a similar opportunity to reinforce his social conservative bona fides while tying in his newly adamant anti-gay and anti-choice positions with the Tea Party’s love of pro-corporate anti-tax talk. Ralph Reed, the resurgent mastermind behind the Christian Coalition, will perhaps be the perfect ally in his effort to paint himself as a true Tea Party candidate who wants small government for corporations and big government for individuals. Reed was, after all, partly responsible for bringing the passion of American evangelicals to the Republican anti-regulation agenda and schmoozes equally comfortably with Pat Robertson and Jack Abramoff. He is the perfect power-broker for an age when GOP politicians are supposed to oppose universal health care while supporting IRS involvement in abortions – the niche that Romney is trying to carefully fit himself into.
Romney will try to take advantage of the GOP base’s newfound love of tax breaks for the rich, while continuing to pretend that he never supported choice and gay rights and reasonable environmental and health policies. If he can get away with it, he’ll be the perfect candidate for today’s ultraconservative GOP. But either way, he’s bound to become a powerful symbol of just how far to the Right you have to go to make it in today’s Republican Party.
By: Michael B. Keegan, President, People For The American Way: Posted June 3, 2011 in The Huffington Post.