Friday, March 03, 2006

Too much cash money, no benefits, welcome to Wal-mart!

The New York Times reports on the recent controversy surrounding Wal-mart and the miserable healthcare benefits it offers employees.  According to an internal memo, that has since been posted on the web, the average Wal-mart employee makes only $20,000 per year, with 8% of their income going to health care costs.  In fact 46% of employees' children are either uninsured or on state Medicaid.  M. Susan Chambers, the Wal-mart VP who wrote the memo, called for Wal-mart's board to shape healthcare coverage as a national issue--the implication clearly being that doing so would keep Wal-mart from having to improve or expand such benefits.  
In fact, over 20 states now have bills pending that would require Wal-mart to offer better healthcare benefits to its employees.  In response to such sentiments, the CEO of Wal-mart, H. Lee Scott Jr., gave a speech to the National Governors' Association, arguing that such legislation is not the solution.  While such legislation is unlikely to pass in most states, Wal-mart's response shows that it takes such proposals as a serious threat to its current "benefit" structure.  Apparently unfazed by Mr. H. Lee Scott Jr.'s speech, the governor of Washington, Christine Gregoire, said 20% of Wal-mart employees receive state aid for healthcare and its a problem she expects Wal-mart to solve. 
While I'm a fan of the free market, I'm not a fan of Wal-mart.  Wal-mart is known for being an extremely efficient organization and that is partly what allows it to sell things so cheaply and effectively.  But it also is a very profitable company and could easily afford to invest in its employees by giving them better healthcare benefits and wages.  In fact, Wal-mart recently reported that fourth-quarter profits rose  13.4% and it raised its dividend by 11.7%, hardly signs of a cash-poor company.   
Don't get me wrong - investing in employee benefits is an expensive proposition, but when you're doing as well as Wal-mart is doing, does it really hurt to share the wealth with your own workers?  Offering meaningful healthcare to their employees may not have many benefits to Wal-mart's bottom line in the short term.  But, if it considers the long-term benefits, a healthier workforce ensures a more productive workforce and, more than that, may have intangible benefits like increased employee loyalty and satisfaction.  It irks me to see big businesses like Wal-mart be so stingy towards its own workers and so extravagant in terms of the benefits and pay of top executives, a trend that has become all too common on Wall Street...

No comments: