POLICY: Wal-Mart Seeks Unbiased Research — and Gets It

OK. This is a little bizarre. Wal-Mart is setting up a political war-room now that its opponents have a new documentary to rally around which captures several of its former managers on film discussing how criminal acts (albeit minor ones) were a part of its everyday management philosophy. Of course its impact on the health care system has been much discussed here on THCB, with the prevailing note being that despite the problems in employer based health care not being of its own making, Wal-Mart has never used its political influence to push for an improvement in the system, and has just dumped its lower paid workers onto Medicaid.

Now it’s sponsored an independent series of studies about its impact and some of the results are not too surprisingly not favorable. Of course, this might be the hubris you’d expect from the Bentonville Kool-aid drinkers who really believe that they are helping America, just like the people at Enron did. There is more to it than that and they’ve got some numbers to allegedly show that low prices justify lower wages–although I don’t think that the hi-tech industry works like that and prices there lower much more rapidly.

But the most interesting number quoted is that "states on average spent $898 for each Wal-Mart worker in Medicaid expenses." According to Reuters Wal-Mart has 1.7 m employees and in the NY Times article last month said it had 1.33m in the US. So if (and I may be mis-reading this) the 1.33m cost an average $900 each, that’s $1.2 billion just to subsidize Wal-Mart employees for Medicaid alone. Not exactly a huge share of the Medicaid budget, but not a negligible share of the Medicaid budget for acute care.

The average child in Medicaid costs $1,700 a year, while the average adult costs $1,900, and there are roughly 25 million kids and 12 million adults on Medicaid. So their care works out to $42bn + $23 bn = $65bn. So some 1.5% of that goes on Wal-Mart employees. That’s not nothing, given that a) they could easily afford it, and b) Wal-Mart’s presence pushes its competitors to force more of their employees onto Medi-caid or into uninsurance too.

So while Wal-Mart is pushing American retailers into looking more like it, it’s also slowly helping focus the nation on the issue of how to reform a health insurance system that was designed for a GM 1950’s world.

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4 replies »

  1. Wal-Mart is frighteningly powerful. It’s scary how uneducated consumers shop there without realizing what they’re supporting. Americans demand great benefits in their own jobs and great work environments. Yet so many shop at Wal-Mart, where they’re not willing to pay the higher prices it would cost to give the store and manufacturing employees (working for low wages in other countries) the same benefits and work environment. It’s absurd how Americans and American companies take advantage of people from poorer countries. To say we’re giving them money and jobs they wouldn’t have otherwise had is ridiculous. We’re taking jobs with better benefits in the US away and replacing them with jobs with poorer benefits in other countries.
    The problem is people don’t see the negative effects directly, they only see immediate lower prices for what they’re buying.

  2. If you’re earning $9000/yr. as a grocery checker in a rural area, though, the dirt cheap is all you can afford.
    Ps. My father really did earn $9000/yr, so I know what of I speak. There’s a reason all the stores in rural areas have names like “The General Dollar Store”, “The Ten Cent Store”, “The Family Dollar”, etc. And it’s not because people like just wearing polyester slacks and plastic flip-flops as a fashion statement, either.

  3. I refuse to shop at Walmart for even a few of the reasons listed in this post. Paying $1 or $2 extra for certain things doesn’t bother me.