Generosity, benevolence, and picking up the burden

This story winds a little, but it begins with Mark O'Brien, a columnist for the Pensacola News Journal, who wrote last month that Pensacola should "be more than the Wal-Mart kind of town we're becoming - cheap and comfy on the surface, lots of unhappiness and hidden costs underneath."

In response, the regional Wal-Mart manager told the News Journal's executive editor Randy Hammer that, if O'Brien wasn't promptly fired (not disciplined, mind you, but fired), the retail chain would no longer sell the News Journal at their stores.

CJR Daily continues the story:

The columnist's crime? He wrote, "I like Wal-Mart prices the same as the next shopper, but there's a downside, too. Many Wal-Mart employees lack the fringe benefits and insurance that makes the difference between existence and a good quality of life. Yet, we customers pay a surcharge from a different pocket -- subsidizing health care for Wal-Mart employees who can't afford it."

O'Brien then cited a passage from Thomas Friedman's book The World is Flat, noting that more than 10,000 children of Wal-Mart employees are in a Georgia state health care program, which costs the state's taxpayers nearly $10 million a year. He also cited a New York Times report that 31 percent of the patients at a North Carolina hospital were Wal-Mart employees on Medicaid.

To his credit, Hammer told them fine--go ahead. The gesture meant little to bottom-line oriented Wal-Mart since it was only a handful of stores that carried the paper in the first place. It was more about bullying. And, indeed, Wal-Mart has now backed off of its ban on the News Journal, and its threat against O'Brien.

At least for a few days, columnist O'Brien was in the company of Jon Stewart, George Carlin, John Mellenkamp, Sheryl Crow, Nirvana, Rolling Stone, Cosmpolitan, and Vibe, all of whom have been banned from Wal-Mart at one time or another because of corporate objections to their content. But O'Brien and the News Journal didn't get the Wal-Mart treatment because they took artistic liberties; they were retaliated against for printing publicly available facts--albeit facts that Wal-Mart didn't like made public: Wal-Mart, like most of corporate America, is strategically and reflexively hostile to workers.

But I didn't come to talk about censorship today. I came to talk about the stock market, health care, and labor.

Remember that NYTimes statistic O'Brien cited: 31 percent of the patients at a North Carolina hospital were Wal-Mart employees on Medicaid. Wal-Mart's on my mind today because of a story published in last Sunday's NYTimes Business section and picked up by several blogs, with the amusing title "How Costco Became the Anti-Wal-Mart."

Some Wall Street analysts assert that [Costco CEO] Mr. [Jim] Sinegal is overly generous not only to Costco's customers but to its workers as well.

Costco's average pay, for example, is $17 an hour, 42 percent higher than its fiercest rival, Sam's Club. And Costco's health plan makes those at many other retailers look Scroogish. One analyst, Bill Dreher of Deutsche Bank, complained last year that at Costco "it's better to be an employee or a customer than a shareholder."

Mr. Sinegal begs to differ. He rejects Wall Street's assumption that to succeed in discount retailing, companies must pay poorly and skimp on benefits, or must ratchet up prices to meet Wall Street's profit demands.

[ . . . ] Emme Kozloff, an analyst at Sanford C. Bernstein & Company, faulted Mr. Sinegal as being too generous to employees, noting that when analysts complained that Costco's workers were paying just 4 percent toward their health costs, he raised that percentage only to 8 percent, when the retail average is 25 percent.

"He has been too benevolent," she said. "He's right that a happy employee is a productive long-term employee, but he could force employees to pick up a little more of the burden."

Mr. Sinegal says he pays attention to analysts' advice because it enforces a healthy discipline, but he has largely shunned Wall Street pressure to be less generous to his workers.

Let's review:

"Too generous to employees."
"Too benevolent."
"Force employees to pick up a little more of the burden."

And they're talking about Costco, the fifth largest retailer in the country, with 2004 net profits of $882 billion million (see below), not some rutabaga commune in Humboldt County CA.

"Too generous to employees." "Too benevolent." Remember those words, my friends, the next time you hear Bush tell you your Social Security benefits are safer if they're administrated by Wall Street. Or the next time he tells you that "free market" solutions to America's health care woes are the best course. If you earn your living from wages and salary, rather than capital gains or inherited money, Wall Street is not your buddy on these issues.

"Too generous to employees?" "Too benevolent?" Here are the basic numbers on Costco and Wal-Mart, rounded up by the Labor Research Association:

Net Profits (2004)
Wal-Mart: $10.5 billion
Costco: $882 million

CEO Salary + Bonus (2004)
Wal-Mart: $5.3 million
Costco: $350,000

Average Pay
Wal-Mart: $9.68/hour
Costco: $16/hour

Health Plan Costs
Wal-Mart: Associates pay 34% of premiums + deductible ($350-$1,000)
Costco: Comprehensive; employees pay 5-8% of premiums

Employees Covered By Company Health Insurance
Wal-Mart: 48%
Costco: 82%

Employee Turnover (estimate)
Wal-Mart: 50%
Costco: 24%

Ironically enough, what this all suggests that one of the voices leading the charge for health care reform in the US could--and should--be the corporations.

Paul Krugman reports a painfully appropriate story today:

Last month Toyota decided to put the new plant, which will produce RAV4 mini-S.U.V.'s, in Ontario. Explaining why it passed up financial incentives to choose a U.S. location, the company cited the quality of Ontario's work force.

There's some bitter irony here for Alabama's governor. Just two years ago voters overwhelmingly rejected his plea for an increase in the state's rock-bottom taxes on the affluent, so that he could afford to improve the state's low-quality education system. Opponents of the tax hike convinced voters that it would cost the state jobs.

[ . . .] But education is only one reason Toyota chose Ontario. Canada's other big selling point is its national health insurance system, which saves auto manufacturers large sums in benefit payments compared with their costs in the United States.

You might be tempted to say that Canadian taxpayers are, in effect, subsidizing Toyota's move by paying for health coverage. But that's not right, even aside from the fact that Canada's health care system has far lower costs per person than the American system, with its huge administrative expenses. In fact, U.S. taxpayers, not Canadians, will be hurt by the northward movement of auto jobs.

Doctors, insurance companies, and the pharmaceutical industry have far too much at stake in perpetuating the current inefficient US health care system to support reform. Next to workers themselves, it's the employers who have the strongest incentive to push for an efficient, publicly funded system. And, since real campaign reform doesn't seem to be happening any time soon, it's also the corporations who have sufficient clout to put the issue on the political agenda.

As a resident and taxpayer in Oregon, where, three weeks into the new budget biennium, the no-tax fetishists (Republicans and Democrats) in the state legislature have finally put together a compromise budget with a mutually acceptable level of funding cuts for education and transportation infrastructure, I'm getting fed up. Aren't you?