Here's a column on Wal Mart, with a followup on their Health care plan.
Wal-Mart: Collective bargaining for the consumer
By Daniel Weintraub -- Bee Columnist - (Published December 30, 2003)
I am not a Wal-Mart shopper. Never have been. I don't think I have ever bought a thing in any of their stories, nor do I plan to any time soon. I prefer shopping at my neighborhood supermarket or, when possible, at the corner grocery. But I think the massive retail company is getting a bad rap.
We are supposed to hate Wal-Mart because the company is huge, nonunion, pays low wages and squeezes suppliers until they scream. The prospect of Wal-Mart invading the grocery business by opening 40 California superstores next year is the only thing that supermarket owners and their workers agree upon: It's bad.
But when I look at Wal-Mart I don't see a monster. I see the world's most efficient consumer-empowerment machine. Through the magic of free markets and free will, Wal-Mart does on our behalf what each of us would do on our own if we could: get the best deal on the merchandise we buy every day.
When we fix our car, hire a plumber or paint our house, we look for the best deal we can get, which we usually define as the lowest price for the quality we want. We insist that government do the same thing. It's a scandal when any bureaucrat is caught paying more than the lowest responsible bid.
What Wal-Mart does is take millions of consumers, bring them together under one umbrella and use their collective bargaining power to get the best price on the quality they demand.
Suppose you were shopping for a new lawnmower and went to your nearest hardware store to take a look at the selection. Say a buddy went with you. You see a mower you like for $299. Your buddy kind of likes it, too. So you approach the store owner with a proposal. If you buy two, will he sell them to you for $275 each? If the owner agrees, do you feel as if you have exploited him? Of course not. You saved a few bucks by using a little extra leverage to your advantage.
Some people cringe when they see Wal-Mart doing the same thing, over and over and around the world. And to be sure, there are questions about labor and environmental practices in foreign countries that bear watching. But for the most part these are transition issues. In the long run, manufacturing jobs will lead to a better life for the world's poor, just as they did for the rest of the developed world.
But what about Americans? Wal-Mart's founder, the late Sam Walton, once boasted that his company bought only goods made in the United States. Now the company he started is blamed for killing American jobs, not only by encouraging worldwide competition but also by paying its own workers half of what employees in similar stores earn.
In California, grocery workers and their bosses are bracing for the effect of Wal-Mart's coming expansion. Supermarket employees in Southern California have been on strike since Oct. 7. The three big companies that employ them -- Ralphs, Safeway and Albertsons -- say they must reduce payroll costs to compete with the coming behemoth.
The unions that represent the grocery workers, meanwhile, are lobbying local governments to ban big stores, namely Wal-Mart, that devote more than a certain amount of space to the sale of food. Several cities already have done so.
The problem with this strategy is that it focuses only on the potential ill-effects on the workers and owners affected by competition in the grocery industry. It ignores the beneficial effects that competition will bring to all other Californians.
And those benefits could be enormous.
A recent independent survey determined that Wal-Mart's grocery prices are 17 percent to 39 percent lower than the company's competitors. And California's supermarket industry was a $46 billion enterprise in 2002. That means the state's residents stand to gain between $8 billion and $18 billion if Wal-Mart enters the fray and drives down prices here as it has every place else the company has been allowed to compete.
Those savings would go disproportionately to middle-class and low-income Californians, for whom supermarket purchases soak up a relatively larger share of family income. And those people will then spend those extra dollars on their other needs, creating jobs in other industries that did not exist before.
So for the sake of 250,000 grocery store clerks and baggers, and their employers, the other 35 million people in this state are asked to agree to pay billions of dollars more than they ought to for the necessities of life, and to deprive themselves of choices that could make their lives better. You don't have to be a Wal-Mart shopper to see that this is not a bargain that makes sense.
Change is not always easy. Its benefits often flow to the many in small portions, while the hurt is felt by a few in a big way. Even so, we shouldn't let the relative handful of people who might be harmed by competition from Wal-Mart deprive the rest of the state of the benefits the company's arrival can bring.
California Insider
A Weblog by
Sacramento Bee Columnist Daniel Weintraub
December 31, 2003
Health care for Wal-Martians
My column Tuesday on Wal-Mart brought a ton of reaction – about evenly divided between criticism and praise. It was clear that one thing driving the critics is their impression that Wal-Mart doesn’t offer health benefits to its employees. This is not true. The company does offer benefits, and it says that about half of its workers subscribe to them, which is about average for retail operations in America.
According to a recent article on this topic in the Wall Street Journal, Wal-Mart has structured its health benefits to emphasize catastrophic care. While the company has relatively high deductibles – up to $1,000 for a plan that costs an employee $13 every two weeks – it also pays 100 percent of medical charges above $1,750 a year in out-of-pocket expenses. And, according to this article, Wal-Mart has no lifetime caps on its coverage, a generous benefit offered by fewer than half of the nation’s retailers. A company VP quoted in the piece says Wal-Mart typically covers medical bills exceeding $100,000 for at least 800 employees a year, and 20,000 cases cost the firm more than $10,000 each.
Wal-Mart has paid for more than 300 organ transplants in the past five years, each costing more than $1 million. Is this the kind of first-dollar coverage for everything that some would like to see, and which is the object of so much of the labor angst in the Southern California grocery industry these days? No. But neither is it evidence that Wal-Mart is some kind of evil corporate rapist. The idea of health insurance, after all, is to prevent unexpected medical bills from bankrupting and devastating an individual. In this regard Wal-Mart’s coverage might be on the cutting edge. While it leaves individual workers responsible for routine expenses, Wal-Mart’s coverage steps in when things get serious and then covers everything, forever. Doesn’t sound so bad.
Posted by dweintraub at 10:12 AM
Ho-hum
Sheila Kuehl may not think Arnold Schwarzenegger has anything interesting to say about the state of the state, but apparently, a lot of other people do. Kuehl, a state senator from Santa Monica, told me in frustration on election night that she might boycott Schwarzenegger's first speech to the Legislature because she couldn't imagine what he might be able to tell her of note about the condition of California. Now the governor's office and Assembly staffers are busy preparing for what will probably be the largest crush of media for such a speech in California history. Credentials for the Assembly floor Tuesday night will be rationed, with priority given to members of the Capitol press corps.
The California Broadcasters Assn., meanwhile, plans to establish an outdoor media center on the north side of the Capitol. And the Capitol's press conference room on the first floor will be converted to a filing center for print reporters.
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