Defending a Vilified Wal-Mart

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The New York Sun

Who is driving the ‘Anti-Wal-Mart’ campaign?

Wal-Mart has recently been named by Black Enterprise magazine as one of the country’s top companies for diversity. The firm was also celebrated this year by Diversity Inc., Asian Enterprise Magazine, the National Association of Women, Black MBA Magazine, Careers & The Disabled Magazine and by Hispanic Magazine for similar accomplishments.

This is the company that Democrats are campaigning against?

Wal-Mart employs 1.2 million Americans, is one of the most successful companies in the country’s history, has by itself lowered the cost of living for all Americans, has inspired competitors to do the same, has improved the efficiency of American retailing and manufacturing at a time that most industries were reeling from intense foreign competition, and is currently pushing an extensive array of environmental initiatives.

This is the company that Democrats are campaigning against?

For fiscal 2006, ending in January of this year, the company recorded another year of strong income and revenue growth, and created 125,000 new jobs in America. In a store that opened near Chicago, Wal-Mart received 25,000 applications for 325 job openings.

This is the company that Democrats are campaigning against?

What is behind all the furor, and what exactly are Democratic candidates hoping to gain by jumping on the anti-Wal-Mart bandwagon? It’s about unions, or the lack thereof, in Wal-Mart’s employee ranks. A review of the major anti-Wal-Mart organizations campaigning against the company reveals that they are all union-funded.

For example, the group known as Wal-Mart Watch is backed by the Service Employees International Union, and its board is headed by Andrew Stern, the union head. Wake Up Wal-Mart is headed by Paul Blank, who last managed the Howard Dean campaign; his group is funded by the Food & Commercial Workers Union. And so it goes.

Not only are the unions understandably frustrated that they have been so ineffective in breaking Wal-Mart’s ranks, they must also be tormented by the company’s success. As the United States’ economy tilts in favor of service enterprises from manufacturing, the ability of the unions to attract members has diminished. Logistically, if for no other reason, it must be harder to round up workers spread out all over the map in thousands of stores than those lumped all together in a factory.

The numbers are bleak for union organizers. According to the U.S.Department of Labor, 12.5% of the U.S. workforce belonged to unions in 2005, down from a high of 21% in 1983. In private businesses, the total is only 7.8%. Responding to the decline, the SEIU was among other groups exiting the AFL-CIO a year ago, led by Mr. Stern. It is no wonder that he is pressing his anti-Wal-Mart agenda; he needs to prove to his membership that life is better outside the mothership.

Wal-Mart is not stupid, nor are they immune to the intensely vitriolic campaign being waged against them. For starters, the attacks have taken a toll on the stock price, which over the past five years has increased by only 3%, vastly underperforming the 85% rise in the S&P 500. Management is, however, new to the spin game, as shown by the recent disaster with Andrew Young. After all, this is a company that Fortune named the most admired company in the country as recently as 2003. It’s probably a little hard for company executives to adjust to being among the most vilified companies in the country.

But they are. In a recent interview with Charlie Rose, Wal-Mart CEO Lee Scott talked about some of the new initiatives undertaken by the company to address public concerns. The number one issue, according to Mr. Scott, is health care coverage provided to WMT employees. Critics complain that Wal-Mart employees pay a greater share of their health care costs than the workers at other comparable stores, and they have to wait longer for coverage.

The company has recently responded to such complaints by changing eligibility requirements and raising benefits spending. Health care spending increased 19% per year over the three years ending January 2005 as the company embraced more generous programs. However, it should be noted that a great many U.S. companies today are foundering under the burden of health care costs that were promised for years and which may well never be delivered. Just talk to the management of Ford Motor Company. Maybe if the unions had not demanded such generous health care coverage, more of them would be employed today turning out Mustangs.

Wal-Mart currently has more 615,000 employees in America enrolled in its health-insurance plans, providing coverage to more than one million people. Because of its size, Wal-Mart has been able to use its clout to lower prices paid by its employees for doctor visits and medications, providing, according to a Wal-Mart spokesman, significant savings. One year ago the company offered a new, lower price package to its employees which gave them medical coverage for as little as $11 per month. Such plans are available to both full time and part time employees who have been with the company for at least one year. This is not the norm in the retailing sector, where most part time workers receive no benefits.

In the interview with Charlie Rose, CEO Scott asserted that “you can’t hire 1.2 million people in the U.S.if you’re not paying competitive wages. “There seems to be some logic in this, which is bolstered by the recent openings of stores in Kearny, New Jersey and White Plains, New York. For the New Jersey store, eight miles outside New York City, the company received 8,000 applications for 300 jobs. In White Plains, a wealthy community with myriad retail establishments, 4,200 people asked for jobs.

Why would folks line up to work with Wal-Mart? Our view is that despite all the negative publicity, people think Wal-Mart offers unusual opportunity for those willing to work hard. It is a fact that more than 75% of store managers started out as hourly workers. It is also a fact that people have some confidence that the company will be around ten years from now, because it is smart, aggressive and determined to move every aspect of their business forward.

In the meantime, the company is paying an average hourly wage of $10.11, way above the minimum federal standard, and offers numerous overtime and bonus programs that actually boost that figure.

In his broadcast, Charlie Rose asked Mr. Scott how Wal-Mart might use its size to best advantage. It’s an interesting question, and Mr. Scott suggested that the company’s highly praised environmental initiatives were indicative of how the huge company can make life better for everyone. By pressuring suppliers to cut down on wasteful packaging, or provide longer-lasting light bulbs, for instance, everyone benefits.

He also discussed some thoughts on how the nation’s health care system could be improved, and costs cut. He noted that while Wal-Mart can record, respond to, order and replace a product bought in any of its stores almost immediately, most health care organizations still require massive amounts of duplicate paper work, and lack even rudimentary systems.

Possibly the most bullish thing one can imagine for health care costs in this country is Wal-Mart indeed lifting its benefits expenditures, and consequently playing a role in the modernization and improved efficiency of the health care industry. It works with bikes, lawn mowers, granola, plasma TVs and garbage bags — why not flu shots?

The New York Sun

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