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Ventura County Star, August 11, 2004
One reason business groups were upset that Gov. Arnold Schwarzenegger
kept $3.8 million in the University of California's budget next year
to fund the Labor Institute is that the institute asks inconvenient
questions.
The one it asked last week was a doozy: Do taxpayers subsidize Wal-Mart's
labor costs?
The answer: Yes, to the tune of $1,952 per worker each year, a total
of $86 million in Medi-Cal, Healthy Families, Food Stamps and other
social services available to the working poor.
The conclusions are largely based on a gold mine of Wal-Mart employment
data from 2001 that became public record during a sexual discrimination
lawsuit against the company.
Comparing that data with industrywide data, the Labor Institute study
concluded that Wal-Mart pays its workers 31 percent less than other
large retailers ($9.70 per hour on average versus $14.01 per hour).
It also finds that 23 percent fewer Wal-Mart workers are covered by
employer-provided health insurance plans than those who work for the
company's retail industry competitors.
Most ominously for taxpayers, the study concludes that if other retailers
decide they must lower wages and benefits in order to compete with
Wal-Mart, it would cost the state treasury $410 million to widen the
safety net of social services.
Rest assured you'll hear more about this study in policy debates to
come.
Most obvious is in the dozens of debates in cities across California
in which Wal-Mart has proposed or will propose to build "supercenters"
that combine a grocery, pharmacy and general merchandise store under
one roof.
Such megastores are commonplace in other states, but in California
there is only one. Wal-Mart reportedly has plans to open 40 such stores
in the state over the next five years.
Monday, Los Angeles City Councilman Eric Garcetti and state Controller
Steve Westly staged a news conference to stress the importance of
conducting a thorough economic analysis before approving any superstore
in Los Angeles.
In a letter to Mayor James Hahn, Westly writes, "As government
leaders, we must weigh the benefits of potential new jobs and revenues
against the likely drain on government resources."
Of immediate statewide impact, the study will surely play a role in
the debate over Proposition 72, the referendum on the Nov. 2 ballot
to overturn a law that would require all large employers in California
to provide health insurance coverage to workers.
Through June 30, more than $2 million had been raised to defeat Proposition
72, almost all the money coming from fast-food chains and large retailers.
Notably missing from the list of contributors to overturn the law
are manufacturing firms, unionized grocery store chains and companies
in other endeavors in which the industry norm is to provide health
benefits to workers.
With Wal-Mart as its poster child, you can expect supporters of Proposition
72—principally labor unions and professional medical groups—to
argue that companies that do not provide health benefits are merely
shifting a portion of their labor costs to taxpayers.
From that springs two arguments.
First, there is the question of fairness: Is it fair that Albertson's,
which provides health insurance to its workers, must match prices
with a competitor whose workers must rely on taxpayers to pick up
the tab when they get sick?
Second, there is the more potent question of what a trend toward low-benefit
jobs could mean to workers who now enjoy decent health benefits.
As Westly put it in his letter to Hahn, "I fear that Wal-Mart's
employment policies are fueling a race to the bottom among major retailers.
Other companies that traditionally have paid fair wages are now cutting
wages and benefits to compete with Wal-Mart."
In some respects, Wal-Mart seems too easy of a target in this debate.
Its wages and benefits do seem to be well below industry norms, but
the bar set by the competition isn't all that high.
The Labor Institute study estimates that the taxpayer subsidy to provide
healthcare to employees of all large retail companies is $880 per
worker per year.
Whatever the precise amount— at Wal-Mart or Target or Sears—it's
clear that taxpayers are already paying substantially to provide healthcare
to many workers in the retail industry.
The uncomfortable question the Labor Institute study raises for consumers
is this: Would it be worth it to pay a few more cents for a sweater
or a toaster in order to get those workers off the dole?
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