Wednesday, October 26, 2005

Image and the Bottom Line

One of the reasons I always cringe when I hear conservative politicians promise to run government like a business is that businesses don't care about the public at large (whether customers or employees), just about the bottom line. That's also why I shudder whenever conservative politicians try to shift a government responsibility to the private sector in order to cut costs. An article in today's NY Times exemplifies my feelings on the issue.

An internal memo sent to Wal-Mart's board of directors proposes numerous ways to hold down spending on health care and other benefits while seeking to minimize damage to the retailer's reputation. Among the recommendations are hiring more part-time workers and discouraging unhealthy people from working at Wal-Mart.

In the memorandum, M. Susan Chambers, Wal-Mart's executive vice president for benefits, also recommends reducing 401(k) contributions and wooing younger, and presumably healthier, workers by offering education benefits. The memo voices concern that workers with seven years' seniority earn more than workers with one year's seniority, but are no more productive.

The memo acknowledged that Wal-Mart, the world's largest retailer, had to walk a fine line in restraining benefit costs because critics had attacked it for being stingy on wages and health coverage. Ms. Chambers acknowledged that 46 percent of the children of Wal-Mart's 1.33 million United States employees were uninsured or on Medicaid.

Wal-Mart executives said the memo was part of an effort to rein in benefit costs, which to Wall Street's dismay have soared by 15 percent a year on average since 2002. Like much of corporate America, Wal-Mart has been squeezed by soaring health costs. The proposed plan, if approved, would save the company more than $1 billion a year by 2011.

Under fire because less than 45 percent of its workers receive company health insurance, Wal-Mart announced a new plan on Monday that seeks to increase participation by allowing some employees to pay just $11 a month in premiums. Some health experts praised the plan for making coverage more affordable, but others criticized it, noting that full-time Wal-Mart employees, who earn on average around $17,500 a year, could face out-of-pocket expenses of $2,500 a year or more.

Eager to burnish Wal-Mart's image as it faces opposition in trying to expand into New York, Chicago and Los Angeles, Wal-Mart's chief executive, H. Lee Scott Jr., also announced on Monday a sweeping plan to conserve energy. He also said that Wal-Mart supported raising the minimum wage to help Wal-Mart's customers.

"It will be far easier to attract and retain a healthier work force than it will be to change behavior in an existing one," the memo said. "These moves would also dissuade unhealthy people from coming to work at Wal-Mart."
[Emphasis added]

In other words, people with diabetes are not wanted as employees (which may be a violation of federal law), nor are workers who are older and more prone to health problems (which may also be a violation of federal law). People with children are OK, primarily because their children can continue to use Medicaid and other government services.

What I found to be hilarious in the article (in a sick sort of way)is the attempt to burnish the image of Wal-Mart by announcing a plan to conserve energy. Clearly this is a nice little nod to environmentalists. Conserving energy is always a good thing, but it also is usually accompanied by a cost-savings. Maybe Wal-Mart could put those savings to use by doing a better job in funding employee benefits.

Maybe Wal-Mart could go even further and lobby the federal government in concert with other large corporations for a national health plan which would remove that cost from the corporate bottom line. Such a plan could be funded by assessments from employers which would probably be far less than what they are paying insurance companies.

Nah, that would make too much sense and would give the government too much power over our lives.


Anonymous Blue Cross of California said...

Great blog I hope we can work to build a better health care system. Health insurance is a major aspect to many.

2:24 PM  

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