Rabid Reference Question #6

I hope that this question fits within your guide lines. And thanks for the offer of assistance!

Many -- a great many -- of Wal-Mart's employees make around $7.00 an hour. Also many of the Wal-Mart employees do not have health insurance. It would be great if Wal-Mart could pay at least $10/hr. and give health benefits.

How much would Wal-Mart's prices rise if they were to institute such a policy?

Many thanks in advance for any assistance

Bill McGown
On a bayou in Mississippi where it is VERY hot and muggy but otherwise wonderful

"Laws are like sausages. You sleep far better the less you know about how they are made."--Otto Von Bismarck

Dear Bill:

I'm sorry it's taken me a little while to get back to you (you should have been question #2, but it was a little more involved than most. I'm not sure this has been a total success, because I don't have a direct answer, really. I must say I now have learned a lot about Wal-Mart that I did not know before, beyond the usual concerns of giant retailers driving out the 'little guys', so thank you for your question. I had no idea just how many controversies Wal-Mart was involved in, from child labour violations to gender discrimination, to sweatshops and overseas exploitation.

I cannot give you a definite answer per se but below please find some sites that relate to your question. Specifically, I haven't found in any of my sources (and I'm sure they're out there, I just don't have access to them, but your local public or academic library probably does--I don't subscribe to business indices, unfortunately) what Wal-Mart pays per employee for its health plan or what specific percentage of employees take advantage of the plan. If you look through the sites below, you can tell how many employees there are (over 1.3 million associates) and the average pay ($8.23/hr). Also, the Workers World link below does indicate that a majority of employees do not participate in the plan, and that it would cost about 20% of their wages to do so, whereas Responsible Wealth reports that

Wal-Mart workers pay double the share of health costs as the average Fortune 500 company (40% compared with 20%), according to the Institute for Southern Studies, who also found that taxpayers spend an average of $420,750 to subsidize the average Wal-Mart store through welfare programs used by employees.

At 3,200 stores in the US, that's $1,346,400,000 in welfare subsidies.

Wikipedia
Wal-Mart Statistics
Wal-Mart Benefits
Everyday Low Wages: The Hidden Price We All Pay for Wal-Mart
Wal-Mart's Magic Numbers
Wal-Mart Profits While We Pay the Bill
Wal-Mart foes detail costs to community
UFCW 770
Case Watch
Workers World
Responsible Wealth

However, the question as stated is how much prices would rise if they were to be paid $10 an hour and received full benefits. I'm afraid that would be very much up to how Wal-Mart implemented such an increase. At this point--and let me make this clear--we leave the territory where I'm a reference librarian, and go into speculative blogging. Now, I'm not an oeconomist, and I'm not that great at math, either, so take what follows with a heap of salt, because it's not taking into account all the variables an expert would. In the fiscal year ending in 2003, worldwide sales were (as reported on their website $244.5 billion. If you raise average to $10/hr (not everyone, but at least a start), that's an average $1.27 increase. For 1.3 million people, if you assumed 40 hours per week (which, admittedly many associates do not receive), that would be an extra $31.43 billion per year. Without the concrete numbers on benefits, you could estimate by adding in the money listed above as welfare subsidies, since if the company were taking care of its workers, they would be paying instead of the taxpayer. That brings the total to $3.278 billion dollars. I don't know Wal-Mart's margin of profit, but it's got to be better than, say, the 50% I've received as a small business retailer ordering goods. The increase in outlay is about 1.34% of total sales, anyway. Some retailers could probably do that without actually raising prices. But whether Wal-Mart would is anybody's guess, although I think many would express doubt.

A little bit of irony, by the way...I received this question a little after talking to an aunt and uncle whose town is eagerly awaiting the opening of a store because they really don't have much else in terms of employment (small town, deep South). My uncle is hoping to get on as a greeter. Of course, he's retired, and maybe doesn't need the same benefits as a young mother with children, for example. Also, that same day I was in Wal-Mart (I live a block or two away from one) and overheard associates discussing the fact that they were not signed up for health plan. Now, I think I understand why. Also, I find it interesting that back when I could afford to contribute to my retirement, the main fund I had was specifically supposed to be a 'socially responsible and aware', and it included Wal-Mart. I wonder if that is still the case? I had to cash that out last year, at a loss, actually, so I guess I can at least say I didn't profit from my time as a shareholder. :) But I think I'll have to rethink shopping there.

I also have a better appreciation for where I work. Sure, the pay is substandard compared to other libraries, but I could have a baby for a total of $10, any hospitalisation is covered 100%, medicines and exams have relatively small co-pays, and I pay something like $20/month for my medical and dental combined.

PS I grew up in Louisiana, so I understand the appeal of bayou country. I saw something the other day here which looked like a very spindly cypress and had a pang of memory, of the good old days of popping water hyacinth, mosquitoes the size of birds, avoiding 'stickers' (Bermuda grass), playing with crawdads, running from bobcats, pretending to fish with coke can tabs, and falling off a cypress ledge and fortunately not into a nest of cottonmouths (I don't know how we survived childhood before they started putting safety everything on kids). Oh, and then there was an alligator (Old George, I think they called him) who would be taken to the south of the state and let loose and then slowly walk himself back up to his lake until they decided to move him again. We were outside Shreveport, at Barksdale, so not quite the same as the lower part of the state, although I went to summer camps down near Baton Rouge. An odd environment, but I have to admit, sometimes, I miss the swamps. :)