November 2013 Archives

Challenging Wal-Mart’s Freeloading Ways

Countless words have been published about the retrograde labor practices of Wal-Mart, but none of that writing conveyed as much as the short message recently reported to have been taped to a bin in an employees-only area at one of the company’s stores in Ohio: “Please donate food items here so Associates in Need can enjoy Thanksgiving Dinner.”

My first reaction was that this was a stunt staged by the Yes Men to embarrass the giant retailer. Yet it was all too real. In fact, a corporate spokesperson saw nothing amiss, saying it showed how much the company’s employees care about each other. No doubt they do, but the problem is that Wal-Mart is so deliberately obtuse about its obligation to provide a decent living to those on its payroll.

Leaving it to hard-pressed workers to support their colleagues is just one of the ways Wal-Mart shifts its costs to others. The company puts a much bigger burden on taxpayers, who end up paying for the healthcare coverage that so many of its employees must get from public programs such as Medicaid.

In the early 2000s some states began to disclose which employers accounted for the most low-wage workers and their dependents in these programs. Wal-Mart was invariably at or near the top of these lists. (See the Good Jobs First compilation here.)

Unfortunately, fewer of these lists are being released (and the Affordable Care Act will apparently do nothing to help). Yet the few recent disclosures show Wal-Mart is still creating more of these hidden taxpayer costs than any other company. For example, in July the Dayton Daily News obtained data from the Ohio Department of Job and Family Services indicating that Wal-Mart had more employees or household members on Medicaid or food stamps than any other employer in the state. The most recent compilation of employers accounting for the largest number of recipients in Connecticut’s Husky program (its version of Medicaid) also had Wal-Mart as number one.

Another approach was taken in a recent report by the Democratic staff of the U.S. House Committee on Education and the Workforce, which estimates that the workforce of a typical Wal-Mart Supercenter costs taxpayers some $250,000 a year for Medicaid services (as part of at least $904,000 a year in overall federal safety net costs per store).

These hidden costs are not the only way Wal-Mart sticks taxpayers with the bill. The company has traditionally also been shameless in demanding special tax breaks and other forms of financial assistance when it opens a new store or distribution center. My colleagues and I at Good Jobs First have been tracking this practice since 2004, when we published a report estimating that the company had collected some $1 billion in such subsidies. We later updated the report, finding that the total had risen to $1.2 billion, and we assembled all the data in a website called Walmart Subsidy Watch.

In many of its more controversial urban siting efforts in recent years, Wal-Mart has put less emphasis on special subsidies, which we like to think is because we made the practice more radioactive. Yet the company cannot resist its giveaway demands entirely.

Recently, for example, the company sought tax breaks totaling some $5.4 million for a Supercenter and Sam’s Club it is proposing to build in the Chicago suburb of Tinley Park. Thankfully, the plan was shot down by the board of the Summit Hill School District, which took its vote after a hearing in which one resident described Wal-Mart as a “corporate monster.”

In Texas, however, Wal-Mart seems to be on track to receive a property tax abatement worth $3 million in connection with its plan to build an e-commerce distribution center near Fort Worth Alliance Airport. (For other recent awards, see the company’s entries in the Good Jobs First Subsidy Tracker database, which covers all companies; be sure to search under the official corporate name Wal-Mart as well as the brand name Walmart).

The spirit of the Summit Hill School District is reflected in the activism of rank and file workers, who with the assistance of OUR Walmart are planning to resume protests at company stores on Black Friday. Their efforts will help replace food drives with a living wage and eventually get Wal-Mart to change all its freeloading ways.

Standing Up to the Boeing Bully

Large corporations are generally not bashful about throwing their weight around, but Boeing is in a class by itself. While other companies may at various times make demands on their workers or on the communities in which they operate, the aerospace giant is willing to exert both forms of pressure at the same time and in a big way. In recent days it has been doing exactly that in Washington State, though not everything has gone according to its plan.

Boeing let it be known that it would build its new 777X airliner and its carbon fiber wing in the Puget Sound area, its traditional manufacturing home, only if it got major concessions from the taxpayers of the state and from its unionized workers.

The first consisted of a 16-year extension of a lucrative aerospace industry corporate tax break estimated to be worth $8.7 billion to Boeing (mostly) and its suppliers. This is the largest state subsidy package in U.S. history. Gov. Jay Inslee hurriedly called a special session of the state legislature to ratify the deal. Although some legislators grumbled, they voted overwhelmingly to give Boeing what it wanted.

This was a replay of what happened a decade ago, when Boeing got Inslee’s predecessor Gary Locke to push through the original aerospace industry giveaway at a price tag of $3.2 billion. Those lawmakers apparently thought that Boeing, having gotten what it wanted, would stay put.

Yet Boeing’s concerns did not end at tax avoidance. The company has long sought to neutralize the power of its unionized employees, who in the Puget Sound area have been a lot less willing than the state legislature to give in to all of Boeing’s demands.

In 2009 the company took the brazenly anti-union step of announcing that it would locate a new assembly line for its Dreamliner in South Carolina, where it would in all likelihood be able to use non-union labor. In addition to a more pliant workforce, Boeing took advantage of a state and local subsidy package estimated to be worth more than $900 million. This year it was awarded another $120 million for an expansion of the facility.

Getting massive subsidies has been so easy for Boeing that in Kansas it walked away from a $200 million deal and sold off its Wichita operations. Citizens for Tax Justice just pointed out that over the past decade Boeing has paid aggregate state corporate income taxes of less than zero (it got net rebates of $96 million).

Boeing apparently assumed that the threat of more runaway production would enable it to steamroll its Puget Sound unionized employees, the largest portion of whom are members of the Machinists union (IAM). Along with the tax deal, the company made its siting decision on the 777X contingent on the willingness of IAM members to give up some of the most important gains they have made through decades of difficult collective bargaining.

Those proposed concessions included a freezing of the contract’s traditional defined-benefit pension plan and its replacement with a defined-contribution, 401(k)-type plan as well as substantial increases in deductibles, co-pays and other employee health insurance costs. In an attempt to make those givebacks more palatable, Boeing offered a one-time $10,000 signing bonus.

Boeing seriously misjudged the mood of the rank and file. Rather than succumbing to the company’s pressure tactics, IAM members just voted overwhelmingly to reject the contract concessions. Press reports suggested that union members were most angered by the way in which the company tried to impose its will.

The next step is unclear. Boeing says that it will now hold a competition for the 777X work, and there are no doubt numerous states and localities that will make extravagant subsidy offers. Yet it turns out that shifting production to a new workforce is not as easy as the company implies. Boeing’s operations in South Carolina have reportedly not met output projections.

Boeing may very well come back to IAM members with less draconian contract terms that workers may decide to accept. But for now the vote stands as a strong rebuke to corporate imperiousness.

New in Corporate Rap Sheets: critical profiles of two more giants of mismanaged care—WellPoint and Humana.

Where Healthcare’s Bare Bones are Buried

junk_insurance President Obama may very well have blundered in leaving out the nuances when he pledged during the Congressional deliberations over the Affordable Care Act that “if you like what you have, you can keep it.” Yet it would have been difficult to anticipate in 2009 that only a few years later the opponents of the ACA would succeed in creating an atmosphere in which much of the public has been made to believe that the government can do nothing right and the private sector nothing wrong when it comes to healthcare reform.

It is amazing how little attention is being paid to the insurance companies whose cancellation notices are what created the current furor over Obama’s supposed betrayal. These companies, with the encouragement of penny-pinching employers, created the substandard plans that must now be eliminated to comply with the minimum coverage provisions of the ACA.

One of the original culprits was Aetna, which in 1999—not long after merging with the controversial HMO pioneer U.S. Healthcare, introduced one of the first bare-bones plans under the name Affordable HealthChoices. The plan, put forth as way to reduce the ranks of the uninsured, was rolled out with the support of groups such as the U.S. Chamber of Commerce and the National Federation of Independent Businesses, which were eager to have an alternative to greater government involvement in healthcare coverage.

Affordable HealthChoices was indeed more affordable than conventional insurance, but that was because it was full of holes. At the time of Aetna’s announcement, the Wall Street Journal (5/4/1999) quoted consumer advocate Ron Pollack of Families USA as saying: “The bottom line for anybody who buys [this plan] is, ‘Don’t get sick,’ because if you get sick you are going to wind up with enormous bills.” Some states barred Aetna from selling the plans.

Another proponent of cut-rate coverage was Wal-Mart, which in the early 2000s, was putting its workers in plans with deductibles that were far above the norm and which excluded many kinds of preventive care. In many cases, the plans did not pay for any treatment of pre-existing conditions during the first year of coverage (Wall Street Journal, 9/30/2003). These provisions, along with premium costs that were difficult for many of the company’s low-wage workers to handle, prompted many Wal-Mart employees to turn to taxpayer-funded programs such as Medicaid. Nonetheless, Wal-Mart touted its high-deductible approach as a model for other employers.

Unfortunately, other companies followed Wal-Mart’s lead. By 2006 there were estimates that nearly one million people had enrolled in what were often called mini-medical plans, while millions more were in plans with more extensive benefits but high deductibles. Other major insurers such as WellPoint, UnitedHealth Group, Cigna and Coventry (now owned by Aetna) jumped into the market to sell what Consumer Reports has called “junk insurance.”

These companies targeted their bare-bones offerings not only at parsimonious companies but also at those with no employer coverage who turned to the individual insurance market, especially younger people more inclined to take a chance on getting by with catastrophic benefits.

Mini-meds contributed to the epidemic of bankruptcies among people with serious health conditions and helped drive home the reality that underinsurance was becoming as serious an issue as those who lacked coverage entirely.

This threat was highlighted by Democrats on the Senate Commerce Committee, led by Jay Rockefeller of West Virginia, who held a hearing in late 2010 entitled “Are Mini Med Policies Really Health Insurance?” Sen. Rockefeller took special aim at the mini med offered by McDonald’s, which capped benefits at $2,000 per year. At the hearing several Aetna customers described how they were covered for only a small portion of their expenses when they had major health problems. For example, a woman who had to go to the emergency room when she lost feeling in one of her arms and ran up more than $16,000 in bills received only $500 in coverage from Aetna.

The ACA was designed to reduce the number of people in bare-bones plans, but the law did not call for their complete elimination. Insurers can no longer cap the dollar value of annual benefits, but strange as it sounds, larger employers can offer low-cost plans that exclude categories of coverage such as hospitalization and still qualify under the new law. In other words, the real problem may be that not enough policies are being cancelled.

Whatever falsity was involved in President Obama’s pledge does not begin to compare with the deception practiced by insurance companies and miserly employers when they make holders of bare bones policies think that they have something that deserves to be called coverage.

Note: This piece draws from my new Corporate Rap Sheet on Aetna, which can be found here.