DON'T CALL ME STUPID, PROFESSOR

Peter Z. Grossman’s Editorial in the Indianapolis Star of September 12, 2006 prompts me to write today. While I don’t claim to be the “Efroymson Professor of Economics at Butler University,” I’d like to think that I’m at least smart enough to connect some of the dots left un-connected in his Editorial, though I'm sure there are many who'd suggest that I'm not.

I support wholeheartedly our political leaders in their efforts to solve major economic problems in this country like taxes, Medicaid and Social Security. It is just unfortunate that such a distinguished Professor can’t see how holding Wal-Mart accountable for its business practices relates to solving these larger economic troubles facing our country.

And why is it that we should accept Wal-Mart as it exists today? According to Mr. Grossman, “About 150 million Americans shop at Wal-Mart, and most say they think Wal-Mart is a good place to shop.” It might be a good place to shop, Mr. Grossman, but the benefits of that company – in its current incarnation - begin and end there.

Mr. Grossman’s editorial, while containing grains of truth, is factually inaccurate at best, and misleading at worst. First, the “campaign” against Wal-Mart (there are several official “campaigns” with plenty of information to support a radical change in Wal-Mart’s business practices.) is based on real people, real lives, and real concerns, not misconceptions. Second, the discussion is specifically and directly related to the real economic issues we face.

[Here's a link to the Wal-Mart Watch Annual report. It's a 4MB PDF file. It requires Adobe Acrobat Reader to view.]

Populist blather, Mr. Grossman? Might that be the sound of someone trying to survive on the yearly average salary of a Wal-Mart employee?

The average two-person family (one parent and one child) needed $27,948 to meet basic needs in 2005, well above what Wal-Mart reports that its average full-time associate earns. [“Basic Family Budget Calculator”] Wal-Mart claimed that its average associate earned $9.68 an hour in 2005. That would make the average associate's annual wages $17,114, since the average full-time Wal-mart employee works only 34 hours per week.

Let’s not forget to consider that this yearly wage calculation is before withholdings, and before medical insurance premiums and deductibles are paid.

Since the average full-time Wal-Mart employee earned $17,114 in 2005, he or she would have to spend between 7 and 25 percent of his or her income just to cover the premiums and medical deductibles, if electing for single coverage.

The average full-time employee electing for family coverage would have to spend between 22 and 40 percent of his or her income just to cover the premiums and medical deductibles. These costs do not include other health-related expenses such as medical co-pays, prescription coverage, emergency room deductibles, and ambulance deductibles.

But here’s the dirty little secret: coverage is affordable, but using it will bankrupt many employees. Wal-Mart’s most affordable plan for 2006 includes a $1,000 deductible for single coverage and a $3,000 deductible for family coverage ($1,000 deductible per person covered up to $3,000) [Wal-Mart 2006 Associate Guide and UFCW analysis]

With one in six Wal-mart employees not having health care, President and CEO Lee Scott said in 2005, "In some of our states, the public program may actually be a better value - with relatively high income limits to qualify, and low premiums." [Transcript Lee Scott Speech 4/5/05]

Apparently, it’s company policy at Wal-Mart to encourage people to use Medicaid. I'm sure that does wonders for their profits.

The estimated total amount of federal assistance for which Wal-Mart employees were eligible in 2004 was $2.5 billion. That’s Medicaid, Mr. Grossman. Remember…that little thing you’d like our government to be spending its time fixing?

One 200-employee Wal-Mart store may cost federal taxpayers $420,750 per year. This cost comes from the following, on average:
$36,000 a year for free and reduced lunches for just 50 qualifying Wal-Mart families.
$42,000 a year for low-income housing assistance.
$125,000 a year for federal tax credits and deductions for low-income families.
$100,000 a year for the additional expenses for programs for students.
$108,000 a year for the additional federal health care costs of moving into state children's health insurance programs (S-CHIP)
$9,750 a year for the additional costs for low income energy assistance.
[The Hidden Price We All Pay For Wal-Mart, A Report By The Democratic Staff Of The Committee On Education And The Workforce, 2/16/04]

Raise prices to cover health insurance and provide a living wage? Wal-Mart can cover the cost of a dollar an hour wage increase by raising prices a half penny per dollar. For instance, a $2.00 box of frozen chicken would then cost $2.01. This minimal increase would annually add up to $1,800 for each employee. [Analysis of Wal-Mart Annual Report 2005]

Mr. Grossman suggests that two independent researchers have estimated that Wal-Mart saves consumers $200 billion per year and that by putting pressure on competitors, it has helped reduce the average family's food bill by one-fourth.

I suppose it wouldn’t do any good to ask, “What’s the cost of lower prices?” Saving $200 billion per year, but pushing the cost of health care into the public system, keeping wages low, and amassing huge corporate profits along the way sounds more like moving money around, not saving anything.

I’m not certain of any study Mr. Grossman cites regarding the employment benefit Wal-Mart brings to a community, but is adding more minimum wage, low- or no-benefit jobs truly beneficial to a community? Adding jobs at Wal-Mart and other service-related jobs into a community seems to only perpetuate creating a lower income populace (or is it populist, Mr. Grossman?) who work and shop at Wal-Mart, but rely on public assistance for their health care and don’t make enough to even pay Federal or State Income Taxes, thereby pushing the costs of supporting our economic system onto those of us who have higher-paying jobs.

A study released in November 2005 by David Neumark, a Senior Fellow at the Public Policy Institute of California - estimating the effects of Wal-Mart stores on county-level employment and earnings, - concludes that in the retail sector, on average, Wal-Mart stores reduce employment by two to four percent. His report further states, "There is stronger evidence that total payrolls per person decline, by about five percent in the aggregate, implying that residents of local labor markets earn less following the opening of Wal-Mart stores." [Here's a link to the entire report by Mr. Neumark. It's a 950k pdf file.]

History has shown that when companies get too big, too powerful or too influential, our Government can and should step in to set reasonable expectations and limitations on that company. Wal-Mart has passed the tipping point of being too big, too powerful and too influential in the political process for our Nation’s good.

With so much to be done in this country, Wal-Mart stands as a shining example of what’s WRONG with our economic system.

If only it were as simple as low prices...

What's the price of Low Prices? [85k pdf file] What's the cost of Low Cost?

So what in the name of all that's holy does this have to do with Real Estate?

Something, I'm sure. I do know that someone making $17k a year is going to have a tough time finding decent housing. Other than that, I haven't a clue. I just needed to vent.