Study: Wal-Mart Hurts Taxpayers
Published on Tuesday, August 3, 2004 by the San Francisco Chronicle
Wal-Marts Cost State, Study Says
by George Raine
 

Employment practices at Wal-Mart, the nation's largest employer with relatively lower labor costs in the retail sector, cost California taxpayers about $86 million annually in public assistance to company workers, according to a study released Monday by a UC Berkeley research institute.

The study estimates that low wages force employees to accept $32 million annually in health-related services and $54 million per year in other assistance, such as subsidized school lunches, food stamps and subsidized housing.

Wal-Mart questioned the validity of the report, saying the authors undervalued the wages and benefits the chain's employees receive.

The UC report comes from the Berkeley Labor Center, an institute that is openly supportive of union causes. Although its researchers have in the past accepted funding from the grocery workers' union to conduct studies, this report was not funded by labor, its authors said.

Wal-Mart, and its possible expansion in California, is a major topic in labor circles as negotiators for 45,000 union grocery clerks in the Bay Area begin contract talks with Safeway, Albertson's and other major employers. The current contract expires Sept. 11. The union, the United Food and Commercial Workers, and management are also working on a separate pact covering 15,000 Sacramento Valley union workers.

These negotiations follow the disruptive 139-day strike and lockout of nearly 70,000 union grocery clerks in Southern California that ended Feb. 29.

In all these talks, management is using Wal-Mart's presence and proposed California expansion as a negotiating tactic, arguing they must lower labor costs to be competitive with the company and other low-cost grocers. Union leadership is backing political efforts to limit Wal-Mart's growth. Authors Arindrajit Dube of the UC Berkeley Institute of Industrial Relations and Ken Jacobs of the UC Berkeley Center for Labor Research and Education make a number of assumptions in their study, beginning with a workforce estimate of 44,000 Wal-Mart employees at 143 Wal-Mart and Sam's Club stores in California who earn an estimated 31 percent less than workers in the large retail sector as a whole.

The wage difference is even greater when comparing Bay Area Wal-Mart workers with other union retail workers: The estimate is that Wal-Mart workers earn on average $9.40 an hour compared with $15.31 for union grocery workers, 39 percent less, and the study estimates that they are half as likely to have health benefits.

A spokeswoman for Wal-Mart, Cynthia Lin, said, "It's disappointing that UC researchers would release a study which has such questionable findings, but then again, they are going to arrive at faulty conclusions when they work off faulty assumptions.''

She said the study reports wages incorrectly. Bay Area workers earn an average of $11.08 an hour while statewide it is $10.37.

Also, 90 percent of Wal-Mart's workers have health insurance, Lin said.

Of them, 50 percent have coverage through Wal-Mart and 40 percent through other sources. She added that two-thirds of workers are senior citizens, college students or second-income providers.

The UC authors do not have data on actual public assistance for Wal-Mart workers. They take information from several sources, including testimony about company wages in a sex-discrimination lawsuit brought against Wal-Mart. They say that, at such low wages, many Wal-Mart workers rely on a public safety net.

The authors extrapolate that if other large California retailers apply the Wal-Mart model of wages and benefits to their 750,000 employees, it would cost taxpayers an additional $410 million a year in public assistance to employees.

David Theroux, founder and president of the libertarian Independent Institute in Oakland, said it is important to consider who the Wal-Mart employees are: They may be former unemployed workers, they may be retirees or have taken a second job out of necessity, or they may be developmentally disabled or have any number of disadvantages. "If we eliminate Wal-Mart ... it means those people are unemployed. Is it better for them to be employed or unemployed?'' Theroux asked.

Theroux also faulted the study for what he said is a presumption that Wal- Mart employees are more prone to go on welfare rolls. "How do they know that? They need to show that,'' he said.

He added that, historically, competition drives up wages. It sharpens workers' skills and boosts productivity so workers can command higher wages. "It works in high tech. Why would retail be any different?'' Theroux said.

The study authors say in their conclusion, "In effect, Wal-Mart is shifting part of its labor costs onto the public.'' Co-author Jacobs, in an interview, said he hopes that policy-makers keep that argument in mind when Wal-Mart seeks to expand.

Indeed, the Los Angeles City Council will hold a hearing Wednesday on legislation that would make approval of a big-box store depend on the city government's evaluation of its economic impact.

© Copyright 2004 San Francisco Chronicle

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