Wal-Mart Memo

NYT reported 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.

One thing I note in the memo I approve of is

• adding health clinics in stores - I wonder if they would be just for the employees, or open to the public
• Move all Associates to “progressively designed” consumer-driven health plans to help control cost trends while allowing Associates to build up savings in Health Savings Accounts - I might prefer that the employee have the option rather than being forced to do it, but I like Health Savings Accounts
• I like the fact that they are considering making it easier for an Associates children to be covered, and am not that disturbed with restricting the Spouse coverage, if the children are covered better
• Giving the employee a choice of options

I am concerned about

• Given the impact of tenure on wages and benefits, the cost of an Associate with 7 years of tenure is almost 55 percent more than the cost of an Associate with 1 year of tenure, yet there is no difference in his or her productivity (Exhibit 2) - I doubt that it is traue
• Moreover, because we pay an Associate more in salary and benefits as his or her tenure increases, we are pricing that Associate out of the labor market, increasing the likelihood that he or she will stay with Wal-Mart - I thought they liked long term employees, and promoted from within.
• Lowering life insurance to $12K

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.

And I question that assumption. I would think an associate would know the stock a lot better after 7 years

To discourage unhealthy job applicants, Ms. Chambers suggests that Wal-Mart arrange for "all jobs to include some physical activity (e.g., all cashiers do some cart-gathering)."

Sounds reasonable to me

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.

And they suggested cutting back on a spouse's insurance but covering children.

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. In an interview, Ms. Chambers said she was focusing not on cutting costs, but on serving employees better by giving them more choices on their benefits.

More choices seems to be an improvement.

interested-participant blogged Maybe it's just me, but I don't see anything wrong with part-time workers or discouraging the hiring of unhealthy workers. Nor do I see anything wrong with trying to enhance profitability.

Mark Thoma blogged So it appears this is about image, not worker health. Memo to self. Next time Wal-Mart does something that appears benevolent to its workers on the surface, look beneath the surface and ask why.