Markets & Finance

Wal-Mart Foes Hop a Bandwagon


Ask Santa Fe (N.M.) mayor David Coss about taking on big business to benefit people in his community and he'll tell you it's not easy. He started trying to boost the minimum wage in Santa Fe back in 2000, after seeing the growing disparity in wages in the 1990s and an increasing number of people in poverty despite a healthy economy. It wasn't until 2004 that a measure was pushed into law, raising the minimum wage to $9.50 an hour. Even then, several business groups sued and stopped implementation of the measure. The law went into effect only last year, after the lawsuit was quashed.

Still, Coss has no doubt that the battle was worth it. He says that workers are paid more and none of the negative repercussions, predicted by critics, have come about. "The business community warned that they would leave Santa Fe and that we'd ignite inflation in Santa Fe. None of that happened. Instead, big box retailer Lowe's opened a store, and Wal-Mart, which already has one store, plans to open a super center," he says.

ON THE BUS. Now, a union-backed group is aiming to stir other local and state politicians across the country to take similar actions. On Aug. 1, activists from WakeUpWalMart.com, an organization started last year by the United Food & Commercial Workers Union, kicked off a cross-country bus tour from New York to Seattle. The group will visit 35 cities in 19 states for 35 days of rallies and town-hall meetings, all aimed at pressuring Wal-Mart (WMT) to increase wages and provide better health care to its employees. "The American people want Wal-Mart to stop making excuses for why one of the richest companies in America can't provide affordable health care and pay a living wage," says Chris Kofinis, spokesman for WakeUpWalmart.com.

The giant retailer counters that it does provide affordable health care to workers and dismisses the bus tour as lacking in substance. "This is a union-funded publicity stunt," says Wal-Mart spokesman Dan Fogleman. "Wal-Mart offers associates $23-per-month health plans, and in some places [it's] as low as $11 per month."

SECOND CITY SHOWDOWN. Still, Wal-Mart's fight over benefits and wages is becoming more fragmented and costlier. Legislation, like that in Santa Fe, is becoming increasingly common at the state and city level. On July 26, the Chicago city council passed an ordinance requiring big retailers with $1 billion or more in retail sales to start paying a minimum wage of $10 an hour and $3 in benefits. Many expect Wal-Mart to challenge the ordinance in court, especially since it's been emboldened by a recent victory in Maryland. On July 19, a federal judge there struck down a state law that required the world's largest retailer to provide more health-care coverage for its employees in the state.

David F. Vite, chief executive of the Illinois Retail Merchants Assn., which represents Wal-Mart and other retailers including Target (TGT), says that the Chicago ordinance is intrusive to the operation of business. However, it will have to wait until at least Sept. 13 to challenge the measure. That's when the bill is slated to go into effect, unless it is vetoed by Mayor Richard Daley. "It is our hope that the Chicago mayor will veto it; if not, we will be in the state or federal courthouse," says Vite.

Wal-Mart's employees face a tough choice on health-care issues. Cynthia Murray, who has worked at a Wal-Mart store in Laurel, Md., for six years, suffers from asthma, but goes to see a doctor only when she suffers a bad attack. Murray is 50 years old, makes $9.47 an hour, and says that the Wal-Mart plan that costs $23 a month has a $1,000 deductible, which makes it too expensive for her to use. Another plan subtracts $100 from her paycheck every two weeks. "I don't think anybody working at Wal-Mart has that kind of money," says Murray. "All I'm asking from Wal-Mart is a fair share."

COUNTERING THE CRITICS. Indeed, Wal-Mart's size is central to this debate. It's the world's largest retailer with annual sales in 2005 topping $321 billion, net profits totaling $11.3 billion, and 1.3 million U.S. employees. Wal-Mart has clearly been a business success story. But critics argue that the success has come at a high cost to its employees, who fall back on the government, which in turn leaves taxpayers footing the bill for their health care. Wal-Mart in the last six months has announced a rash of initiatives—from more affordable health-care plans for employees to ambitious environmental goals.

Wal-Mart's Fogleman says that the average full-time associate at Wal-Mart makes $10.11 an hour, not counting overtime, and that more than 50% of its workers are full time. Fogleman also says that even though the deductibles for the $23 plan might seem high, each covered family member can go to a doctor three times and get three generic prescriptions filled before the deductible kicks in.

Still, Wal-Mart is working hard to change public opinion. Last week, it hired Leslie Dach, a prominent Democratic operative and former adviser to President Bill Clinton. And last year, it hired Edelman Public Relations, where Dach worked, and has developed a multipronged strategy to respond to criticism. It launched Web sites such as Walmartfacts.com, which gives answers to frequently asked questions, and Paidcritics.com, which responds to attacks on the company and is supported by a group that is funded primarily by Wal-Mart. It has also hired a cadre of Washington (D.C.) lobbyists and also set up a political campaign-style "war room," which is staffed by consultants and PR managers.

POLITICAL ATTENTION. Wal-Mart is winning many fights. Its legal win in Maryland was a clear victory and marked a significant setback for many other local and state officials who had proposed similar health-care reform in more than 20 states (see BusinessWeek.com, 7/19/06, "Rollback Ruling Favors Wal-Mart"). But Wal-Mart still has an uphill battle as groups like WakeUpWalMart ratchet up the decibel level. The bus tour is winning the support of marquee names like former vice-presidential candidate John Edwards.

Indeed, health care and the minimum wage have become such hot-button issues that the campaign is bringing together fierce opponents. Joe Lieberman, vice-presidential nominee in 2000, is fighting tooth and nail against multimillionaire businessman Ned Lamont in Connecticut's Democratic primary for a U.S. Senate seat. But both will appear together on Aug. 2 at WakeUpWalMart's stop in Bridgeport, Conn.

WakeUpWalMart hasn't managed to convince any Republican politicians to join the campaign at any of the 35 stops, but these are not partisan issues. New York State Senator Nicholas Spano, a Republican, was a sponsor of the minimum-wage bill and also a health-care bill that was similar to the Chicago ordinance and Maryland law. He helped push New York State's hourly minimum wage to $7.15 from $5.15 and has proposed that New York should tax companies with at least 100 employees if they fail to spend at least $3 an hour on health insurance per worker. That bill is stalled, but Senator Spano promises to take it up again. He says, "Big box corporations like Wal-Mart should pick up their share of the burden."


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