How taxpayers subsidize the world's
by Jenna Wright
Dollars and Sense magazine, January/February
Wal-Mart has released its expansion plans
for 2005, and Americans can expect up to 230 new supercenters
to open in their communities. The company plans to open SO million
square feet of retail space this year. President and CEO Lee Scott
is confident the expansion will boost Wal-Mart's bottom line.
But it takes money to make money, and WalMart is getting a surprising
amount of that seed money, along with massive subsidies to its
existing operations, from U.S. taxpayers.
A raft of studies show that millions of
taxpayer dollars are flowing to new and existing Wal-Mart stores
around the country. In many instances, individual Wal-Mart facilities
have received either direct or indirect subsidies from states
and localities. Last May, Good Jobs First (GJF), a research and
advocacy group that seeks to hold corporations accountable when
they receive public subsidies, released a report detailing subsidies
WalMart has received to build both retail stores and the network
of nearly 100 distribution centers the company has created to
facilitate its expansion. The group found that over 90% of the
company's distribution centers have been subsidized. It also uncovered
91 instances when the retail stores received public funds, and
believes "the real total is certainly much higher."
GJF investigators documented 244 Wal-Mart
subsidy deals with a total value of $1.008 billion. Taxpayer dollars
have helped individual stores and distribution centers with everything
from free or cut-price land to general grants. One example: in
Sharon Springs, N.Y., a distribution center made a deal with an
industrial development agency for the agency to hold the legal
title to the facility so the corporation could evade property
taxes. Good Jobs First estimates that Wal-Mart will save about
$46 million over the life of this one agreement.
Subsidizing Low Wages
Wal-Mart's low-road labor policies give
the corporation access to a less obvious taxpayer subsidy: government
benefits to its employees. The company's policies by now are notorious:
wages at or close to poverty level, managers discouraged from
awarding overtime, employees forced to work off the clock without
pay and repeatedly denied their right to organize. The result
is that many Wal-Mart employees are eligible for myriad forms
of public assistance. In other words, by providing financial assistance
in various forms to Wal-Mart employees, the federal and state
governments are essentially subsidizing the corporation for its
substandard wages and benefits.
Health care benefits represent one such
subsidy. Wal-Mart's employee health coverage is minimal and expensive;
little of the company's vast low-wage workforce is covered. Nationally,
two-thirds of workers at large firms get health insurance from
their employer. But at WalMart, only 41% to 46% of employees use
the company's health insurance, in large part because many of
Wal-Mart's low-wage workers simply cannot afford to pay the high
premium the company
charges. In 2001, Wal-Mart workers paid
42% of the total cost of the company's health plan. In contrast,
the typical large business expects employees to pay only 16% of
the total cost for individual coverage, or 25% for family coverage.
At discount retailer Costco, which competes directly with Wal-Mart's
Sam's Club stores, employees pay less than 10%; as a result, 82%
of them are covered through the company.
Instead of providing affordable health
insurance, Wal-Mart encourages its employees to sign up for publicly
funded programs, dodging its health care costs and passing them
on to taxpayers. The company is the poster child for a problem
outlined in a 2003 AFL-CIO report on Wal-Mart's role in the health
care crisis: "federal, state and local governments"
- American taxpayers - must pick up the multi-billion-dollar tab
for employees and dependents, especially children, of large and
profitable employers who are forced to rely on public hospitals
and other public health programs for care and treatment they need
but cannot obtain under their employers' health plans."
In Georgia, one of every four WalMart
employees has a child in the state's PeachCare health program,
according to a recent survey. Over 10,000 of the 166,000 children
covered by PeachCare have a parent working for Wal-Mart; no other
employer in the state has a comparable share of its employees
in the program.
In California, the families of Wal-Mart
employees use an estimated 40% more in publicly funded health
care than the average for families of employees at other large
retail firms, according to an August 2003 study by University
of California, Berkeley's Institute for Industrial Relations.
Providing health care to Wal-Mart families costs California taxpayers
an estimated $32 million annually.
Thanks to their poverty-level wages, Wal-Mart
workers are often eligible for other kinds of government assistance
as well. The same study found that California Wal-Mart employees
and their families utilize an additional $54 million in non-health
related federal assistance, including food stamps, the Earned
Income Tax Credit, subsidized school lunches, and subsidized housing.
The Democratic staff of the House Committee
on Education and the Workforce estimated the breakdown of costs
for one 200-employee Wal-Mart store:
* $36,000 a year for free or reduced school
lunches, assuming that 50 families of employees qualify.
* $42,000 a year for Section 8 rental
assistance, assuming that 3% of the store employees qualify.
* $125,000 a year for federal tax credits
and deductions for low-income families, assuming that 50 employees
are heads of households with a child, and 50 employees are married
with two children.
* $108,000 a year for the additional federal
contribution to state children's health insurance programs, assuming
that 30 employees with an average of two
* $100,000 a year for additional Title
I expenses, assuming 50 families with two children qualify.
* $9,750 a year for the additional costs
of low-income energy assistance.
Overall, the committee estimates that
one 200-person Wal-Mart store may result in an excess cost of
$420,750 a year for federal taxpayers.
The effects of Wal-Mart's free-loader
policies radiate beyond Wal-Mart itself; Wal-Mart employees are
not the only victims. Firms large and small are forced to cut
their own costs in order to compete, creating a "race to
the bottom, in which everyone suffers," according to the
AFL-CIO report. Employers that provide adequate pay and benefits
to their employees are under pressure from companies like Wal-Mart
that do not. The result: a growing low-wage sector and ever-greater
need for government benefits (funded, incidentally, by an increasingly
regressive tax structure).
As an economic power, Wal-Mart is in a
class by itself, with over $8 billion in net income last year-it's
about five times the size of the second-largest retailer in the
United States. Wal-Mart's sheer size means it can drag whole sectors
with millions of workers both in the United States and abroad
down its low-road path. Taxpayers are feeding this giant corporate
monster, and at a very high price.
Jenna Wright was a D&S intern in 2004.
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