WASHINGTON — In the high stakes political game over health care reform, the centerpiece of President Obama’s domestic agenda, Wal-Mart Stores Inc. stands to gain considerable ground in its public image and labor relations.
This story first appeared in the July 15, 2009 issue of WWD. Subscribe Today.
The country’s largest retailer has long been cast as antiworker after a series of negative incidents and a vigorous effort against unionizing its stores, but in recent times has improved its stance through better employee benefits. Now, Wal-Mart has inserted itself into a game-changing debate of historical proportions that promises to burnish its reputation and establish the company as a model corporate citizen in the eyes of workers and consumers.
At the same time, business groups, including the retail industry’s major lobbying group, the National Retail Federation, find themselves on the other side of public sentiment by opposing several of the health care proposals, including an employer mandate. Such a stance in this economic climate is loaded with public relations headaches.
The retail industry employs 24 million people, 50 to 60 percent of whom are eligible for health care benefits, according to industry figures. That means 10 million to 12 million retail employees, many of them working part-time, are not eligible for employers’ health coverage.
A new USA Today/Gallup poll out Tuesday said 56 percent of Americans favor a health care reform bill, 33 percent oppose it and 12 percent do not feel strongly either way. To finance the bill, 61 percent believe employers who do not provide insurance should pay a fee.
Also on Tuesday, House lawmakers unveiled their comprehensive health care reform legislation. It includes an employer mandate that gives employers the option of providing health insurance to all employees or contributing funds on their behalf. The legislation would exempt small employers, defined as payrolls under $250,000, from the employer mandate.
The NRF took an aggressive stance against Wal-Mart’s position in a letter to its members. Tracy Mullin, NRF president and chief executive officer, said: “Although the move may provide a short-term public relations boost to Wal-Mart, it could have long-standing, devastating consequences to retailers throughout the country.”
A Wal-Mart spokesman declined to comment directly on Mullin’s statement, but he noted Wal-Mart believes the focus should be on health care reform and providing ideas to contribute to the discussion. “The question is what other proposals are being forwarded by the NRF or other interested parties,” he said.
Some experts said the NRF and other business groups could run the risk of being isolated in the debate. But the NRF doesn’t see it that way and is fighting back.
“From my perspective, this strengthens our position in the debate by showing we’re willing to even go as far as to criticize a retailer [Wal-Mart], albeit a nonmember retailer, for an odd and peculiar position they have taken,” said Neil Trautwein, NRF’s vice president and employee benefits policy counsel.
Asked whether it would hurt the NRF’s image, Trautwein said: “I’m not concerned that we have lost image. If anything, I think this has helped protect the NRF as a positive player in the health care reform debate.”
As for a burnished Wal-Mart image — the corporate giant’s identity as a defender of workers’ rights might be far from fully formed — the nation’s largest private employer has already scored points with President Obama, longtime critics, neutral observers and even some labor groups for endorsing, in conjunction with the Service Employees International Union, the controversial employer mandate provision in health care reform legislation being drafted on Capitol Hill.
White House Press Secretary Robert Gibbs praised Wal-Mart in his daily briefing with reporters on Monday.
“And obviously Wal-Mart came out as the nation’s largest employer and discussed the importance and the need for health care that cuts costs now,” Gibbs said.
But while Wal-Mart continues to bask in the glow of the positive attention, labor-management experts warn that the temporary détente the retailer has with organized labor is likely just that: temporary.
Wal-Mart, with a workforce of 1.4 million, has long been a target of organized labor, seeking to add workers to its membership and reverse years of declines in its ranks. Many observers argue Wal-Mart’s alliance with labor groups on health care could evaporate overnight when Congress begins considering the Employee Free Choice Act, a bill that would make it easier for workers to join a union.
Still, experts say Wal-Mart could achieve a significant short-term public relations boost and significant long-term gains from its support of health care reform and its temporary alliance with big labor and Democrats.
“You’ve got to hand it to [Wal-Mart]. They obviously paid a high price for their p.r. talent,” said Steve Hoch, a professor of marketing at the Wharton School of the University of Pennsylvania and director of the Jay H. Baker Retailing Initiative. “It looks like they are getting their money’s worth.”
P.r. benefits notwithstanding, Hoch said he believes Wal-Mart’s intentions to rein in soaring health care costs while providing more coverage to its employees at lower costs are genuine. “Let’s face it, nobody has better control of their health care costs than Wal-Mart,” said Hoch. “If everybody has to [provide insurance coverage to all employees] there is no advantage or disadvantage unless you do a better job at controlling health care expenses. Frankly, Wal-Mart might as well get out in front of it and get a little good p.r. out of this.”
Bud Konheim, president and ceo of Nicole Miller, said, “I’m sure p.r. was factored in. They are in every town in America and they want to be seen as a good citizen, but I don’t think that was the bottom line that ruled their decision.”
Konheim said he believes what ruled Wal-Mart’s decision was “profit,” which he applauded. He also said Wal-Mart’s entry into the debate will change the course of public opinion.
“If Wal-Mart takes the lead and shows it is beneficial, everybody will fall in line,” he said. “You have to give them credit for thinking this through. They took a stand. They knew they would take heat for it and they knew it would be controversial, but they did it because they really believed it would be good for Wal-Mart.”
Wal-Mart’s foray into health care reform dates back to 2007 when then-president and ceo H. Lee Scott helped launch a coalition with Andy Stern, president of the SEIU, and John Podesta, president and ceo of the Center for American Progress.
“At the time, they said essentially that while the organizations disagreed on a number of things, they found they agreed wholeheartedly on the need for health care reform and wanted to work together to achieve that,” said a Wal-Mart spokesman.
Wal-Mart unveiled its recent endorsement of employer mandates in a joint letter to President Obama on June 30, signed by ceo Mike Duke, with the heads of the SEIU and the Center for American Progress.
“Not every business can make the same contribution, but everyone must make some contribution,” they said in the letter. “We are for an employer mandate which is fair and broad in its coverage, but any alternative to an employer mandate should not create barriers to hiring entry-level employees.”
Wal-Mart covers 51.8 percent of its U.S. employees in terms of health care benefits, according to the spokesman. He said 5.5 percent of Wal-Mart’s workforce is uninsured, while 94.5 percent of its U.S. employee base has some type of health care insurance either from the company or elsewhere.
The Wal-Mart spokesman said the company is taking a “pro-business position” on health care reform, adding, “The current system is not sustainable.
“Businesses cannot afford the continuing increases in health care costs and the status quo is just not acceptable to us and we don’t think it should be acceptable to anyone,” he said.
Wal-Mart will likely gain leverage in shaping the health care debate with both the Obama administration and Congress stemming from its sheer market dominance, as well as its partnership with a major union.
Organized labor has found itself in unlikely alliance with Wal-Mart, which spawned two labor-backed watchdog groups, WakeupWalMart.com and Wal-Mart Watch, to ferret out workplace violations and keep the retail giant’s feet to the fire during the height of the organizing efforts. The two groups have largely remained silent on the union alliance and Wal-Mart’s health care efforts. A spokesman for Wal-Mart Watch, of which the SEIU is a founder, referred press inquiries to the SEIU.
Several calls to WakeupWalMart.com were not returned, but the organization posted a letter on its Web site sent to President Obama from Joseph Hansen, international president of the United Food & Commercial Workers International Union, the primary union behind attempts to organize Wal-Mart.
Underscoring the angst many in the labor community feel, Hansen said in the letter that he received the news of Wal-Mart’s support of employer mandates “with interest and a great deal of skepticism.
“As a company that has had a significant role in fueling this nation’s health care crisis, I have serious questions about Wal-Mart’s commitment to playing a constructive role in fashioning reform that, in fact, provides quality affordable care for all,” the letter said.
Hansen asked Obama to review whether Wal-Mart is prepared to fund a “meaningful portion” of its employees’ and dependents’ health care costs and extend coverage to part-time workers.
Thea Lee, policy director at the AFL-CIO, said Wal-Mart’s letter to Obama supporting mandates was vague, but noted the company’s support could have a positive effect on reform.
“It may take some of the stigma away from the concept of employer mandates,” Lee said of Wal-Mart’s support.
The jury is still out on whether Wal-Mart will get a boost in its image among workers from its alliance on the issue with labor groups, particularly since the divisive and bruising debate over unionizing legislation is looming.
“Part of it is going to be how one interprets Wal-Mart’s change of mind or change in practice,” said Robert Bruno, associate professor of labor and employment relations at the University of Illinois. “If you conclude that Wal-Mart has been brought into this position as a result of a concerted effort on the part primarily of the labor movement and the coalition supported their cause, then it increases the likelihood that workers at Wal-Mart will come to see unionization as an effective and worthwhile tool to advance their interests.”
Conversely, Bruno said it is conceivable that Wal-Mart’s leadership in the area of offering more and improved health care benefits could undermine efforts to unionize its stores if workers perceive Wal-Mart is offering better benefits than a union could give them. Of the two scenarios, Bruno said Wal-Mart will more than likely still be under pressure by unions to sign collective bargaining agreements due to its sheer size and market dominance.
“I think no matter what Wal-Mart does around health care, it’s not likely that it is going to turn off the incentive to unionize,” Bruno said.
Hoch with the Wharton School said: “The last thing Wal-Mart wants to do is be unionized. My guess is it is fairly safe in that regard.”
As for others in the business community opposed to employer mandates, Bruno said, “I think it suggests a level of unreasonableness. “It is a disconnect from where the American public is. It is a disconnect from where the need of the markets is and it is a disconnect to how the political winds have changed.”
Konheim said the “NRF political voting machine is not as strong” as the union’s own leverage.
“Wal-Mart is looking at the landscape and asking itself where it is and where it wants to be,” said Konheim. “In five years, it will be able to say it was on the right side of national health care. You have to give it to them.”