Tuesday, October 25, 2005

Wal-Mart Proposes Raising the Minimum Wage

from The Wall Street Journal
Wal-Mart Stores Inc. Chief Executive Lee Scott, whose company has become synonymous with low prices and, critics say, low pay, called on Congress to consider raising the minimum wage.

In a speech to Wal-Mart directors and executives, Mr. Scott unveiled a series of initiatives designed to present a kinder, gentler face for the world's biggest retailer, which has come under stepped-up criticism for everything from its wages and benefits to its impact on small businesses.

Mr. Scott also discussed a new health-care package with lower premiums for Wal-Mart workers, and he touted the retailer's efforts to cut pollution.

Whether it is jobs, health care, product sourcing or environmental impact, "it is clear to me that in order to build a 21st century company, we need to view these same issues in a different light," Mr. Scott said in his speech yesterday. He added that he has spent the better part of last year exploring ways to use the company's heft and resources to have a more positive impact on society.

The proposal to lift minimum wage is particularly likely to raise eyebrows. Though Wal-Mart pays above the current $5.15 an hour minimum wage -- the average hourly wage among its 1.3 million U.S. workers is just under $10 an hour -- some of its smaller competitors don't pay as much. As a result, a boost in the minimum wage could pressure the profitability of Wal-Mart competitors.

"This makes it look like they're doing something for labor, but with little cost to themselves," says Lawrence Katz, professor of economics at Harvard University, Cambridge, Mass.

But Mr. Scott, noting that minimum wage hasn't changed in almost a decade, described Wal-Mart's core customer base as finding it increasingly difficult to afford basic necessities between paychecks.

"We simply believe it is time for Congress to take a look at the minimum wage and other legislation that can help working families," he said.

Mr. Scott delivered his speech on the eve of the company's annual two-day conference for analysts at its Bentonville, Ark., headquarters. Analysts likely will want to know how the company plans to achieve some of these goals while containing costs and jump- starting sales.

In energy-saving moves that will save Wal-Mart money, Mr. Scott said the company plans to increase the fuel efficiency of its truck fleet -- among the largest in the country -- by 25% in the next three years. It also will invest a total of $500 million annually exploring technological advances to reduce greenhouse gases 20% during the next seven years and sharing its findings with others, including competitors.

In addition, Wal-Mart said it will show preference to factories in China that participate in a "green company program" it is helping to design and to suppliers who address their own contribution to global warming.

"Wal-Mart now sees the need to raise environmental standards and that is promising, but will they adapt tough voluntary standards and press suppliers to do the same?" said Fred Krupp, president of the New York-based Environmental Defense, a large environmental group active in global-warming issues.

Mr. Krupp added: "If they do, it could be very big."

Critics also have taken Wal-Mart to task for its health benefits; less than half its workers are enrolled in a company-offered health plan, partially because of the cost of the premiums.

Mr. Scott elaborated on a new health-plan option for financially strapped workers. It costs approximately $23 a month for an individual, about $17 less than the cheapest previous plan. But workers will be covered for three visits to the doctor and three generic prescriptions under the new plan before a $1,000 deductible kicks in.

The previous plan required the deductible payment to be met first.

"They are simply repackaging an old bad policy and calling it a fairer plan," said Paul Blank, campaign director of WakeUpWalMart.com, an activist campaign run by the United Food and Commercial Workers.

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