Political Roundtable - Part V

[Nivek]

Even Walmart is not arguing that its healthcare costs will quintuple. What they're saying is that their costs will rise from $330 million to $500 million -- an increase of about $170 million or 50%+. Which is a lot. But, it also changes the back-of-the-spreadsheet math I posted earlier. It wouldn't represent a 4% dividend reduction, but rather a 1.4% reduction.

Out of curiosity, how can Costco afford healthcare insurance for roughly 85% of its workers, but Walmart can't?

And, I keep hearing the assertion that raising the minimum wage will cause layoffs, but the economic research seems to indicate that raising the minimum wage has had little-to-no effect on employment.

[Induveca]

The health care costs discussed was specifically for their part time workers losing coverage. Wal-Mart provided "catastrophic" plans for said workers.

Based on their employee headcount it's estimated they paid 20-25 dollars per month for said "catastrophic" plans. The cheapest ACA plan is around 125-150 dollars with a hefty deductible.

[dckingsfan]

Even Walmart is not arguing that its healthcare costs will quintuple. What they're saying is that their costs will rise from $330 million to $500 million -- an increase of about $170 million or 50%+. Which is a lot. But, it also changes the back-of-the-spreadsheet math I posted earlier. It wouldn't represent a 4% dividend reduction, but rather a 1.4% reduction.

Out of curiosity, how can Costco afford healthcare insurance for roughly 85% of its workers, but Walmart can't?

And, I keep hearing the assertion that raising the minimum wage will cause layoffs, but the economic research seems to indicate that raising the minimum wage has had little-to-no effect on employment.

I would look for Cosco to follow suit... just give them time.

I concur - initially the increase in minimum wage will not increase unemployment. But, I think that many of those jobs would then be ripe for automation. I also believe that it will decrease new employment opportunities for teenagers and first time employees - that will have a long-term negative effect on employment.

The previously mentioned decoupling of healthcare from employment would be the best scenario.

[Induveca]

Also in 2012 59 percent of all workers made the minimum wage. $7.25 an hour.

As business owner, how does doubling wages NOT impact my bottom line?

It immediately results in converting non-essential full time staff to part time staff. If government mandated costs continue to increase? Benefits disappear and you start handing out flyers for government assistance programs.

[Nivek]

Walmart says its net increase will be from $330 million to $500 million. There's obviously some discrepancy between what they're saying and what you're saying. Not sure what the source of that discrepancy is.

From your numbers, the actual costs would seem to be nearly a rounding error for a company with profits in excees of $12 billion. Elimination of healthcare insurance is said to affect 30,000 part-time workers. According to your numbers, the cost to Walmart has been $25 per month per worker. That comes to $300 per year, or $9 million.

If Walmart's cost quintupled, its costs would rise to $45 million. So, a $36 million increase. That would account for about 21% of the $170 million increase Walmart is saying it would have faced.

You're not convincing me.

[Nivek]

Also in 2012 59 percent of all workers made the minimum wage. $7.25 an hour.

As business owner, how does doubling wages NOT impact my bottom line?

It immediately results in converting non-essential full time staff to part time staff. If government mandated costs continue to increase? Benefits disappear and you start handing out flyers for government assistance programs.

This is where things disconnect for me. The business media keeps reporting record profits for corporations. I keep seeing news about corporations pulling in MASSIVE profits and building major cash reserves. And yet 59% of workers are getting paid the absolute minimum? And getting benefits cut?

This doesn't suggest to me that corporations are so on the brink of catastrophe that they can't afford to pay workers a decent wage and/or provide a decent benefits package. It's not making sense to me.

[fishercob]

Parallel to the Walmart discussion about morality and economics:

Watch this 60 Minutes piece on the Cost of Cancer Drugs

Profits vs. people -- there should be a happy medium, but clearly we are not there. Drugs companies need financial incentive to innovate and invest in R&D, yes. But putting patients into personal bankruptcy as a means of maximizing shareholder value is immoral.

Then there's the whole other effed up fact that we have system -- food, health care, pharma -- designed to let people get sick so they have to buy treatment, and we no focus on keeping people healthy in the first place.

[Induveca]

Walmart says its net increase will be from $330 million to $500 million. There's obviously some discrepancy between what they're saying and what you're saying. Not sure what the source of that discrepancy is.

From your numbers, the actual costs would seem to be nearly a rounding error for a company with profits in excees of $12 billion. Elimination of healthcare insurance is said to affect 30,000 part-time workers. According to your numbers, the cost to Walmart has been $25 per month per worker. That comes to $300 per year, or $9 million.

If Walmart's cost quintupled, its costs would rise to $45 million. So, a $36 million increase. That would account for about 21% of the $170 million increase Walmart is saying it would have faced.

You're not convincing me.

The *major* cost increase would be only for catastrophic plans. Those are also the plans most chosen by their part time workers, who make the smallest wage. In other words it makes no sense to pay a part timer 200 dollars a month and take 50 percent of that for insurance. 25? Sure, when no other options for them exist.

Also the 170 million increase you are quoting is for their ENTIRE U.S. Workforce of 1.2 million people. Corporate healthcare plans typically run between 35 to 900 dollars monthly depending on the individual/family. That's not an equation neither of us are figuring out without access to their employee database.

[nate33]

Out of curiosity, how can Costco afford healthcare insurance for roughly 85% of its workers, but Walmart can't?

Costco is primarily located in affluent suburbs. Nobody in those areas hire people at minimum wage because there's usually a shortage of workers. Teenagers make $9-10 and hour at McDonalds in those neighborhoods so it's reasonable for Costco to hire slightly-more-skilled, adult workers at $12-15 an hour and pay their insurance.

Walmart's are typically located in small rural towns with little to no industry except farming. The prevailing wage is a lot lower.

[nate33]

Also in 2012 59 percent of all workers made the minimum wage. $7.25 an hour.

As business owner, how does doubling wages NOT impact my bottom line?

It immediately results in converting non-essential full time staff to part time staff. If government mandated costs continue to increase? Benefits disappear and you start handing out flyers for government assistance programs.

This is where things disconnect for me. The business media keeps reporting record profits for corporations. I keep seeing news about corporations pulling in MASSIVE profits and building major cash reserves. And yet 59% of workers are getting paid the absolute minimum? And getting benefits cut?

This doesn't suggest to me that corporations are so on the brink of catastrophe that they can't afford to pay workers a decent wage and/or provide a decent benefits package. It's not making sense to me.

Walmart employes 1.5 million people. If you give them all a dollar-per-hour wage increase, that's going to cost them $3 billion a year. The company profits $16B a year. That's a 20% hit in profits, which is a really big deal.

Providing health insurance is roughly equivalent to a $3 per hour wage increase.

[nate33]

Parallel to the Walmart discussion about morality and economics:

Watch this 60 Minutes piece on the Cost of Cancer Drugs

Profits vs. people -- there should be a happy medium, but clearly we are not there. Drugs companies need financial incentive to innovate and invest in R&D, yes. But putting patients into personal bankruptcy as a means of maximizing shareholder value is immoral.

Then there's the whole other effed up fact that we have system -- food, health care, pharma -- designed to let people get sick so they have to buy treatment, and we no focus on keeping people healthy in the first place.

There are definitely some conflicting interests between capitalism and healthcare. Capitalists make money by treating the sick, NOT by making them healthy. I don't have the answer to this dilemma. It's tempting to argue that we should just turn over health care to the government, but I reflexively resist that solution when it comes to ANY problem. Governments are REALLY, REALLY bad at efficiency.

(Yes, I'm aware that other countries have national health care, but it only works because the good ol' USA has a private health care system which funds all the R&D that these other countries essentially steal.)

Governments should only run things when it's an absolute last resort. The military is a good example (because we wouldn't want the power of the military in the hands of a private corporation).

[Nivek]

Also in 2012 59 percent of all workers made the minimum wage. $7.25 an hour.

As business owner, how does doubling wages NOT impact my bottom line?

It immediately results in converting non-essential full time staff to part time staff. If government mandated costs continue to increase? Benefits disappear and you start handing out flyers for government assistance programs.

This is where things disconnect for me. The business media keeps reporting record profits for corporations. I keep seeing news about corporations pulling in MASSIVE profits and building major cash reserves. And yet 59% of workers are getting paid the absolute minimum? And getting benefits cut?

This doesn't suggest to me that corporations are so on the brink of catastrophe that they can't afford to pay workers a decent wage and/or provide a decent benefits package. It's not making sense to me.

Walmart employes 1.5 million people. If you give them all a dollar-per-hour wage increase, that's going to cost them $3 billion a year. The company profits $16B a year. That's a 20% hit in profits, which is a really big deal.

Providing health insurance is roughly equivalent to a $3 per hour wage increase.

I'm referencing Walmart, but really this is about corporate culture. And, my response to an across the board 20% reduction in corporate profits is ambivalence. What's so great about Walmart turning a $16 billion profit vs. $12.8 billion? And so on, throughout the corporate world. Maybe worshiping at the altar of constantly increasing profits isn't the best way to run a business. I don't know.

[nate33]

I'm referencing Walmart, but really this is about corporate culture. And, my response to an across the board 20% reduction in corporate profits is ambivalence. What's so great about Walmart turning a $16 billion profit vs. $12.8 billion? And so on, throughout the corporate world. Maybe worshiping at the altar of constantly increasing profits isn't the best way to run a business. I don't know.

But this is the nature of capitalism. In order for businesses to attract capital (which is used to invest, grow and employ people), they must offer a competitive return on capital or else they fail.

What you are suggesting is the exact opposite of what makes capitalism work. You may as well be advocating communism, and we know how well that works.

[fishercob]

I'm referencing Walmart, but really this is about corporate culture. And, my response to an across the board 20% reduction in corporate profits is ambivalence. What's so great about Walmart turning a $16 billion profit vs. $12.8 billion? And so on, throughout the corporate world. Maybe worshiping at the altar of constantly increasing profits isn't the best way to run a business. I don't know.

But this is the nature of capitalism. In order for businesses to attract capital (which is used to invest, grow and employ people), they must offer a competitive return on capital or else they fail.

What you are suggesting is the exact opposite of what makes capitalism work. You may as well be advocating communism, and we know how well that works.

So a $12,800,000,000 profit isn't a competitive return on capital?

Communism doesn't work. Unfettered, unregulated capitalism doesn't "work" either. In general adhering to a strict ideology is bad public policy. Economic principles are important, sure. But they must be balanced by social and human interests too. This country is made up of people, after not -- not just an economy.

[noworriesinmd]

Believe it or not, most of the economic data about Walmart is false. If you google "Economic impact of Walmart" you get a lot of hits, but they all reference the same material or they take you to sites that have hidden agendas.

Here are some interesting links
http://www.nber.org/papers/w18111
http://business.time.com/2012/06/04/the ... g-to-town/
https://www.minneapolisfed.org/publicat ... m?id=3033&

Most of the stuff on the web is rehash of old stuff or the same econ data from union and anti walmart people.

I believe Companies have a moral obligation to the communities they operate in AND the shareholders they serve. There has to be a delicate balance between the two. Ultimately, Shareholders are #1.

We all work hard to earn money. What is the right amount to give to charity?
How much are you willing to give up of your salary to help others?

I say this, because Walmart's profits are it's shareholders.

I have my job, not out of Corporate charity..but because I bring something to the table with my skillset....healthcare just happens to be a benefit of my employment along with my salary.

Walmart in aggregate is profitable, but its margins are pretty low. Productivity is how most corporations are increasing their profits (i.e. the more one person can do...the better for corporate profitability because your costs don't increase because of hiring another person).

Without Walmart, Economists believe inflation would be a % point higher....that is a big deal. Also the DMV is a dream location. It is common for people in this area to pull in 100k+, Outside this region it is rare. Walmart helps people survive via low prices.

I think the whole ACA / minimum wage argument is a false one. Robotics and Automation fundamentally changed how Car manufactures produced cars. They could produce better cars consistently w/o human interaction. Now, there are few automotive jobs....but those jobs that are left are highly skilled and pay well.

Consumer retail is going through the same process. I don't go to a brick and mortar store to get my groceries, or goods. How much is a Walmart greeter worth? Will that job be replaced with a Kiosk (already happening at McDonarlds). As we continue to argue that a Company take on extra costs the cost of that employee will rise. Once it hits the cost of automation threshold....it's game over for all those employees. However the jobs that will be left will be high paying jobs WITH health insurance as a benefit. We keep on talking about Walmart retail....Walmart Corporate pays very well.

I believe all humans should be given the opportunity to live in dignity. However, I also say....I plan and prepare for the world that is....vs the world that I wish was.

ACA, has slowed the cost of healthcare, but I waiting to see what really happens...that will take 5 years to play out. A Company rarely eats costs.....so I'm curious how things play out.

[Induveca]

Also in 2012 59 percent of all workers made the minimum wage. $7.25 an hour.

As business owner, how does doubling wages NOT impact my bottom line?

It immediately results in converting non-essential full time staff to part time staff. If government mandated costs continue to increase? Benefits disappear and you start handing out flyers for government assistance programs.

This is where things disconnect for me. The business media keeps reporting record profits for corporations. I keep seeing news about corporations pulling in MASSIVE profits and building major cash reserves. And yet 59% of workers are getting paid the absolute minimum? And getting benefits cut?aver

This doesn't suggest to me that corporations are so on the brink of catastrophe that they can't afford to pay workers a decent wage and/or provide a decent benefits package. It's not making sense to me.

The disconnect here is pretty apparent. You're referencing Fortune 500 "corporation" profits trumpeted by Wall Street. Only 10% of the US population is employed by a Fortune 500 company.

[nate33]

So a $12,800,000,000 profit isn't a competitive return on capital?

You and Nivek keep throwing that number out as if it's meaningful because it's big. $12.8B is a lot of money, but it's not all that money for a company with a market capitalization of $253B. Walmart's operating profit is just 5.8%. That's low by Fortune 500 standards.

[fishercob]

So a $12,800,000,000 profit isn't a competitive return on capital?

You and Nivek keep throwing that number out as if it's meaningful because it's big. $12.8B is a lot of money, but it's not all that money for a company with a market capitalization of $253B. Walmart's operating profit is just 5.8%. That's low by Fortune 500 standards.

And yet, their stock price sits at $79/share, up 50% from five years ago at this time.

[Nivek]

We're talking past each other at this point. The actual real world cost of providing health insurance for its employees is a small portion of Walmart's profit.

Telling me the company's profit margin is small by Fortune 500 "standards" is irrelevant. The problem is Fortune 500 "standards" for the balance between profits and worker treatment. I think what fish and I are suggesting is that maybe these companies have a responsibility that goes beyond maximizing profit.

[Nivek]

Also in 2012 59 percent of all workers made the minimum wage. $7.25 an hour.

As business owner, how does doubling wages NOT impact my bottom line?

It immediately results in converting non-essential full time staff to part time staff. If government mandated costs continue to increase? Benefits disappear and you start handing out flyers for government assistance programs.

This is where things disconnect for me. The business media keeps reporting record profits for corporations. I keep seeing news about corporations pulling in MASSIVE profits and building major cash reserves. And yet 59% of workers are getting paid the absolute minimum? And getting benefits cut?aver

This doesn't suggest to me that corporations are so on the brink of catastrophe that they can't afford to pay workers a decent wage and/or provide a decent benefits package. It's not making sense to me.

The disconnect here is pretty apparent. You're referencing Fortune 500 "corporation" profits trumpeted by Wall Street. Only 10% of the US population is employed by a Fortune 500 company.

I thought we were talking about big corporations. I'd agree there's a difference in scale with smaller businesses.