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October 31, 2005


Kevin Brancato

You wrote:


So, if the argument is that some large number of Wal-Mart employees sought their jobs solely to get access to health insurance....then why aren't they buying it?


This all depends on the pool of alternative jobs WM associates have. I think WM associates are far more likely to work for other retailers than outside the retail industry (but I have no data on that).


The recent internal memo puts Wal-Mart equal to national firms, but considerably higher than other retailers in *eligibility* for health insurance. For most retailers, only 56% of employees are eligible for insurance, while 81% of WM's associates are.

However, the *participation rate* for Wal-Mart employees was slightly lower than other retailers (and way lower than national employers), yielding an *enrollment rate* of 48% of WM associates in WM's health insurance plan (greater than 36% for other retailers, but much lower than the 68% for national employers).

While pretty weak, this does seem to present some evidence that some Wal-Mart employees -- those whose alternatives are other retail -- are in it for the health insurance, as unexpected as that might sound.

[Btw, I couldn't get my TypeKey to work on your site.]

R.J. Lehmann

Thanks for your comments, Dr. Brancato. I'm not sure that I'd necessarily jump to the conclusion that Wal-Mart employees with multiple jobs are markedly more likely to work in other retail positions, but I also lack any data on the subject.

I do think it's worth noting that the difference between 56% eligibility of most retailers and the 81% at Wal-Mart is almost entirely explained by the degree to which Wal-Mart makes benefits available to part-timers. Relatively few take them up on the offer, which would be consistent with the make-up of the part-time labor force, consisting largely of students (who tend to be covered by their parents) and moonlighters (who tend to be covered by their primary job.) Speaking anecdotally, it's my understanding that in many communities where Wal-Mart is the only major retail outlet, it's fairly common for teachers and farmers and factory workers and so forth to pull down a few shifts a week at Wal-Mart just to gain access to the employee discount card. I myself worked part-time for three years at a Barnes & Noble for much the same reason.

So my hunch is that, because of the tendency for part-timers to eschew participation, the very high eligibility rate at Wal-Mart (or very low eligibility rates at other retailers, depending on your perspective)skews the enrollment rates for both in ways that are somewhat misleading. For traditional full-time employees, the take-up rates seem fairly comparable among the major retailers, all of whom are generally below the national average because their employees will be more likely to get coverage from spouses, parents or the government.

In any case, the internal memo also cites an employee survey suggesting that only 3% chose Wal-Mart because of the benefits it offers. Perhaps that's not entirely reliable, but I think it's suggestive of the notion that any adverse selection Wal-Mart suffers WRT its nearest competitors is probably pretty small.


I'm not sure how the Typekey system works, but I've gotten a number of emails recently suggesting the folks at Typepad are in the process of upgrading the system, so hopefully it's a temporary bug.

Frank Howland

A question I had about the memo was the claim that associates with longer tenure are no more productive than associates with short tenure. Yet, according to the memo, employees' wages rise with tenure: "Given the impact of tenure on wages and benefits, the cost of an Associate with 7 years of tenure is almost 55 percent more than the cost of an Associate with 1 year of tenure, yet there is no difference in his or her productivity (Exhibit 2)." (I'm quoting from the 27 page version of the memo available I believe from the New York Times.) Are Wal-Mart's wages not equal to the value of marginal product? Or are Susan Chambers and McKinsey and Co. confused? If Wal-Mart is not setting the wage equal to value of marginal product, why?

California Health Insurance

It is unfortunate to hear wages for health care costs have been rising. Health insurance is an important aspect to many lives.

R.J. Lehmann

It certainly is.


Anyone who wants to tell me that socialized medicine is bad can kiss my exhausted butt. I have been trying to get a bi-pap machine for months and I have insurance!


After battling with my insurance company I was finally able to get them to pony up for a biPap machine. After my $1200 deductible plus 20% I a out around $1400 but its better than nothing. Happy holidays.

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All of this contributes to what I'd call the "unfortunate selection" the company faces, but this is true of pretty much all large retail operations.


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What an excellent blog! So, if the argument is that some large number of Wal-Mart employees sought their jobs solely to get access to health insurance....then why aren't they buying it?

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