Last week, we learned that Wal-Mart was giving the lowest paid of its hourly employees a raise. In a blog post, Wal-Mart Chief Executive Officer Doug McMillon said that as of April, the company will pay a minimum of $9 an hour. That is $1.75 more than the federal minimum wage of $7.25, which has been unchanged for almost six years. Next February, Wal-Mart’s lowest hourly rate will rise to $10. All told, about a half-million Wal-Mart workers in the U.S. will be affected.
There has been lots of theorizing about why the nation’s largest retailer did this: See this, this and this. But I have a much simpler explanation: The Wal-Mart business model is broken.
As in any complex situation, there are many nuances and wrinkles: This was inevitable; state minimum-wage laws had already mandated those minimums (or higher) for at least two-thirds of the employees in Wal-Mart’s stores. In the years since the last federal minimum-wage increase, many of Wal-Mart’s employees had fallen below the poverty level and the strengthening economy has made it harder to attract and retain employees.
There is also the issue of the negative PR generated by Wal-Mart’s low, low wages. As we discussed back in 2013, many of its full-time employees receive a full array of federal and state welfare. Wal-Mart has become the nation’s largest private-sector beneficiary of taxpayer-supported public assistance (see “How McDonald’s and Wal-Mart Became Welfare Queens”). Indeed, the U.S. taxpayer has been subsidizing the wages of this publicly traded, private-sector company to the tune of $2.66 billion in government largess a year.
Although many factors contributed to the move, the simple reason for the increase is because Wal-Mart has stopped growing. Same-store sales have been little changed or declining for some time now. When we look at the underlying causes, the company’s workforce, and how it is managed, are the prime suspects…
Labor is seen as a cost driver rather than a sales driver. Managers do not have much direct control over sales, almost never making decisions on merchandise mix, layout, price, or promotions. But managers do have control over payroll costs and are evaluated regarding whether they meet weekly or monthly targets for payroll as a percentage of sales. At times these pressures have been such that Walmart managers have put pressure on employees to work off the clock.
With a bonus structure designed to drive down labor costs, guess what Wal-Mart managers did?
Cutting on salary and benefits, however, didn’t necessarily lower costs. About 44 percent of Wal-Mart’s hourly staff turns over each year. That’s a lot of people, because the company employs 2.2 million workers worldwide. Hiring replacements is a costly and time consuming process.
Consider competitors such as Costco: It has average hourly wages of $20 and a turnover rate of “17% overall and just 6% after one years employment,” according to the Harvard Business Review. HBR estimates the full cost of “replacing a worker who leaves is typically 1.5 to 2.5 times the worker’s annual salary.” That is no small chunk of change.
My favorite Recovering Republican, Barry Ritholtz…always my first read at Bloomberg news sites.
Behavior rooted in the attitudes and analysis of 19th Century Republican royalty ends up unproductive pretty consistently. Enjoying the fruits of the economic crash provoked by the financial-real estate band of thieves and frauds, Walmart was able to draw its serfs from the supersized pool of unemployed, underemployed and maybe-never-again-employed made accessible by free market economic ideologues.
But, just as those who don’t study history are doomed to repeat mistakes, those who don’t include economics studies as part of understanding history are doomed to repeat the biggest mistakes before their competitors. How much time do you spend shopping at Sears, Borders or Radio Shack? Driving there in your Oldsmobile.
Not paying your employees enough to shop at your own store is a second-order issue. One that Republicans couldn’t care less about. An example of pig-headedness masquerading as fiscal conservatism.
Walmart appears to be trying to enter the 20th Century – if not the 21st. Anyone think the Walmartians in Congress will learn from their example?
Maybe, Cartoon of the Epoch?
Sierra Blanca county in Texas with two U.S. Border Patrol highway checkpoints is refusing to prosecute drug cases previously sent to it from those checkpoints.
The county—and all four states bordering Mexico—wants funding from Washington, D.C. to handle cases that federal prosecutors decide to send to state courts…
A program that reimbursed California, Arizona, New Mexico and Texas for prosecuting federally initiated cases hasn’t been funded since 2013…
You might ask those folks in Congress – the ones who whine the loudest about border security – why they cut back on funding for law enforcement along the border with Mexico.
The straw that broke the camel’s back here was the end of a Drug Enforcement Administration grant in late 2014. The grant helped the county after the Southwest Border Prosecution Initiative ended.
County Judge Mike Doyal is Hudspeth County’s chief elected official. He said his county lost more money than it earned by accepting federally initiated drug cases.
“And they [the DEA] said, ‘We’re not renewing the grant.’ And we said, ‘We’re not taking any of the cases,’” said County Judge Mike Doyal, the chief elected official in Hudspeth County.
There are no current plans in Congress to bolster funding for border states prosecuting federally initiated cases.
The term “Congressional cheapskates” comes to mind. Along with Tea Party “idjits”.
All the fear-mongering in the world ain’t about to get drug traffickers put into the slammer on good looks alone. Someone has to cover the paychecks for law enforcement and counties like Sierra Blanca can’t afford it.
Used to be a regular stop for me when I was on the road from El Paso to visit clients in the Permian Basin. Mostly played-out mines leftover from the last time they had a local economy. Though there still is a working talc mine part way between El Paso and the Sierra Blanca exit off I-10. Think about it next time you powder a baby’s butt.
Marijuana advocates’ hopes that the U.S. capital would easily follow in the footsteps of Denver or Seattle in clearing the way for lawful pot use are set to go up in smoke this week.
Voters in the District of Columbia last year passed a measure clearing the way for pot possession, but members of Congress have used their power over the city to prevent local officials from coming up with any plan to let the drug be sold legally for recreational purposes.
With the congressional review period for the new measure set to expire on Wednesday, District of Columbia pot users will be left in a murkier position than those in Colorado and Washington state, which fully legalized marijuana last year…
The uncertainty stems from Initiative 71, a referendum approved by 65 percent of District voters in November. A key argument by supporters was that marijuana laws unfairly victimized black people in Washington, who represent about half the city’s population…
Initiative 71 ran into opposition in Congress, which has oversight over the heavily Democratic District of Columbia. Republicans inserted a provision in a spending bill in December that barred the District from using any funds to legalize pot.
Representative Jason Chaffetz, the chairman of the House of Representatives Oversight and Government Reform Committee, has vowed to block legalization…
OK, maybe Congressional Republicans, Blue Dog Democrats, don’t hate change, progress, democracy, Black folks and women as much as the bigots in the Tea Party caucus. The end result is the same when questions come down to civil rights, to an individual’s right to make a choice from a range of options outside the 19th Century.
Want to decide if you will have an abortion, use birth control, get married to someone unapproved, smoke a little weed instead of chugging a 12-pack of lite beer, spend your vacation in Cuba? Not if the clown show masquerading as conservatism gets its fear-ridden way. Nothing new about cowardice and ignorance pretending to have an ideology. It still stinks on ice when ordinary citizens have no alternative except to go even further backwards.
UPDATE: Made it past Congressional curmudgeons!
Imagine you’re a Medicare patient, and you go to your doctor for an ultrasound of your heart one month. Medicare pays your doctor’s office $189, and you pay about 20 percent of that bill as a co-payment.
Then, the next month, your doctor’s practice has been bought by the local hospital. You go to the same building and get the same test from the same doctor, but suddenly the price has shot up to $453, as has your share of the bill.
Patients around the country are getting that unpleasant surprise, as more and more doctors’ offices are being bought by hospitals. Medicare, the government health insurance program for those 65 and over or the disabled, pays one price to independent doctors and another to doctors who work for large health systems — even if they are performing the exact same service in the exact same place.
This week, the Obama administration recommended a change to eliminate much of that gap. Despite expected protests from hospitals and doctors, the idea has a chance of being adopted because it would yield huge savings for Medicare and patients.
In the dry language of the annual budget, the White House asks Congress to “encourage efficient care by improving incentives to provide care in the most appropriate ambulatory setting.” In normal English, that means reducing financial incentives that are causing many doctors to sell their practices to hospitals just to take advantage of extra revenue.
The heart doctors are a great example. In 2009, the federal government cut back on what it paid to cardiologists in private practice who offered certain tests to their patients. Medicare determined that the tests, which made up about 30 percent of a typical cardiologist’s revenue, cost more than was justified, and there was evidence that some doctors were overusing them. Suddenly, Medicare paid about a third less than it had before.
But the government didn’t cut what it paid cardiologists who worked for a hospital and provided the same test. It actually paid those doctors more, because the payment systems were completely separate. In general, Medicare assumes that hospital care is by definition more expensive to provide than office-based care.
You can imagine the result: Over the past five years, the number of cardiologists in private practice has plummeted as more and more doctors sold their practices to nearby hospitals that weren’t subject to the new cuts. Between 2007 and 2012, the number of cardiologists working for hospitals more than tripled, according to a survey from the American College of Cardiology, while the percentage working in private practice fell to 36 percent from 59 percent. At the time of the survey, an additional 31 percent of practices were either in the midst of merger talks or considering it. The group’s former chief operating officer once described the shift to me as “like a migration of wildebeests.”
Cardiologists are not the only doctors who have been migrating toward hospital practice. In the last few years, there have been increases in the number of doctors working for hospitals across the specialties. And spreads between fees for office services exist in an array of medical services, down to the basic office visit.
RTFA for more disheartening details. The crux remains, Obama and Congress in those first couple of years managed to get changes through to lower costs for some healthcare. The lawyers, lobbyists and other professional creeps working for the medical-industrial complex figured out a way around the changes – and increased profits to boot. Doctors around the country lined up to join the money parade. Not all of them. There remains a principled class in the corner here and there.
But, who noticed the changes? Who did anything about it? Certainly not Congress. They may be elected to represent the people of America, every state; but, they only listen to the Sound of Money riffling into their bank accounts.
It’s taken Obama till the last half of his second term to stand up and notice the change, propose new legislation to sort the problem. How much of a chance do you think we have of getting regulations through a Congress controlled by greenback conservatives, both Republican and Democrat – and restore a human focus to healthcare and family practice?
Remember “Audit the Fed”? It was the call that united populists of the right and left (and quite a few terrified centrists) around the cause of congressional investigators poking around the inner workings of the Federal Reserve, including its setting of interest rate policies.
And it’s back, with a new campaign from Senator Rand Paul (whose father led the earlier version) to push for a bill to do just that in a now-Republican-led Congress. But to make sense of the debate, here’s the simple fact you need to keep in mind: When people say they want to audit the Fed, what they really mean is “The Fed is doing things I disagree with.”
It’s easy to say that the Fed is a very secretive, mysterious institution. That has certainly been true historically, and in some respects remains true today. But in most of the ways that matter, the Fed is actually more transparent about what it decides to do, why and how it carries those policies out than almost any other institution in government.
…You can go to the New York Fed’s website and see the Fed’s securities holdings down to the individual exact bond holding. That’s how I know, for example, that as of Feb. 4 the Fed owned precisely $449.94 million worth of United States Treasury notes that mature April 30, 2015. The CUSIP code is #912828MZ0, in case you happen to know what a CUSIP code is (it is a numbering system to identify a particular bond or other security.)
Perhaps you don’t believe that information, and assume that the banksters at the New York Fed are lying to us all. Well, O.K., but keep in mind that those financial statements are audited already, in 2013 by Deloitte & Touche, one of the giant accounting firms that verify the books of virtually all major companies in America. Oh, and checking up behind them are the Fed’s inspector general and the Government Accountability Office, the same agency that Senator Paul would like to give greater powers to look into the Fed’s business…
After a monetary policy meeting, the central bank immediately releases a statement of several hundred words announcing what it has done, why and which of its officials voted against the action. Four times a year, the chairwoman, Janet Yellen, stands up immediately thereafter and takes questions from reporters for an hour or so. You may not like the answers, and she can duck a question as effectively as any public official, but she at least faces them.
Also four times a year, the Fed releases a bunch of details of Fed leaders’ forecasts, telling you what they expect to happen in the future with growth, inflation, unemployment and their own interest rate policy…
This legislation pressed by Republicans, Blue Dog Democrats and their lying subalterns has only one purpose. They want to corrupt the independence of the Federal Reserve and put control of monetary policy into the dirty hands of Congress.
Can you imagine Congress – especially a version like the present crop of do-nothings – trying to construct monetary policy to drag our sorry butt out of the Great Recession? The recession resulted from Congressional refusal to lead oversight of the financial industry. The Fed had to construct what little rescue they could because our elected representatives were afraid to do anything useful on their own.
Now, they want to end the Fed’s political independence. And they lie – again and again – and call this an “audit”. Humbug!
A UK court vindicated Edward Snowden’s whistleblowing…by ruling that the secrecy surrounding one of the programs he exposed was, in fact, illegal. The decision is more evidence that not only were the Snowden revelations necessary and justified, but are also slowly forcing changes in both US and UK, even as both governments fiercely resist.
In a stunning ruling, the Investigatory Powers Tribunal (IPT) – which oversees (and usually rubber stamps) Britain’s spy agencies – declared that the intelligence-sharing rules between the NSA and GCHQ (Britain’s NSA equivalent and partner-in-crime) governing their mass surveillance program violated UK human rights laws because they were kept secret for so long.
The IPT is one of Britain’s most secretive and deferential courts, which makes this ruling so particularly stinging. And the only reason the surveillance program is currently lawful is because the plaintiffs – Privacy International and a coalition of other groups – forced GCHQ to reveal more of their alleged rules to the public in the course of the case, which itself all stems from the reporting on the Snowden documents…
The complicit British media (with only a few exceptions) refused to cover the GCHQ story at all unless they were called in to act as public relations agencies for the government by printing fear-mongering stories claiming that anyone reporting on the issue of privacy was just helping terrorists and pedophiles…
Yes, the British Press is even slimier than their corporate cousins in the United States.
This case also calls for a re-examination of the British government’s deplorable actions against those who have merely reported on the Snowden stories. They’ve forced the Guardian to destroy a hard drive full of Snowden documents, outrageously detained Glenn Greenwald’s partner David Miranda under the Terrorism Act and threatened Guardian reporters with prosecution for doing their jobs. Until now, the UK government has used vague excuses related to “terrorism” for their authoritarian actions – but now their motives should now be clear to all: they were trying to cover up an illegal program.
It remains to be seen how the court will react, if at all, to future cases. But this should be a warning for both the UK government and the media: the law and even the most obsequious of courts are not on your side. Your citizens aren’t either.
From this side of the pond, I think we only get to recognize small differences. Independence in a few centers of hard-copy journalism are not as self-limiting as the Brits. But, then, we haven’t an Official Secrets Act to deal with. Yet. Butt-kissers in Congress have proposed passing similar laws in the United States now that the pimps for oppressive government are in charge of both wings of congress.
Anyone confident the White House crew will stand up against a rebirth of official McCarthyism?
Just as the political correctness of the Right has generally been obeyed by the respectable Left in Congress, in the American Press – the same is true of policies counter to our Constitution. It took decades and a Supreme Court wholly unlike the sycophants of surveillance-as-safety currently in place atop our court system. And it only took a couple of Republican presidents and cowardly Democrats in Congress to remove principle from the oversight of politics once again.
After spending several years interviewing scientists and holding public forums to debate ethics and air concerns, the U.K.’s lower house of Parliament this week voted to allow babies to be born with three genetic parents.
While some call it a perversion, the procedure has nothing at all to do with kinky sex. Rather, it’s a highly advanced single-cell micro-surgery, replete with cutting-edge lasers and imaging software and, yes, even a joystick, whereby a small number of skilled geneticists is able to remove the nucleus of a donor woman’s egg (the part that plays host to some 25,000 genes) from its surrounding cytoplasm (in which reside 37 genes) and insert the intended mother’s nucleus in its place…
The purpose of the procedure, also called mitochondrial gene replacement therapy, is not to tweak the physical characteristics or personality traits of a child – those reside in the nucleus, which still belongs wholly to the intended mother. Rather, it is to swap out that mother’s faulty mitochondrial DNA – those pesky 37 genes that power every cell in our bodies save red blood cells – with a healthy donor’s.
Because when mitochondrial DNA fail to provide energy to our cells, dozens and possibly hundreds of diseases can result, causing a wide range of problems that include extreme fatigue, dementia, stunted growth, deafness, blindness, multi-organ failure, and even death…
This kind of genetic mixing crosses the so-called germ line – the series of cells through which genes pass down through future generations – which is outlawed in dozens of countries, including the UK, hence the need for Parliament to make an exception. And while it’s not yet illegal in the US, the FDA has hesitated for several years to approve the first clinical trials here. “Maybe the FDA will wait for the results if they don’t want to conduct clinical trials here,” Mitalipov said.
That sounds about right for the United States. I’ve lived through a lifetime of governments whose only concept of adventure involves military hardware and killing furriners. Add into the equation Congress which has become fearful unto death of the religious right – and you know in advance what chance enabling legislation might have.
Shades of the American Family Whatever! The United States began a backwards trudge to the 19th Century when Ronald Reagan removed solar panels from the roof of the White House. The few years of progress we found during a fraction of Obama’s first term will probably be revoked if both conservative and nutball Republicans acquire the White House in addition to Congress. Should more than 35% of eligible voters crawl out from wherever they hide – and Hillary is elected along with a supportive Congress – we might get another year or two of change before political cowardice resumes its traditional place in a collapsing imperial nation.
We’ll continue our journey on the way to becoming 1950 England.
America’s presidential election is still nearly two years away, and few candidates have formally thrown their hats into the ring. But both Democrats and Republicans are hard at work figuring out what will appeal to voters in their parties’ respective primary elections – and thinking about what will play well to the electorate as a whole in November 2016.
The contrast between the parties at this stage is striking. Potential Republican presidential candidates are arguing among themselves about almost everything, from economics to social issues; it is hard to say which ideas and arguments will end up on top. The Democrats, by contrast, are in agreement on most issues, with one major exception: financial reform and the power of very large banks.
The Democrats’ internal disagreement on this issue is apparent when one compares three major proposals to address income inequality that the party and its allies have presented in recent weeks. There are only small differences between President Barack Obama’s proposals (in his budget and State of the Union address), those made in a high-profile report from the Center for American Progress, and ideas advanced by Chris Van Hollen, an influential member of Congress. (For example, Van Hollen recommends more redistribution from higher-income people to offset a larger tax cut for middle-income groups.)
Against this backdrop of programmatic unity, the difference of opinion among leading Democrats concerning Wall Street – both the specifics of the 2010 Dodd-Frank financial reforms and more broadly – stands out in bold relief.
But a serious challenge to all of these views has now emerged, in proposals by Senator Elizabeth Warren, a rising Democratic star who has become increasingly prominent at the national level. In her view, the authorities need to confront head-on the outsize influence and dangerous structure of America’s largest banks.
Warren’s opponents like to suggest that her ideas are somehow outside the mainstream; in fact, she draws support from across the political spectrum. In last month’s fight against Citigroup’s successful effort to roll back Dodd-Frank, for example, Warren’s allies included the House Democratic leadership, the Independent Community Bankers of America, Republican Senator David Vitter, and Thomas Hoenig (a Republican-appointed vice chair of the Federal Deposit Insurance Corporation).
Warren’s message is simple: remove the implicit government subsidies that support the too-big-to-fail banks. That single move would go a long way toward reducing, if not eliminating, crony capitalism and strengthening market competition in the financial sector. This is a message that plays well across the political spectrum. And growing support for Warren’s ideas helps the Federal Reserve and other responsible regulators in their efforts to prevent big banks from taking on dangerous levels of risk.
RTFA. Consider the possibility that the Democrat Party – unlike Republicans – might challenge subservience to Wall Street or be satisfied with populist lip service to core reforms pressed by Elizabeth Warren, Bernie Sanders and many others?
The Pentagon’s internal watchdog has questioned the air force’s need for 46 armed Reaper drones, and suggested the flying service is wasting $8.8 billion on superfluous aircraft.
As purchases of General Atomics’s MQ-9 Reaper ballooned from 60 aircraft in 2007 to the current 401, air force officials did not justify the need for an expanding drone fleet…
During that time, costs for purchasing one of the signature counter-terrorism weapons of Barack Obama’s presidency increased by 934%, from $1.1 billion to more than $11.4 billion, according to a declassified September report by the Pentagon inspector general. Purchasing costs are a fraction of what the drones cost to operate and maintain over their time in service: in 2012, the Pentagon estimated the total costs for them at $76.8 billion…
Responding to heavy demand for additional aerial intelligence from troops deployed in Afghanistan, Iraq and elsewhere, the former defense secretary Leon Panetta in 2011 ordered the air force to buy sufficient drones to perform 65 combat air patrols, missions that require up to four aircraft to observe a target for nearly 24 hours.
But the air force’s air combat command “did not conduct and maintain consistent, complete and verifiable analyses for determining the necessary MQ-9 procurement quantity”, the inspector general found. Combing through insufficient or incorrect air force analyses, Pentagon investigators found that the officials “could not provide the underlying support for aircraft quantity determinations” and sidestepped a bureaucratic process for determining needed capabilities…
Pentagon inspectors found that the air force’s inability to justify its continuing Reaper purchases risks wasting $2.5 billion for 13 mission-ready drones; $2.1 billion for 11 training drones; $958 million for five test drones; $766 million for four air national guard drones; and $1.7 billion for nine attrition-reserve drones.
The per-cost waste of the questionable drone purchases works out to roughly $192 million for each of the 46 Reapers the inspector general was unable to justify buying.
We all know what Congress’ response will be to this critical finding by the Inspector General. They – Republicans and Democrats alike – will double the purchase.
Keeping the military-industrial complex fat and happy is one of the primary requirements of holding federal elected office.