The One Problem With Wal-Mart's Recent Hiring Spree
... Is that it is for temporary workers.
Of course, to some this is a good sign and an indication that eventually, at some point, all these workers will become full-time. Alas, it isn't. Recall that as we pointed out first back in 2010 in "Charting America's Transformation To A Part-Time Worker Society", this has been a long-term transformation, which has only accelerated in recent months with the implementation of Obamacare, whose provisions (which once again had to be passed to be grasped) effectively punishes employers by hiring full-time workers.
Since for corporations the bottom line is all that matters, this is manifesting in the hiring plans of the world's largest private employer. And where Wal-Mart goes, all other cost-cutting corporations (which in a time when revenue growth is negative, is everyone) are sure to follow. In short: while the quantity assessment of jobs may be improving, it is the quality that is collapsing, as those hired are mostly into lower-paying jobs (this chart explains it all), or just part-time with no job security, no leverage, and zero benefits.
Wal-Mart Stores Inc has in recent months been only hiring temporary workers at many of its U.S. stores, the first time the world's largest retailer has done so outside of the holiday shopping season.
A Reuters survey of 52 stores run by the largest U.S. private employer in the past month, including one in every U.S. state, showed that 27 were hiring only temps, 20 were hiring a combination of regular full, part-time and temp jobs, and five were not hiring at all. The survey was based on interviews with managers, sales staff and human resource department employees at the stores.
The new hiring policy is to ensure "we are staffed appropriately," when the stores are busiest and is not a cost-cutting move, said company spokesman David Tovar. Temporary workers, he said, are paid the same starting pay as other workers.
Using temporary workers enables the company to have adequate staff on busy weeknights and weekends without having to hire additional full-time staff.
And without having to pay full-time wages. Of course, in the new normal, part-time wages are sufficient to gobble up the houses that make up the "housing recovery."
Walmart U.S. Chief Executive Bill Simon also confirmed that the company is hiring more temp workers. "Their hours flex by the needs of the business from time to time," he told reporters the day before Wal-Mart's annual meeting last week.
The hiring strategy could save Wal-Mart money by trimming labor costs at a time when its margins remain under pressure. Many consumers are still struggling given a high jobless rate and lack of income growth, leaving retailers of everyday goods with little pricing power, according to other company CEOs and benefits experts. Competition from dollar stores, other big box discount chains and grocery stores is also intense.
It also could set an example for some other companies as they look for ways to cushion themselves from a potential rise in healthcare costs next year as a result of President Barack Obama's health care reforms, according industry experts and retail executives. Tovar said that the move wasn't related to these reforms, commonly known as Obamacare, but he did acknowledge that it could take a year or more for temporary workers to receive health care benefits. Turnover in retail often occurs within the first few months.
Temp workers typically have a completion date after which they have to reapply for work, but part-time employees work fewer hours than full-time workers indefinitely.
This is coming to every retailer near you, despite promises to the contrary:
The move to hire more temps throughout the year has not caught on with Wal-Mart's rivals such as Target, Costco and Sears, all of which said they are hiring full time and part-time employees but don't plan to hire temps outside of seasonally busy periods like the holidays.
"I don't know about others' practices or philosophies, but I can say that Costco's general hope and expectation when hiring an employee is to make it a long-term relationship," said Patrick Callans, vice president for human resources and risk management at Costco.
Mr. Callans, however, is more concerned about the "long-term relationship" with his shareholders, which is why the full-time facade will be the first to go once the company has no other place left where to cut costs.
But while wages were the primary driver for the part-time rotation in the past, the key variable now is none other than the president and his healthcare plan.
Hiring temps is "one strategy" that retailers could use to mitigate the potential rise in healthcare costs due to the new healthcare care law, said Neil Trautwein, a healthcare lobbyist for the National Retail Federation. "Another strategy could be employing more part-time employees."
Wal-Mart already has begun to change the healthcare plans it provides workers. Last November, it said that newly hired part-time employees would have to work a minimum of 30 hours a week, up from 24 hours previously, before they can qualify for health coverage.
Its U.S. employees also faced an 8-36 percent increase in premiums in 2013, the company said at the time, prompting some workers to forego insurance. The majority of eligible employees at Wal-Mart sign up for the company's health insurance.
Under the reforms, large companies must next year offer healthcare to 95 percent of employees who work more than 30 hours a week or pay a penalty of $2,000 per worker for the entire workforce.
When the work hours are so variable that the employer is not certain whether an employee qualifies, they can elect to determine eligibility by measuring hours during a period of up to 12 months, a strategy Wal-Mart said it plans to use.
Temp workers may therefore have to wait a year - provided they are still employed at the company - to find out if they are eligible.
"A temporary worker may never get that far," said Barbara McGeoch, a principal and health benefits expert at consulting firm Mercer's legal, regulatory and legislative group. "They may never get the coverage.
It would be ironic if these same part-time workers are the same who now are doomed to be locked out of the full-time labor force because they supported Obama's first-term sole achievement, Obamacare, which is now rapidly morphing into its true self - the biggest hindrance to the restoration of a healthy and vibrant job market. But with Bernanke at the printer, who needs such old-school things like work?