Government and Business

S.E.C. Changes Reporting Rule On Bosses' Pay
The New York Times
By FLOYD NORRIS
December 27, 2006

The Securities and Exchange Commission, in a move announced late on the last business day before Christmas, reversed a decision it had made in July and adopted a rule that would allow many companies to report significantly lower total compensation for top executives.

The change in the way grants of stock options are to be explained to investors is a victory for corporations that had opposed the rule when it was issued in July, and a defeat for institutional investors that had backed the S.E.C.’s original rule.

“It was a holiday present to corporate America,” Ann Yerger, the executive director of the Council of Institutional Investors, said yesterday. “It will certainly make the numbers look smaller in 2007 than they would otherwise have looked.”

Christopher Cox, the commission chairman, said yesterday that he viewed the decision as “a relative technicality” that improved the rule. When the rule was adopted in July, Mr. Cox said it was aimed at providing information that would allow shareholders to “make better decisions about the appropriate amount to pay the men and women entrusted with running their companies.”

In announcing the new rule on Friday, he said “the new disclosure requirements will be easier for companies to prepare and for investors to understand.”

As controversy has grown over rising executive pay, it has been hard to even get agreement on the total value of compensation for top executives. The rules passed last summer required companies to disclose more information and to compile it in a summary compensation table that is expected to become the standard by which corporate pay is compared.

The new rule changes the way grants of stock options will be measured in that summary table.

Under the old rule, if a company awarded an options grant valued at $15 million to an executive this year, the full amount of $15 million would show up in the summary compensation table.

Under the new rule, which takes effect immediately, the amount reflected in the table would be much smaller, with the remaining part of the $15 million included in later years, as the executive qualifies to exercise the options.

Under some circumstances, the options grant might not be reported at all in the first year, even if the executive would otherwise have been the company’s highest paid executive had the full value of the option grant been included.

The new rule is intended to make the disclosures identical to the way companies report options expenses in their financial statements, under accounting standard 123R, as approved by the Financial Accounting Standards Board.

In an interview yesterday, Mr. Cox said the change reflected what the commission had intended to do when it adopted the original rule in July. “My understanding all along was that we were going to follow the 123R model,” he said. “It came out differently from that when we adopted it.”

The fact it came out differently was disclosed by the S.E.C. at the time. The commission pointed out that some companies had wanted to time the disclosures in accordance with the accounting rule, but said the other approach “is more consistent with the purpose of executive compensation disclosure.”

But on Friday, the S.E.C. said it now believed that the change would provide “a fuller and more useful picture of executive compensation than our recently adopted rules.”

While practices vary, stock options often vest — meaning they may be exercised — over a period of three to five years after they are granted. The options can be canceled if the employee leaves the company before they vest.

For most executives, the accounting rule says the expense should be spread over the period from the grant to full vesting. So if options vest over five years, the expense would be reported over that period.

In the $15 million example, if the options vested over a five-year period, the summary compensation table would reflect a cost of $3 million per year. In the first year, the cost might be lower if the options were issued relatively late in the year, and could be almost nothing if they were issued just before the end of the company’s fiscal year.

But the new rule could create confusion because it would treat options issued to some executives — those eligible for retirement — differently.

If an executive were eligible to retire when the option was granted, and could keep the option if he or she did retire, then the entire option grant would be expensed immediately and listed in the summary table in the year it was granted.

But if the executive is not eligible for retirement, then the expense is spread out over the several years it takes for the options to vest.

That makes it possible that two executives with identical pay packages would have very different disclosures, making the one eligible for retirement seem to be much better compensated. “This will muddy the waters,” Ms. Yerger said.

Asked about that, Mr. Cox conceded it was an anomaly. But he said there were anomalies under the other rule as well. John White, the director of the commission’s division of corporation finance, pointed to the fact that the rule adopted in July could lead to reporting of compensation that would never be received.

“The anomaly that the commission was most concerned with was that if an executive leaves the company before the options vest, the full amount of the option still was reported in compensation disclosure when, in fact, nothing was received,” said Mr. White, who became director of the division in March, after the previous rules were proposed but before they were adopted.

He said that some companies issued options that had so-called cliff-vesting, in which all options vested after five years, and were forfeited if the executive left before that time. Under the new rule, expenses would still be reported for the first years, but then a negative amount would be reported in the year the executive left, reversing the earlier reported figures. There was no such reversal in the July rules.

The commission adopted the new rule in an unusual way, making it take effect immediately even though the commission had not announced that it was considering a change and had not sought public comment.

An S.E.C. spokesman pointed to two other rules adopted that way in recent years. Both were intended to comply with new federal laws that were about to take effect.

One, in 2000, stated that e-mail messages from mutual funds could satisfy rules requiring that information be given to customers in writing. The other, in 2001, established rules for complying with the Gramm-Leach-Bliley Act allowing mergers of financial companies.

Mr. Cox said there was no time to seek comment if the change announced Friday was to take effect in time to affect proxies issued in coming months. He said it would be confusing if companies reported one way in 2007 and then changed in 2008.

The rules adopted in July were intended to deal with widespread complaints that it was difficult to discover all elements of pay packages for top executives. Besides providing the summary table, the disclosures will provide new information in a number of areas, including retirement benefits.

The disclosures will be made for a company’s chief executive, chief financial officer and the three other highest paid executives, as indicated by the summary table. For those on the list, all option grants will be disclosed, so even if the summary table leaves out much of the value of options granted to a chief executive, investors could see the terms of the grant and consider it in assessing how well the executive was paid.

Under the July rule, a large options grant to an executive could propel him or her onto the disclosure list. But under the rule adopted Friday, such a grant might not put the executive in that group, meaning there would be no disclosure of that executive’s pay that year.

Over time, of course, most executives whose pay is being disclosed would have the same total reported under either rule. Under the new rule, options that were granted in prior years, but vested in 2006, will show up in next spring’s disclosures.

The reduction in reported pay is likely to be the largest at companies that accelerated the vesting of options in 2005 to avoid reporting them as an expense at all when the new accounting rule went into effect. Executives at those companies will not have as many old options vesting as they normally would have, and thus will be able to report lower pay.

The commission said it would take public comments on the latest change for 30 days, but it added that the new rules were now final.

When the commission considered the issue earlier this year, David C. Chavern, a vice president of the United States Chamber of Commerce, urged it to take the step it rejected in July and adopted on Friday, saying that to do otherwise would overstate compensation, since options would not have been earned when they were reported, and might later be canceled.

Whenever the value of the options shows up in the summary table, the value shown will be the estimated value of the option at the time it was granted. Years later, when the options vest, the stock price could be much higher or lower than it was when the option was issued, making the options much more valuable — or all but worthless — by the time they show up in the summary compensation table at the old value.

Wal-Mart Walkout

Wal-Mart Workers Walk Out
Employees at one store in Florida stage a protest - and win a reprieve.
By Pallavi Gogoi
BusinessWeek
Tuesday 17 October 2006

For months, politicians and activists have been saying that the low prices at the world's largest retailer, Wal-Mart Stores, come at a tremendous cost to its low-paid employees. They point to lawsuits that contend the company discriminates against women and forces low-paid employees to work through lunch breaks and after their shifts, without extra compensation. Wal-Mart has also been boosting its political contributions to stop initiatives aimed at forcing the retailer to raise pay and benefits.

Now, as Wal-Mart rolls out a new round of workplace restrictions, employees at a Wal-Mart Super Center in Hialeah Gardens, Fla., are taking matters into their own hands. On Oct. 16, workers on the morning shift walked out in protest against the new policies and rallied outside the store, shouting "We want justice" and criticizing the company's recent policies as "inhuman." Workers said the number of participants was about 200, or nearly all of the people on the shift.

It's the first time that Wal-Mart has faced a worker-led revolt of such scale, according to both employees and the company. Just as surprising, the company quickly said it would change at least one of the practices that had sparked the protest. Late in the day on Oct. 16, there was some disagreement over which of the new policies would be put on hold.

The protest wasn't led by any union group. Rather, it was instigated by two department managers, Guillermo Vasquez and Rosie Larosa. The department managers were not affected directly by the changes, but they felt that the company had gone too far with certain new policies. Among them were moves to cut the hours of full-time employees from 40 hours a week to 32 hours, along with a corresponding cut in wages, and to compel workers to be available for shifts around the clock.

In addition, the shifts would be decided not by managers, but by a computer at company headquarters. Employees could find themselves working 7 a.m. to 4 p.m. one week and noon to 9 p.m. the next. "So workers cannot pick up their children after school everyday, and part-timers cannot keep another job because they can be called to work anytime," says Vasquez.

In addition to scheduling changes and reduction in hours, workers are now required to call an 800 number when they are sick. "If we are at an emergency room and spend the night in a hospital and cannot call the number, they won't respect that," says Larosa, who has worked at the store for six years. "It will be counted as an unexcused absence."

Beginning last week, the two managers began talking with other employees, one at a time, getting their signatures in support of a protest. The demonstration may not have happened if not for the tight-knit nature of this predominantly Spanish-language community near Miami. At least 15 department managers joined the workers in speaking out against the new policies. "We are a Spanish-speaking community, some from Cuba, some from Venezuela and the Dominican Republic, and if something affects my brothers and sisters, it affects me," says Yahima Morales, who has been a department manager of health and beauty aids for four years at the store.

The employees drafted a protest letter that they have sent to executives at Wal-Mart headquarters in Bentonville, Ark., and also to Florida politicians, including Florida Governor Jeb Bush. "In the letter, we state that we want justice and that Wal-Mart should stop harassing us," says Vasquez. At least 400 store employees have signed the letter.

Wal-Mart spokesman David Tovar says his understanding is that the protest was prompted by the reduction in hours, which he says was simply a mistake. "The new schedules posted made it seem like some hours were reduced, but that was inaccurate and we have corrected it." Tovar wouldn't talk about the sick-leave issue, saying that he wasn't aware the topic was raised by the workers. As for the changes in shifts, he says: "Our schedules are set so that we have adequate staff during the busiest hours of the day."

The scheduling changes, which have been rolled out in Wal-Mart stores around the country in recent weeks, are a sign that the retailer is acting on ideas outlined in an internal document that was leaked last year. In the memo, a Wal-Mart executive said it would find ways to rid its payroll of full-time and unhealthy employees who are more expensive for the company to retain.

Wal-Mart executives have recently told Wall Street analysts that the company wants to transform its workforce from 20 percent part-time to 40 percent. Recently, it was also reported that older employees in some stores who had back and leg problems were barred from using stools on which they had sat for years.

The moves come as the company is struggling to keep its profits growing at the rapid rate that they have in the past. As it squeezes its workforce expenses and trims costs in all corners, it is also expanding overseas. On Oct. 16, The Wall Street Journal reported that Wal-Mart has agreed to spend $1 billion to acquire Trust-Mart, a closely held Taiwanese company that owns one of the largest food and department store chains in China.

What's next at the Hialeah Gardens store, where store managers have had to pitch in to keep the store open? Is this the first step to forming a union at the store? That's unlikely, given the fate of previous attempts to unionize store employees. When employees in Jonquière, Que., Canada, voted last year to unionize, Wal-Mart shut the store. Vasquez says the workers haven't really talked about their plans, beyond getting the company to change its practices. "At this point, we just want to be heard," he says.

America's Uninsured

Number of Uninsured Still Climbing Despite "Healthy" Economy
By Michelle Chen
The NewStandard
Wednesday 25 October 2006

A new analysis of census data reveals that despite signs of what some call a rebounding economy, the number of people lacking health insurance continues to expand.

According to a report released last week by the public-health research institute Kaiser Family Foundation, in 2005 another 1.3 million Americans joined the ranks of the uninsured, bringing the total uninsured non-elderly population to just over 46 million. Not counting seniors eligible for Medicare, the uninsured rate reached about 18 percent.

The report noted that the uninsured rate continued a five-year growth streak - even as the economy's total productivity grew substantially and unemployment decreased.

Of the 1.3 million new uninsured people studied in the report, over a million were individuals living in family units that make below twice the poverty level. That typically amounts to less than $40,000 per year for a family of four, though the threshold varies according to location and household size.

The population of uninsured children grew by an estimated 360,000 in 2005 following several years of general decline, according to census data released in August.

Researchers attributed much of the coverage gap to the soaring cost of insurance premiums for employer health benefits. But they also pointed to structural economic changes that may be undermining healthcare coverage for working Americans.

Between 2000 and 2005, more workers moved into small firms or self-employment, where health coverage is generally less prevalent. In that same period, industries that have traditionally offered solid health benefits - such as manufacturing, government administration and mining - lost about two million workers.

Meanwhile, 5.6 million workers entered industries that traditionally have low employer-insurance rates, including retail, communications and construction.

The uninsured population grew by a larger margin in 2005 than it did in 2004, according to the Kaiser analysis. Researchers found that in 2004, Medicaid and its sister program for children, the State Children's Health Insurance Program, expanded slightly, picking up some of the slack from the loss of employer coverage. But last year, those public programs failed to grow to offset the continued decline in employer-based insurance.

Students Resort to Private Loans, Staggering Debt

By Carrie Sturrock
The San Francisco Chronicle
Wednesday 25 October 2006

Ethan Winsby considers himself in financial ruin at age 27 - but not because he lost at gambling or risked everything on a startup that went bust.

Like a growing number of young adults, he had to take out private loans to attend college.

He graduated from the California Culinary Academy in San Francisco in 2005, but he said his subsequent low-paying job as a cook has made it nearly impossible for him to repay the $35,000 he borrowed.

As the 18 percent interest rate compounded, his debt has soared to $50,000. The monthly payments, if he made them, would be two-thirds of his $1,200 monthly after-tax salary.

With no prospects of paying his loans off quickly, Winsby sees his debt spiraling out of control.

"At this rate, I'm going to be in default," he said. "Default means you have no options. It's the main source of stress in my life. It shouldn't be. I was trying to make a career for myself. I wish I hadn't even gone to school."

As the cost of college skyrockets and the federal government limits how much it will loan students, young adults increasingly are taking out private loans to finance their education.

The amount loaned to students nearly tripled between 2001 and 2006, from $6.1 billion to $17.3 billion, according to an annual student aid survey released Tuesday by the College Board.

"I am shocked and worried about the amount of debt these companies are encouraging students to take out," said Robert Shireman, executive director of the Project on Student Debt.

The trend is especially dangerous, he said, because such loans almost always carry a variable interest rate and lack the protections offered by federal loans, "so if interest rates go up, your private student loan can look like a credit card pretty quickly."

Recent changes in federal law make it nearly impossible to discharge any kind of student loan debt through bankruptcy. Instead, a borrower faces the possibility of a ruined credit rating or being forced into an unaffordable payment plan.

Education experts are calling on the federal government to raise the amount it will loan students and to give them more grants to keep them from having to turn to private loans to fill the gap.

Historically, private lenders have marketed loans to students in professional schools who have high earning potential once they graduate. But increasingly, they are targeting undergraduates.

One company, Loan to Learn, advertises on Google with this tantalizing ad: "Financial Aid Not Covering Your Costs? Get up to $50,000 in five days." The company will loan qualifying undergraduates $50,000 a year, up to $250,000.

The United States Student Association filed a complaint with the Federal Trade Commission in September saying that Loan to Learn engaged in "false and deceptive advertising practices" by encouraging students to view its private loans as a preferable alternative to federal grants and loans.

If the FTC finds a company has violated the law, it can seek a court order to require changes.

Loan to Learn officials deny misleading students and say they provide a needed service.

"To say that Loan to Learn doesn't have an interest in the students cuts to the core," said Catherine Reynolds, chairwoman and CEO. "What we do is simply try and help families have an option."

Students and families are finding it increasingly hard to pay for college. In the past five years, the cost of attending a public university has risen 35 percent after adjusting for inflation, according to the College Board. Meanwhile, federal loan amounts have stagnated.

For example, under the most popular federal program, called Stafford, an undergraduate can borrow no more than $23,000 over five years - roughly what the average private university charges for a single year's tuition and fees. The maximum Pell Grant for needy students has stayed at $4,050 for three years.

Many students turn instead to private loans.

A decade ago, such high-interest loans represented 6 percent of all the cash loaned to students. Today they are 20 percent, according to the College Board.

When Beccie and Carl Smalls' son decided to attend Brooks Institute of Photography in Santa Barbara in 2002, they realized federal loans wouldn't come close to covering tuition and expenses.

The Smalls co-signed on two private loans totaling $50,300 through Stillwater Bank (which later sold the loans to the Sallie Mae company) so their son could get a lower interest rate. He racked up another $31,976 in private loans that his parents didn't co-sign - the interest rate on those ranged from about 12 to 17 percent - then dropped out to keep from going deeper into debt.

When his loans came due six months later, he didn't make enough money as a fledgling photographer to cover the $1,000 monthly payment. Sallie Mae agreed to postpone the due date two more years, but with compounding interest, his debt grew to at least $110,000. And because he didn't graduate, he couldn't consolidate his loans under a fixed interest rate, Beccie Small said.

As co-signers of two of the loans, the Smalls became fearful. What if their son failed to make his payments? A collection agency could ruin the Smalls' credit rating and eat up any savings they had.

In 2006, they took a second mortgage on their house to pay off the two loans they co-signed, which had grown from $50,300 to $67,200. Their son still owes $555 a month for the next 15 years on the rest of the loans. By the time he pays them, he will have given Sallie Mae $98,877. And the Smalls owe $712 a month to pay off their house loan.

"There should be more options for these kids," said Beccie Small. "There was one option for him - private loans. He wanted to go to school so bad, he took what they gave him."

Students often get into trouble because they don't fully understand the terms and agreements of what they're getting into, said Alan Collinge, who founded Student Loan Justice in Washington 18 months ago to collect stories of wronged students and to advocate for change. He did this after unemployment caused him to default on a $38,000 loan to attend the University of Southern California. That loan has grown to $105,000 with compounding interest, penalties and fees.

"College students are an extremely vulnerable segment of the population," Collinge said. "They will sign virtually anything you put in front of them."

Ethan Winsby feels like he signed away his freedom. Every night, he searches the Internet for a way out of the financial mess and wonders what will happen when Sallie Mae no longer allows him to put off the payments. In reviewing his situation, Sallie Mae spokesman Tom Joyce called Winsby an "unusual case" and said few of the company's borrowers have such high variable interest rates. He added that less than 2 percent of Sallie Mae's private loan borrowers default.

But higher-education experts counter that default rates are deceptive. Companies use techniques such as allowing borrowers to defer payments to avoid defaulting - but loan recipients still owe many times what they originally borrowed.

They say too many people are like Winsby, struggling with loans they might never be able to repay.

"What sense does it make to dig the hole deeper and create an underclass who because of their student loan default will never get out of debt?" asked Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers. "We're marginalizing a significant portion of our population."

Protect Yourself
Some tips for students facing the high cost of college:
Exhaust all federal loan possibilities as well as state and institutional grants and aid.
Ask questions. If the interest rate is variable, for example, ask the lender if there is a limit on how high the rate can go. For more questions, go to projectonstudentdebt.org/private_loan_questions.vp.html.
Talk to the financial-aid adviser at your college about the loan before agreeing to borrow the money.
Document everything. If you are offered a discount, get the terms in writing.
Source: Project on Student Debt

Chronicle staff writer David Lazarus contributed to this report.

Child Labor

Child Labor Is Back: Children Again Sewing Clothing for Wal-Mart, Hanes, and Other US Companies
National Labor Committee (NLC)
Press Release
Tuesday 24 October 2006

New York - The following was released today by the National Labor Committee (NLC) on child labor:

An estimated 200 children, some 11 years old or even younger, are sewing clothing for Hanes, Wal-Mart, J.C. Penney and Puma at the Harvest Rich factory in Bangladesh.

The children report being routinely slapped and beaten, sometimes falling down from exhaustion, forced to work 12 to 14 hours a day, even some all-night, 19- to 20-hour shifts, often seven days a week, for wages as low as 6 and a half cents an hour. The wages are so wretchedly low that many of the child workers get up at 5 a.m. each morning to brush their teeth using just their finger and ashes from the fire, since they cannot afford a toothbrush or toothpaste.

The workers say that if they could earn just 36 cents an hour, they could climb out of misery and into poverty, where they could live with a modicum of decency.

In the month of September, the children had just one day off, and before clothing shipments had to leave for the US, the workers were often kept at the factory 95 to 110 hours a week. After being forced to work a grueling all-night 19- to 20-hour shift, from 8 a.m. to 3 or 4 a.m. the following day, the children sleep on the factory floor for two or three hours before being woken to start their next shift at 8 a.m. that same morning.

The child workers are beaten for falling behind in their production goal, making mistakes or taking too long in the bathroom (which is filthy, lacking even toilet paper, soap or towels).

In 1996, after Charles Kernaghan and the National Labor Committee revealed that Kathie Lee Gifford's clothing line for Wal-Mart was being made by 12 and 13-year-olds in Honduras, the resulting scandal and publicity was enough to virtually wipe out child labor in garment factories around the world producing for export to the US.

Exactly a decade after the Kathie Lee Gifford scandal, children are again sewing clothing for Wal-Mart, Hanes and other US companies," said Charles Kernaghan, director of the National Labor Committee. "Children belong in school, not locked in sweatshops. Wal-Mart, Hanes and the other companies owe these children, and must now provide them with stipends to replace their wages and cover all necessary expenses to send them back to school."

Corporate monitoring has again proved a miserable failure, as Harvard Rich was certified by the US apparel industry's Worldwide Responsibly Apparel Production (WRAP) monitoring group. Not only did the US companies fail to notice the child workers, the beatings, the excessive mandatory overtime, but also that not one single worker in Harvest Rich was paid the correct overtime pay legally due them. Any worker daring to ask for their proper wages, or that their most basic legal rights be respected, would immediately be attacked, beaten and fired.

"Right now, more than 100 children at the Harvest Rich factory are being threatened with firing," says Kernaghan. "It is time for the US companies to act immediately, today, to guarantee that this does not happen and that the children are returned to school."

Full report, photos and video footage available at http://www.nlcnet.org.

The National Labor Committee is an independent, nonprofit human rights organization and the leading anti-sweatshop watchdog group in the US. The NLC has run successful campaigns not only against Kathie Lee Gifford and Wal-Mart but also on production for Sean "P Diddy" Combs, the NFL, NBA, GAP, Disney, Nike and others. Most recently, the NLC exposed the descent of the US-Jordan Free Trade Agreement into human trafficking and involuntary servitude.

Former Miners File Suit Against Alcoa

By Nathan Blackford
Warrick Publishing Online
Wednesday 08 November 2006

Former miners and their families have alleged for nearly three years that waste dumped at the Squaw Creek Mine north of Boonville was the cause of a multitude of physical ailments. Now, 41 people - mostly miners and their spouses - have filed suit asking for damages from the mine's owner, Alcoa.

Starting in 1965, Alcoa disposed of various waste materials at Squaw Creek, including hexavalent chromium sludge and coal tar pitch, into open pits. There are at least 12 identified waste disposal sites in the north field of the Squaw Creek Mine.

The former miners contend that the waste was toxic and that Alcoa knew or should have known the danger the material posed to those who worked near it. The suit asks for unspecified monetary damages from Alcoa for negligence, infliction of emotional distress and loss of consortium.

The suit was filed with the Warrick County Circuit Court on Oct. 23. Attorney Peter Racher of the Indianapolis law firm Plews, Shadley, Racher and Braun is representing the plaintiffs.

"We feel very, very strongly that a responsible company would have exposed wastes of these types to a vulnerable population," said Racher. "No one informed (the plaintiffs) that working with hexavalent chromium was harmful to human skin or human organs. No one told them that coal tar pitch contains many substances known or suspected of being human carcinogens."

The suit contends that many of the plaintiffs have relatives or friends who have died from cancer as a result of exposure to toxic substances at Squaw Creek. That has caused them to worry about the "precariousness of their future health, the well being of their loved ones, and the looming imminence of premature death."

Miners believe that they have suffered a wide range of health problems - though cancer is a main concern - from exposure to toxic waste. The suit claims that former mine workers "have been required to endure painful surgeries, radiation, chemotherapy and other treatments" due to effects from toxic waste.

But Alcoa says - as it has contended from the beginning - that the materials are not toxic and did not cause the health problems the miners have had.

"We've believed all along, and according to the information we've had, that those materials would not result in health impacts," said Alcoa spokesperson Sally Rideout-Lambert. "These are not the type of materials that would cause these health problems."

Racher disagrees.

"That is a very controversial position that Alcoa takes," said Racher. "We think that the science had been in place for decades about the adverse human health impacts associated with the substances that were disposed of at the mine. And Alcoa knew that the people who would come in contact with these substances were untrained and unprotected."

Racher says that the Material Safety Data sheets concerning coal tar pitch and hexavalent chromium sludge predict that chronic exposure to the materials will produce exactly the kinds of health effects suffered by the former miners.

"These people have suffered incredibly," said Racher. "These are folks for whom honorable work at the mine was their livelihood. They expected that through hard work they would enjoy good lives. Instead, through hard work they got sick, and with illnesses that are life-threatening. Every one of these people, their lives have been completely upended."

How much material was actually dumped at the mine is unclear. The United Mine Workers Union Local 1189 estimates that approximately 71 million cubic feet of chromium sludge and 69 million gallons of coal tar pitch were dumped. Lambert says those figures are estimates, generally based on how much waste could have been produced rather than by actual counts.

Alcoa owned the Squaw Creek Mine through a subsidiary known as Alcoa Fuels, Inc. Company officials have admitted that waste was dumped at the mine, though they have contended it was done by the rules.

Alcoa also set up a health screening program for the miners through the University of Cincinnati Center for Occupational Health. The final results of that study are not complete.

Mining ended in the north field at Squaw Creek in 1987, and the mine stopped all production in 1998. A 2004 report from the Indiana Department of Environmental Management indicates that the waste material has not moved or become a health hazard.

Another former miner, Bil Musgrave, had filed a similar lawsuit against Alcoa in February.

But that case has been delayed in federal court, and Racher said that the second suit, which is not a class-action, would be able to stay in the Warrick County courts.

Labor Issues in Houston

Labor's Gambit in Houston
By Sylvia Moreno and Dale Russakoff
The Washington Post
Friday 17 November 2006

A service union has organized the city's janitors - and taken their fight global.
Houston - According to the laws of economics, a $5.25-an-hour night cleaning woman with breast cancer is no match for the multibillion-dollar corporations that run the energy capital of America. But that's only one of the assumptions being tested in a strike of 1,700 Houston janitors that began almost four weeks ago.

Ercilia Sandoval, 42, and her impoverished co-workers have become international celebrities of the Service Employees International Union's debut campaign in the right-to-work South. The union's Justice for Janitors campaign organized local janitors last year and this week is staging noisy protests and civil disobedience here, nationally and even internationally as it demands higher wages. Janitors have walked off the job at buildings that house more than half of Houston's office space.

One of the union's prime tactics is shaming this oil-rich city's business leaders with international publicity about the poverty-level wages of their cleaning people. As part of the campaign, Sandoval, a Salvadoran immigrant who works a four-hour shift cleaning the Aon building in Houston's posh Galleria district, has been telling her story on Web sites, in speeches and in interviews.

She has no health insurance, and she says it took her four months to qualify for the public assistance she needed to begin chemotherapy treatments. She lost her hair from the procedure and is scheduled for a mastectomy next month.

"I am supporting the union," Sandoval said, "for all the other Ercilias who are out there or who might have already died because of no health insurance."

Union picketers have publicized the janitors' cause in multiple languages, from Moscow to Miami to Sacramento, targeting buildings owned by the same multinational companies that own the Houston towers where the janitors work. Besides the low wages, the union is also drawing attention to the unusually high rate of medically uninsured in Harris County, which includes Houston: 31 percent, compared with the national rate of 15.9 percent.

A picketer in Germany carried a sign saying, "Houston, we have a problem" in German - echoing the famous line from the Apollo 13 space mission.

"We learned over many years that these fights can't be just about unions," said SEIU President Andrew L. Stern. "They're symbolic of what's wrong in our country. The voters in this last election said loud and clear that we're growing apart, not growing together in this economy, and they want it to change."

Democratic congressional leaders have said one of their first priorities as a majority will be raising the minimum wage from $5.15 to $7.25 an hour, which would go a long way toward meeting the union's goals.

The Houston janitors are demanding more - $8.50 an hour plus health insurance. They also are demanding full-time work instead of four-hour shifts. Their proposed package, equivalent to a 60 percent pay increase, would still fall short of what SEIU janitors make in other cities, including the District. In many other cities, union janitors work full time and get health benefits.

Five major cleaning contractors that employ the janitors did not respond to the SEIU package, and the union accused them of bad faith, calling the strike on Oct. 23 at 58 buildings. Tenants say they have not noticed a difference, however, because the cleaning companies hired replacement workers. Spokesmen for three of the cleaning companies said none of them would comment until the dispute is resolved.

All day Wednesday and Thursday, hundreds of striking janitors moved about the city, accompanied by drums and makeshift maracas - empty soda cans filled with beans. Several hundred of them gathered outside the Chevron headquarters on Wednesday, where 14 out-of-town protesters were arrested for chaining themselves to the front door of the 40-foot-tall tower of glass, steel and granite.

On Thursday, protesters from around the country - dubbed "freedom flyers" by the SEIU - flew to Houston to join the janitors and to liken their struggle to the Boston Tea Party and the anti-slavery, civil rights and women's movements.

As in other cities, the union has organized the entire labor market, not just one cleaning company - an approach that means no company would be put at a disadvantage by paying union wages and benefits. Its success, according to Stern, has knocked down the conventional wisdom that "you can't organize immigrants." Here, as in many cities, the cleaners are predominantly Latino and female.

The SEIU is facing some of the same adversaries it has battled in other cities because ownership of downtown real estate and building services is highly concentrated.

Here, as elsewhere, the union is applying pressure not only to cleaning contractors but to owners of the buildings where they clean because owners would absorb most of the cost of higher wages and benefits for janitors. Union supporters say the building owners - Hines Interests, Crescent Real Estate, Brookfield Properties, Transwestern and P.M. Realty - could end the strike tomorrow by giving cleaning contractors the go-ahead to meet the union's demands.

Among the demonstrators on Wednesday was Rene Ramirez, a lead cleaner in the Chevron Corp. headquarters whose job is to check up on janitors and carpet cleaners and to mix the chemicals used to wipe down restrooms and offices. He said he had continued working in the early days of the strike but changed his mind when he went to a weekly meeting with supervisors from the cleaning contractor GCA Services Group Inc.

Ramirez, who earns $7 an hour, said he pointed out that GCA janitors were making $5.15 an hour after three and four years on the job and needed a raise. He said the company representative answered, "If you don't like it, you can always leave and go somewhere else."

Flora Aguilar, 51, another striking janitor, was making $5.15 an hour after more than two years on the night crew for the cleaning contractor OneSource at the 55-floor Enterprise Plaza downtown. She was taking home $209 every two weeks, of which $20 went to bus fares. She said she had seen two managers fire women for refusing to stay past the end of their shift - even though the women would have missed their last bus home.

There were indications in recent days that the union's campaign had produced some movement. Local officials said downtown business leaders were meeting unofficially with cleaning companies and the union, and the union, as a goodwill gesture, called off plans to picket the Sears Tower in Chicago.

US Rep. Sheila Jackson Lee (D-Tex.) said she made an impassioned plea to the Greater Houston Partnership, the voice of the business community, to press cleaning contractors to meet the janitors' demands.

"The image of a city standing against working people who are trying to elevate themselves is not an image that represents Houston," she said. "I'm not going to let my city be projected that way."

Russakoff reported from New York.

Immigrant Workers

About 1,000 Workers at North Carolina Plant Walk Out Over Firings of Immigrants
The Associated Press
Friday 17 November 2006

Tar Heel, North Carolina - About 1,000 nonunion workers, mostly Hispanics upset with the recent firing of immigrants for allegedly providing false documents, walked off their jobs at a Smithfield Foods Inc. slaughtering plant, a union spokeswoman said.

About 300 workers were protesting Friday morning outside the plant, said Libby Manly, a representative of the United Food and Commercial Workers Union, which helped organize the protest and has been trying for years to form a union at the plant. The plant is considered the world's largest hog slaughtering plant.

Smithfield Foods also has failed to address problems of sexual harassment and denial of workers compensation claims, said Gene Bruskin, a representative of the union who serves as the Smithfield campaign director.

"There's a long train of abuses in that plant really going back more than a dozen years," Bruskin said. "Recently the activity in the plant has been increasing."

Smithfield spokesman Dennis Pittman said the company was only complying with a request from US Immigration and Customs Enforcement to gather the names, Social Security numbers (which are usually needed to prove eligibility to work in the United States), dates of birth and gender of workers at the plant. About 600 workers were found to have unverifiable information. The company fired about 75 people for providing false information, he said.

"This walkout - which apparently was instigated by the United Food and Commercial Workers Union - is totally unjustified," Pittman said. "If Smithfield were to do what the union is calling for, we would be breaking federal law by knowingly employing undocumented workers. The union should stop trying to pressure Smithfield to break the law."

Workers on Friday distributed a statement from Latino and black leaders that calls for an end to "unjust firing of Smithfield workers and the timely rehire of all workers who have been unfairly terminated." The statement also demanded no retaliation against protesting workers.

The plant, about 25 miles (40 kilometers) south of Fayetteville, employees 5,000 workers and slaughters up to 34,000 hogs a day. Smithfield, Virginia-based Smithfield Foods is the world's largest pork processor.

Rep. Frank Offers Business a 'Grand Bargain'

Rep. Frank Offers Business a "Grand Bargain"
Reduced regulations for more job benefits.
By Michael Kranish and Ross Kerber
The Boston Globe
Sunday 19 November 2006

Representative Barney Frank has proposed in a series of meetings with business groups a "grand bargain" with corporate America: Democrats would agree to reduce regulations and support free-trade deals in exchange for businesses agreeing to greater wage increases and job benefits for workers.

Frank, the Newton Democrat who is in line to chair the House Financial Services Committee, has struck a conciliatory posture with financial-industry leaders in recent years. But since the morning after Election Day, he has moved quickly to lay out an ambitious plan to try to end the political stalemate between Republicans and Democrats on broad economic issues.

"What I want to do is break that deadlock," Frank said in an interview. "A lot of policies that the business community wants us to adopt for growth are now blocked. On the other hand, the business community is successfully blocking the minimum wage [increase] and created a very anti union attitude in the Congress."

Frank proposes that if businesses support a minimum wage increase and provide protection for workers adversely affected by trade treaties, Democrats would be more willing to ease regulations and approve free-trade deals. Frank also would support changes to immigration rules favored by businesses, and noted that allowing more immigrants would put needed funds into the Social Security system.

Frank casts his proposal as a way for capitalists to quell some of the populist fervor that was expressed in last week's election, when many Democrats vowed to crack down on companies moving jobs overseas.

"I'm a capitalist, and that means I'm for inequality," Frank told Boston business leaders on the morning after Election Day, in a speech about his grand bargain. "But you reach a point where you get more inequality than is healthy, and I believe we're at that point.

"What we want to do is to look at public policies that'll get some bigger share of the increased wealth into wages, and in return you'll see Democrats as internationalists.... I really urge the business community to join us."

After 26 years in Congress, Frank's ambition - and his ability to broker such a deal - is at an apex. His power will take a quantum leap when his chairmanship is approved by House Democrats - an approval that is little more than a formality. The 70-member Financial Services Committee oversees everything from banking to housing to urban affairs.

Frank is also a close adviser to Speaker-elect Nancy Pelosi, with whom he bonded during the campaign when Republicans deemed both of them reasons to be fearful of Democrats.

But while Frank has won support in Massachusetts among financial-services executives, some national business leaders are skeptical. Bruce Josten , chief lobbyist for the US Chamber of Commerce said he is worried that Frank's grand bargain would mandate costly benefits to employees, including health care , in exchange for support of free trade.

"His grand bargain ... certainly is not going to sail with the American business community," Josten said in an interview. Josten noted that Frank historically has been at odds with the US Chamber due in part to opposition to trade deals. In 2005, for example, Frank supported the chamber's issues only 33 percent of the time.

Frank, for his part, is unconcerned. Asked about the chamber's low ranking of him, he responded with one of his classic zingers: "That's more than I give them."

Frank said he will work out details of his grand bargain after conducting a series of hearings starting early next year. "I am not claiming I have majority support," he said. "I expect to spend much of the next year in the committee documenting this." But he said he has general backing from Pelosi and other top Democrats.

A starting point could be health care. Many businesses are trying to shed high health care premiums. Frank hopes that workers and businesses can agree on a government-administered plan paid for by workers that would reduce burdens on businesses, which would pass on savings to employees through higher wages.

"I think employer-paid health care is a mistake," he said. "I think it depresses wages."

Stephen J. Collins , president of the Automotive Trade Policy Council, which represents Detroit's Big Three automakers, said business leaders would welcome such a discussion with Frank. "Our companies are very open about the fact that they are facing massive competitive challenges of a global nature that need big answers," Collins said. "There has to be a partnership between government and industry to solve some of these problems, and health is one of them."

Much of Frank's work on economic issues has been behind the scenes until now. In the months before the election, Frank wrote a series of strategy memos to Democratic colleagues in which he urged them to campaign on "how poorly most workers have fared under the Bush economy."

In one memo, Frank went through a point-by-point rebuttal of a White House report on how workers fared under the Bush administration, arguing that only the wealthiest Americans have seen a significant income gain.

While it might seem like a stretch for one of the most liberal members of Congress to believe he is in position to strike a monumental deal with big business, Frank said he has a track record of working with banking and financial companies that should allay such concerns.

For example, he said, he put pressure on Bank of America to retain jobs in Massachusetts, but he also helped pass rules allowing banks to process more money electronically. He also has backed measures to help banks by making it harder for Wal-Mart and similar national chains to enter the retail banking business.

For Boston's large money-management industry, meanwhile, Frank has served as an important ally. For instance, he once sided with Fidelity Investments chief executive Edward C. Johnson III in arguing against a law that would require mutual-fund boards to have independent chairmen.

Many national representatives of the financial industries have become major Frank supporters. In the 2006 election cycle, banking and financial industries poured $457,299 in Political Action Committee money to Frank's campaign fund, accounting for the majority of the $721,561 in committee funds that he received. By comparison, labor union committees , a more traditional ally of liberal Democrats, gave Frank $83,000.

At the meeting with Boston business leaders, Frank was lauded as a liberal who has helped the financial industry. "I believe he's one of the voices in the Democratic party that is trying to reposition the party as a pro-growth, pro-jobs party as opposed to simply being against things," said Paul Guzzi , president of the Greater Boston Chamber of Commerce, which sponsored the speech.

Former representative Steven Bartlett , a Texas Republican who served with Frank in Congress and who now represents businesses as the president of the Financial Services Roundtable, said Frank's ability to work with business leaders and Republicans should not be underestimated.

"I'm a very conservative Republican and Barney is a very liberal Democrat, but we worked a lot of legislation together," Bartlett said in an interview.

But even Bartlett wonders whether Frank will be able to broker something so large as a grand compromise between business and labor and Democrats and Republicans. Bartlett said Frank's effort sounds more like a political framework than legislation.

Frank, however, is optimistic. Asked how much his power increases by going from ranking minority member to committee chairman, he responded: "It's a quantum difference. It is the difference between 'I wish I could do this' and 'I'm going to do this.'"

Rep. Frank Offers Business a 'Grand Bargain'

Rep. Frank Offers Business a "Grand Bargain"
Reduced regulations for more job benefits.
By Michael Kranish and Ross Kerber
The Boston Globe
Sunday 19 November 2006

Representative Barney Frank has proposed in a series of meetings with business groups a "grand bargain" with corporate America: Democrats would agree to reduce regulations and support free-trade deals in exchange for businesses agreeing to greater wage increases and job benefits for workers.

Frank, the Newton Democrat who is in line to chair the House Financial Services Committee, has struck a conciliatory posture with financial-industry leaders in recent years. But since the morning after Election Day, he has moved quickly to lay out an ambitious plan to try to end the political stalemate between Republicans and Democrats on broad economic issues.

"What I want to do is break that deadlock," Frank said in an interview. "A lot of policies that the business community wants us to adopt for growth are now blocked. On the other hand, the business community is successfully blocking the minimum wage [increase] and created a very anti union attitude in the Congress."

Frank proposes that if businesses support a minimum wage increase and provide protection for workers adversely affected by trade treaties, Democrats would be more willing to ease regulations and approve free-trade deals. Frank also would support changes to immigration rules favored by businesses, and noted that allowing more immigrants would put needed funds into the Social Security system.

Frank casts his proposal as a way for capitalists to quell some of the populist fervor that was expressed in last week's election, when many Democrats vowed to crack down on companies moving jobs overseas.

"I'm a capitalist, and that means I'm for inequality," Frank told Boston business leaders on the morning after Election Day, in a speech about his grand bargain. "But you reach a point where you get more inequality than is healthy, and I believe we're at that point.

"What we want to do is to look at public policies that'll get some bigger share of the increased wealth into wages, and in return you'll see Democrats as internationalists.... I really urge the business community to join us."

After 26 years in Congress, Frank's ambition - and his ability to broker such a deal - is at an apex. His power will take a quantum leap when his chairmanship is approved by House Democrats - an approval that is little more than a formality. The 70-member Financial Services Committee oversees everything from banking to housing to urban affairs.

Frank is also a close adviser to Speaker-elect Nancy Pelosi, with whom he bonded during the campaign when Republicans deemed both of them reasons to be fearful of Democrats.

But while Frank has won support in Massachusetts among financial-services executives, some national business leaders are skeptical. Bruce Josten , chief lobbyist for the US Chamber of Commerce said he is worried that Frank's grand bargain would mandate costly benefits to employees, including health care , in exchange for support of free trade.

"His grand bargain ... certainly is not going to sail with the American business community," Josten said in an interview. Josten noted that Frank historically has been at odds with the US Chamber due in part to opposition to trade deals. In 2005, for example, Frank supported the chamber's issues only 33 percent of the time.

Frank, for his part, is unconcerned. Asked about the chamber's low ranking of him, he responded with one of his classic zingers: "That's more than I give them."

Frank said he will work out details of his grand bargain after conducting a series of hearings starting early next year. "I am not claiming I have majority support," he said. "I expect to spend much of the next year in the committee documenting this." But he said he has general backing from Pelosi and other top Democrats.

A starting point could be health care. Many businesses are trying to shed high health care premiums. Frank hopes that workers and businesses can agree on a government-administered plan paid for by workers that would reduce burdens on businesses, which would pass on savings to employees through higher wages.

"I think employer-paid health care is a mistake," he said. "I think it depresses wages."

Stephen J. Collins , president of the Automotive Trade Policy Council, which represents Detroit's Big Three automakers, said business leaders would welcome such a discussion with Frank. "Our companies are very open about the fact that they are facing massive competitive challenges of a global nature that need big answers," Collins said. "There has to be a partnership between government and industry to solve some of these problems, and health is one of them."

Much of Frank's work on economic issues has been behind the scenes until now. In the months before the election, Frank wrote a series of strategy memos to Democratic colleagues in which he urged them to campaign on "how poorly most workers have fared under the Bush economy."

In one memo, Frank went through a point-by-point rebuttal of a White House report on how workers fared under the Bush administration, arguing that only the wealthiest Americans have seen a significant income gain.

While it might seem like a stretch for one of the most liberal members of Congress to believe he is in position to strike a monumental deal with big business, Frank said he has a track record of working with banking and financial companies that should allay such concerns.

For example, he said, he put pressure on Bank of America to retain jobs in Massachusetts, but he also helped pass rules allowing banks to process more money electronically. He also has backed measures to help banks by making it harder for Wal-Mart and similar national chains to enter the retail banking business.

For Boston's large money-management industry, meanwhile, Frank has served as an important ally. For instance, he once sided with Fidelity Investments chief executive Edward C. Johnson III in arguing against a law that would require mutual-fund boards to have independent chairmen.

Many national representatives of the financial industries have become major Frank supporters. In the 2006 election cycle, banking and financial industries poured $457,299 in Political Action Committee money to Frank's campaign fund, accounting for the majority of the $721,561 in committee funds that he received. By comparison, labor union committees , a more traditional ally of liberal Democrats, gave Frank $83,000.

At the meeting with Boston business leaders, Frank was lauded as a liberal who has helped the financial industry. "I believe he's one of the voices in the Democratic party that is trying to reposition the party as a pro-growth, pro-jobs party as opposed to simply being against things," said Paul Guzzi , president of the Greater Boston Chamber of Commerce, which sponsored the speech.

Former representative Steven Bartlett , a Texas Republican who served with Frank in Congress and who now represents businesses as the president of the Financial Services Roundtable, said Frank's ability to work with business leaders and Republicans should not be underestimated.

"I'm a very conservative Republican and Barney is a very liberal Democrat, but we worked a lot of legislation together," Bartlett said in an interview.

But even Bartlett wonders whether Frank will be able to broker something so large as a grand compromise between business and labor and Democrats and Republicans. Bartlett said Frank's effort sounds more like a political framework than legislation.

Frank, however, is optimistic. Asked how much his power increases by going from ranking minority member to committee chairman, he responded: "It's a quantum difference. It is the difference between 'I wish I could do this' and 'I'm going to do this.'"

Houston Janitor Strike Ends With Agreement

Workers to get higher wages, health coverage.
By Dale Russakoff
The Washington Post
Tuesday 21 November 2006


After a month-long strike featuring local, national and international demonstrations, Houston janitors reached an agreement yesterday with five major cleaning contractors that will double their income and provide them with health insurance by 2009.

The 5,300 mostly female, mostly Latino janitors represented by the Service Employees International Union will see their wages rise from $5.30 per hour on average to $7.75 by Jan. 1, 2009. Their shifts will also lengthen to six hours, as opposed to four hours or less, over the next three years, according to the agreement. They will be offered health coverage in 2009 for $20 a month for individuals, $175 for families.

The janitors ratified the agreement Monday night at the city's convention center. They are expected to return to work today. The union said janitors who walked off the job on Oct. 23 will be allowed to return to their jobs.

Yesterday's announcement marked the first victory in the right-to-work South for SEIU's long-running Justice for Janitors campaign that has organized low-wage workers at cleaning companies in 29 cities, including Washington. Union and management advocates said it signals a new phase of labor organization in the South.

"They'll wave this victory in the faces of the next people and just keep going," said Jack Haskell, a labor relations consultant who works for businesses that have faced the SEIU before. "It's going to be like when Sherman marched through Atlanta." Haskell and his firm, Adams, Nash, Haskell & Sheridan, are not involved in the current janitors' dispute.

"If Houston janitors can win by standing together, then workers anywhere can win by standing together," said SEIU spokesperson Lynda Tran.

University of Texas law professor Julius G. Getman said that unions historically have had little luck organizing in the South. "But it's a very different South now with the influx of low-wage immigrant workers," he said.

Speaking on behalf of the five cleaning contractors - ABM Janitorial Services, Sanitors, OneSource Facility Services, GCA Services Group and Pritchard Industries - attorney D. Michael Linihan said, "We have worked very diligently to both protect the interests of our valuable customers and to insure that our employees are treated in a fair manner."

Ercilia Sandoval, 42, one of the striking janitors and a member of the bargaining committee, said she believed that the workers would win but vowed to press the case "for our brothers who are in other cities earning the same low salaries we were earning until now."

Sandoval, who has been diagnosed with breast and lung cancer, was unhappy with the lag in the health insurance piece of the agreement. She called it a "very urgent issue that I wanted in this first year. I don't want anyone else to go through what I have gone through.... We'll fight for free insurance for the entire family in the next contract. I won't rest until I see that."

Throughout the strike, the SEIU applied more pressure to the owners of the buildings cleaned by the Houston janitors than to the cleaning contractors that employ them. Building owners ultimately have to absorb the cost of higher wages and benefits for janitors, and the union accused this oil-enriched business community of hoarding energy profits while keeping janitors in poverty.

"The SEIU people are masters at messaging and creating corporate outlaws," said Michael Lotito, an attorney with Jackson Lewis in San Francisco who has represented companies facing SEIU campaigns. "At some point the company says: 'We have to find a way out of this. We're taking too many negative hits.'"

At a news conference yesterday, Houston Mayor Bill White praised the agreement, which ended a campaign of civil disobedience at home and attacks on Houston's reputation nationally and abroad.

"I don't think people understood how low the wages were and that some people were only working four hours a day," White said. He called the settlement "a milestone in the history of the city of Houston and more importantly something uplifting the lives of Houston residents who are just trying to get by every single day."

Staff writer Sylvia Moreno in Houston contributed to this report.

Growing the Minimum Wage

By Peter Dreier
TomPaine.com
Monday 27 November 2006

Americans are divided about many things, but on at least one issue they stand united: During the past decade, polls have consistently shown that Americans overwhelmingly want Congress to raise the minimum wage. According to a report earlier this year from the Pew Research Center, 83 percent of the American public - including 72 percent of Republicans and 75 percent of those who earn over $75,000 a year - favor boosting it to more than $7 an hour. But, since 1997, Congress has refused to act, leaving the minimum wage stuck at $5.15 an hour.

Frustrated by Congress' intransigence, a growing number of states have made an end run around Washington. Before Election Day, 22 states had enacted laws - by passing ballot measures or by legislative action - to raise their minimum wages above the federal level.

On November 7, voters in another six states - Arizona, Colorado, Missouri, Montana, Nevada and Ohio - approved measures to raise state minimum wage levels by $1 to $1.70 an hour. But in each of these six states, voters took another important step. They agreed to increase the minimum wage each year by indexing it to inflation. Four other states - Oregon, Florida, Washington and Vermont - had already approved minimum wage laws that are not only higher than the federal level, but also include annual cost-of-living adjustments (COLAs). Washington State's minimum wage, now $7.63, is the nation's highest.

Nancy Pelosi, who will become Speaker of the House in January, has pledged to hike the federal minimum wage to $7.25 an hour as one of the Democrats' first acts after taking control of the House and Senate. This would give at least 6.6 million low-wage workers a direct pay increase; millions more will have their wages hiked because the floor has been raised.

But with the Democrats now in a stronger position in Congress, many union leaders and community groups want them to push not only to raise the federal minimum wage, but also to include a path-breaking cost of living adjustment, so that inflation doesn't continue to erode its purchasing power.

Since 1997, when Congress last raised the minimum wage, its buying power has declined by 20 percent. The federal minimum wage is now the lowest it's been since 1955 (in inflation-adjusted dollars). The highest during that period was in 1968, when it was worth almost $8 an hour in today's dollars. Progressive Democrats in Congress should up the ante and demand a minimum wage hike to at least the poverty level - $20,000 a year, or $9.60 an hour - with a COLA clause, too.

"Periodically adjusting the minimum wage to keep up with inflation just makes common sense," said John J. Sweeney, President of the AFL-CIO, a major proponent of hiking the wage.

"Whenever we have given them the chance, a large majority of voters - including large numbers of Republican voters - voted for minimum wage increases with indexing," said Maude Hurd, president of ACORN, the national community organizing group that has played a key role in many of the state-level minimum wage battles. "The President and Congress should follow their lead."

In November 2004, ACORN and several labor groups led a successful battle in Florida to raise the minimum wage by one dollar to $6.15 an hour and to increase it annually based on the consumer price index. There, where Bush beat John Kerry by 381,000 votes, voters favored the minimum wage increase by 3.1 million votes - or 71.3 percent to 28.7 percent - despite the opposition of the state's business community and Governor Jeb Bush.

ACORN and its union allies then looked for other key states in this year's races where they could not only win ballot measures to hike the minimum wage with a COLA provision but also target voter mobilization efforts to increase turnout among likely Democrats - a liberal counterpart to conservative efforts to put anti-gay marriage measures on the ballot.

They identified six states with potentially close Senate, House or gubernatorial races.

In Missouri, Proposition B - which will increase the state's minimum wage from the current federal base to $6.50 and index it to inflation - garnered 76 percent of the statewide vote and won a majority in every county. It was supported by all age groups and income levels. Four-fifths of voters earning less than $50,000 supported raising the minimum wage, as did almost three-quarters of those earning over $50,000. In Montana, 73 percent of voters approved an initiative to raise the state minimum wage to $6.15 and require annual cost-of-living increases. The grassroots campaigns to hike the minimum wage increased voter turnout, especially in the cities, and helped Democrats Claire McCaskill and John Tester win close victories in Missouri and Montana, respectively, helping their party to a majority in the US Senate.

After he was elected in 2002, one of Illinois Gov. Rod Blagojevich's first acts was to sign a bill to raise the state minimum wage from the federal level to $6.50. During his successful campaign for re-election this fall, Blagojevich, a Democrat, frequently pledged to hike it again. A week after his victory, he proposed and the state Senate approved an increase to $7.50 an hour with an annual inflation adjustment. This proposal now moves to the state House. If the Illinois House approves Blagojevich's plan, it will be only the second state - after Vermont - to raise the minimum wage with a COLA clause through the legislative, rather than ballot measure, route.

In 2004 and 2005, California's Republican Gov. Arnold Schwarzenegger vetoed bills passed by the Democrat-controlled legislature that would have raised the minimum wage by a dollar and included a cost-of-living adjustment. This year the Democrats approved legislation to raise the minimum wage from its current $6.75 an hour to $7.50 in January 2007 and $8 in January 2008 and include an indexing provision. Seeking to attract Democratic voters in his ultimately successful re-election bid, Schwarzenegger agreed in September to sign the bill if its sponsors eliminated the COLA clause.

"We had a choice - give him an ideal bill that he would veto or get a dollar and a quarter per hour more for our workers," said Assembly Speaker Fabian Núñez, explaining why the Democrats accepted the deal. "We decided to side with doing the right thing for the poor people."

While business groups invariably oppose any proposal to raise the minimum wage, they are particularly adamant against incorporating a COLA provision. But linking increases to inflation is neither a new nor radical idea. Just last month President Bush signed legislation providing COLA to military veterans who receive disability benefits. Many union contracts require employers to give annual wage increases based on the consumer price index. The federal government already has a cost-of-living adjustment (based on the annual increase in consumer prices) for the 48 million seniors who receive Social Security. Indeed, this 1975 provision has kept many seniors from falling into poverty. Since then, seniors don't have to await a special act of Congress to receive a benefit increase; no longer does inflation drain value from their Social Security checks.

Since 1997, the last time they raised the minimum wage, the Republican-controlled Congress has voted to give members cost-of-living pay raises totaling $31,600. Corporations routinely provide their top executives with huge pay and bonus increases that far exceed the inflation rate, even in years when these companies' own profits and stock value decline. In one year alone, for example, the median pay for the CEOs of America's 100 largest companies increased 25 percent to $17.9 million in 2005.

What about the working poor?

Labor unions, anti-poverty community organizations and faith-based groups will be pushing Pelosi and her Democratic colleagues to take up the COLA cause when they take power in January. Shouldn't workers at the bottom end of the American economy - who spend almost all of their hard-earned wages on basic necessities - get an annual raise to help them keep up with the steadily rising cost of housing, food, gasoline, clothing and health care?

Peter Dreier teaches politics and directs the Urban & Environmental Policy program at Occidental College. He is coauthor of Place Matters: Metropolitics for the 21st Century and The Next Los Angeles: The Struggle for a Livable City.

Secrets, Lies, and Sweatshops

American importers have long answered criticism of conditions at their Chinese suppliers with labor rules and inspections. But many factories have just gotten better at concealing abuses.
By Dexter Roberts and Pete Engardio
BusinessWeek
Monday 27 November 2006

Tang Yinghong was caught in an impossible squeeze. For years, his employer, Ningbo Beifa Group, had prospered as a top supplier of pens, mechanical pencils, and highlighters to Wal-Mart Stores and other major retailers. But late last year, Tang learned that auditors from Wal-Mart, Beifa's biggest customer, were about to inspect labor conditions at the factory in the Chinese coastal city of Ningbo where he worked as an administrator. Wal-Mart had already on three occasions caught Beifa paying its 3,000 workers less than China's minimum wage and violating overtime rules, Tang says. Under the US chain's labor rules, a fourth offense would end the relationship.

Help arrived suddenly in the form of an unexpected phone call from a man calling himself Lai Mingwei. The caller said he was with Shanghai Corporate Responsibility Management & Consulting Co., and for a $5,000 fee, he'd take care of Tang's Wal-Mart problem. "He promised us he could definitely get us a pass for the audit," Tang says.

Lai provided advice on how to create fake but authentic-looking records and suggested that Beifa hustle any workers with grievances out of the factory on the day of the audit, Tang recounts. The consultant also coached Beifa managers on what questions they could expect from Wal-Mart's inspectors, says Tang. After following much of Lai's advice, the Beifa factory in Ningbo passed the audit earlier this year, Tang says, even though the company didn't change any of its practices.

For more than a decade, major American retailers and name brands have answered accusations that they exploit "sweatshop" labor with elaborate codes of conduct and on-site monitoring. But in China many factories have just gotten better at concealing abuses. Internal industry documents reviewed by BusinessWeek reveal that numerous Chinese factories keep double sets of books to fool auditors and distribute scripts for employees to recite if they are questioned. And a new breed of Chinese consultant has sprung up to assist companies like Beifa in evading audits. "Tutoring and helping factories deal with audits has become an industry in China," says Tang, 34, who recently left Beifa of his own volition to start a Web site for workers.

A lawyer for Beifa, Zhou Jie, confirms that the company employed the Shanghai consulting firm but denies any dishonesty related to wages, hours, or outside monitoring. Past audits had "disclosed some problems, and we took necessary measures correspondingly," he explains in a letter responding to questions. The lawyer adds that Beifa has "become the target of accusations" by former employees "whose unreasonable demands have not been satisfied." Reached by cell phone, a man identifying himself as Lai says that the Shanghai consulting firm helps suppliers pass audits, but he declines to comment on his work for Beifa.

Wal-Mart spokeswoman Amy Wyatt says the giant retailer will investigate the allegations about Beifa brought to its attention by BusinessWeek. Wal-Mart has stepped up factory inspections, she adds, but it acknowledges that some suppliers are trying to undermine monitoring: "We recognize there is a problem. There are always improvements that need to be made, but we are confident that new procedures are improving conditions."

China's export manufacturing is rife with tales of deception. The largest single source of American imports, China's factories this year are expected to ship goods to the US worth $280 billion. American companies continually demand lower prices from their Chinese suppliers, allowing American consumers to enjoy inexpensive clothes, sneakers, and electronics. But factory managers in China complain in interviews that US price pressure creates a powerful incentive to cheat on labor standards that American companies promote as a badge of responsible capitalism. These standards generally incorporate the official minimum wage, which is set by local or provincial governments and ranges from $45 to $101 a month. American companies also typically say they hew to the government-mandated workweek of 40 to 44 hours, beyond which higher overtime pay is required. These figures can be misleading, however, as the Beijing government has had only limited success in pushing local authorities to enforce Chinese labor laws. That's another reason abuses persist and factory oversight frequently fails.

Some American companies now concede that the cheating is far more pervasive than they had imagined. "We've come to realize that, while monitoring is crucial to measuring the performance of our suppliers, it doesn't per se lead to sustainable improvements," says Hannah Jones, Nike Inc.'s vice-president for corporate responsibility. "We still have the same core problems."

This raises disturbing questions. Guarantees by multi-nationals that offshore suppliers are meeting widely accepted codes of conduct have been important to maintaining political support in the US for growing trade ties with China, especially in the wake of protests by unions and antiglobalization activists. "For many retailers, audits are a way of covering themselves," says Auret van Heerden, chief executive of the Fair Labor Assn., a coalition of 20 apparel and sporting goods makers and retailers, including Nike, Adidas Group, Eddie Bauer, and Nordstrom. But can corporations successfully impose Western labor standards on a nation that lacks real unions and a meaningful rule of law?

Historically associated with sweatshop abuses but now trying to reform its suppliers, Nike says that one factory it caught falsifying records several years ago is the Zhi Qiao Garments Co. The dingy concrete-walled facility set near mango groves and rice paddies in the steamy southern city of Panyu employs 600 workers, most in their early 20s. They wear blue smocks and lean over stitching machines and large steam-blasting irons. Today the factory complies with labor-law requirements, Nike says, but Zhi Qiao's general manager, Peter Wang, says it's not easy. "Before, we all played the cat-and-mouse game," but that has ended, he claims. "Any improvement you make costs more money." Providing for overtime wages is his biggest challenge, he says. By law, he is supposed to provide time-and-a-half pay after eight hours on weekdays and between double and triple pay for Saturdays, Sundays, and holidays. "The price [Nike pays] never increases one penny," Wang complains, "but compliance with labor codes definitely raises costs."

A Nike spokesman says in a written statement that the company, based in Beaverton, Ore., "believes wages are best set by the local marketplace in which a contract factory competes for its workforce." One way Nike and several other companies are seeking to improve labor conditions is teaching their suppliers more efficient production methods that reduce the need for overtime.

The problems in China aren't limited to garment factories, where labor activists have documented sweatshop conditions since the early 1990s. Widespread violations of Chinese labor laws are also surfacing in factories supplying everything from furniture and household appliances to electronics and computers. Hewlett-Packard, Dell, and other companies that rely heavily on contractors in China to supply notebook PCs, digital cameras, and handheld devices have formed an industry alliance to combat the abuses.

A compliance manager for a major multinational company who has overseen many factory audits says that the percentage of Chinese suppliers caught submitting false payroll records has risen from 46% to 75% in the past four years. This manager, who requested anonymity, estimates that only 20% of Chinese suppliers comply with wage rules, while just 5% obey hour limitations.

A recent visit by the compliance manager to a toy manufacturer in Shenzhen illustrated the crude ways that some suppliers conceal mistreatment. The manager recalls smelling strong paint fumes in the poorly ventilated and aging factory building. Young women employees were hunched over die-injection molds, using spray guns to paint storybook figurines. The compliance manager discovered a second workshop behind a locked door that a factory official initially refused to open but eventually did. In the back room, a young woman, who appeared to be under the legal working age of 16, tried to hide behind her co-workers on the production line, the visiting compliance manager says. The Chinese factory official admitted he was violating various work rules.

The situation in China is hard to keep in perspective. For all the shortcomings in factory conditions and oversight, even some critics say that workers' circumstances are improving overall. However compromised, pressure from multinationals has curbed some of the most egregious abuses by outside suppliers. Factories owned directly by such corporations as Motorola Inc. and General Electric Co. generally haven't been accused of mistreating their employees. And a booming economy and tightening labor supply in China have emboldened workers in some areas to demand better wages, frequently with success. Even so, many Chinese laborers, especially migrants from poor rural regions, still seek to work as many hours as possible, regardless of whether they are properly paid.

In this shifting, often murky environment, labor auditing has mushroomed into a multimillion-dollar industry. Internal corporate investigators and such global auditing agencies as Cal Safety Compliance, sgs of Switzerland, and Bureau Veritas of France operate a convoluted and uncoordinated oversight system. They follow varying corporate codes of conduct, resulting in some big Chinese factories having to post seven or eight different sets of rules. Some factories receive almost daily visits from inspection teams demanding payroll and production records, facility tours, and interviews with managers and workers. "McDonald's, Walt Disney, and Wal-Mart are doing thousands of audits a year that are not harmonized," says van Heerden of Fair Labor. Among factory managers, "audit fatigue sets in," he says.

Some companies that thought they were making dramatic progress are discovering otherwise. A study commissioned by Nike last year covered 569 factories it uses in China and around the world that employ more than 300,000 workers. It found labor-code violations in every single one. Some factories "hide their work practices by maintaining two or even three sets of books," by coaching workers to "mislead auditors about their work hours, and by sending portions of production to unauthorized contractors where we have no oversight," the Nike study found.

The Fair Labor Association released its own study last November based on unannounced audits of 88 of its members' supplier factories in 18 countries. It found an average of 18 violations per factory, including excessive hours, underpayment of wages, health and safety problems, and worker harassment. The actual violation rate is probably higher, the FLA said, because "factory personnel have become sophisticated in concealing noncompliance related to wages. They often hide original documents and show monitors falsified books."

While recently auditing an apparel manufacturer in Dongguan that supplies American importers, the corporate compliance manager says he discussed wage levels with the factory's Hong Kong-based owner. The 2,000 employees who operate sewing and stitching machines in the multi-story complex often put in overtime but earn an average of only $125 a month, an amount the owner grudgingly acknowledged to the compliance manager doesn't meet Chinese overtime-pay requirements or corporate labor codes. "These goals are a fantasy," the owner said. "Maybe in two or three decades we can meet them."

Pinning down what Chinese production workers are paid can be tricky. Based on Chinese government figures, the average manufacturing wage in China is 64 cents an hour, according to the US Bureau of Labor Statistics and demographer Judith Banister of Javelin Investments, a consulting firm in Beijing. That rate assumes a 40-hour week. In fact, 60- to 100-hour weeks are common in China, meaning that the real manufacturing wage is far less. Based on his own calculations from plant inspections, the veteran compliance manager estimates that employees at garment, electronics, and other export factories typically work more than 80 hours a week and make only 42 cents an hour.

BusinessWeek reviewed summaries of 28 recent industry audits of Chinese factories serving US customers. A few factories supplying Black & Decker, Williams-Sonoma, and other well-known brands turned up clean, the summaries show. But these facilities were the exceptions.

At most of the factories, auditors discovered records apparently meant to falsify payrolls and time sheets. One typical report concerns Zhongshan Tat Shing Toys Factory, which employs 650 people in the southern city of Zhongshan. The factory's main customers are Wal-Mart and Target. When an American-sponsored inspection team showed up this spring, factory managers produced time sheets showing each worker put in eight hours a day, Monday through Friday, and was paid double the local minimum wage of 43 cents per hour for eight hours on Saturday, according to an audit report.

But when auditors interviewed workers in one section, some said that they were paid less than the minimum wage and that most of them were obliged to work an extra three to five hours a day, without overtime pay, the report shows. Most toiled an entire month without a day off. Workers told auditors that the factory had a different set of records showing actual overtime hours, the report says. Factory officials claimed that some of the papers had been destroyed by fire.

Wal-Mart's Wyatt doesn't dispute the discrepancies but stresses that the company is getting more aggressive overall in its monitoring. Wal-Mart says it does more audits than any other company - 13,600 reviews of 7,200 factories last year alone - and permanently banned 141 factories in 2005 as a result of serious infractions, such as using child labor. In a written statement, Target doesn't respond to the allegations but says that it "takes very seriously" the fair treatment of factory workers. It adds that it "is committed to taking corrective action - up to and including termination of the relationship for vendors" that violate local labor law or Target's code of conduct. The Zhongshan factory didn't respond to repeated requests for comment.

An audit late last year of Young Sun Lighting Co., a maker of lamps for Home Depot, Sears, and other retailers, highlighted similar inconsistencies. Every employee was on the job five days a week from 8 a.m. to 5:30 p.m., with a lunch break and no overtime hours, according to interviews with managers, as well as time sheets and payroll records provided by the 300-worker factory in Dongguan, an industrial city in Guangdong Province. But other records auditors found at the site and elsewhere - backed up by auditor interviews with workers - revealed that laborers worked an extra three to five hours a day with only one or two days a month off during peak production periods. Workers said they received overtime pay, but the "auditor strongly felt that these workers were coached," the audit report states.

Young Sun denies ever violating the rules set by its Western customers. In written answers to questions, the lighting manufacturer says that it doesn't coach employees on how to respond to auditors and that "at present, there are no" workers who are putting in three to five extra hours a day and getting only one or two days off each month. Young Sun says that it follows all local Chinese overtime rules.

Home Depot doesn't contest the inconsistencies in the audit reports about Young Sun and three other factories in China. "There is no perfect factory, I can guarantee you," a company spokeswoman says. Instead of cutting off wayward suppliers, Home Depot says that it works with factories on corrective actions. If the retailer becomes aware of severe offenses, such as the use of child labor, it terminates the supplier. A Sears spokesman declined to comment.

Coaching of workers and midlevel managers to mislead auditors is widespread, the auditing reports and BusinessWeek interviews show. A document obtained last year during an inspection at one Chinese fabric export factory in the southern city of Guangzhou instructed administrators to take these actions when faced with a surprise audit: "First notify underage trainees, underage full-time workers, and workers without identification to leave the manufacturing workshop through the back door. Order them not to loiter near the dormitory area. Secondly, immediately order the receptionist to gather all relevant documents and papers." Other pointers include instructing all workers to put on necessary protective equipment such as earplugs and face masks.

Some US retailers say this evidence isn't representative and that their auditing efforts are working. BusinessWeek asked J.C. Penney Co. about audit reports included among those the magazine reviewed that appear to show falsification of records to hide overtime and pay violations at two factories serving the large retailer. Penney spokeswoman Darcie M. Brossart says the company immediately investigated the factories, and its "auditors observed no evidence of any legal compliance issues."

In any case, the two factories are too small to be seen as typical, Penney executives argue. The chain has been consolidating its China supply base and says that 80% of its imports now come from factories with several thousand workers apiece, which are managed by large Hong Kong trading companies that employ their own auditors. Quality inspectors for Penney and other buyers are at their supplier sites constantly, so overtime violations are hard to hide, Brossart says.

Chinese factory officials say, however, that just because infractions are difficult to discern doesn't mean they're not occurring. "It's a challenge for us to meet these codes of conduct," says Ron Chang, the Taiwanese general manager of Nike supplier Shoetown Footwear Co., which employs 15,000 workers in Qingyuan, Guangdong. Given the fierce competition in China for foreign production work, "we can't ask Nike to increase our price," he says, so "how can we afford to pay the higher salary?" By reducing profit margins from 30% to 5% over the past 18 years, Shoetown has managed to stay in business and obey Nike's rules, he says.

But squeezing margins doesn't solve the larger social issue. Chang says he regularly loses skilled employees to rival factories that break the rules because many workers are eager to put in longer hours than he offers, regardless of whether they get paid overtime rates. Ultimately, the economics of global outsourcing may trump any system of oversight that Western companies attempt. And these harsh economic realities could make it exceedingly difficult to achieve both the low prices and the humane working conditions that US consumers have been promised.

Aaron Bernstein in Washington, Stanley Holmes in Seattle, and Xiang Ji in Beijing contributed to this report

Wal-Mart Girds for Showdown With New Congress on Unions, Trade

By Kim Chipman and Lauren Coleman-Lochner
Bloomberg
Monday 04 December 2006

Wal-Mart Stores Inc., long an ally of Republicans, has spent the last two years ramping up political donations to Democrats. The company will soon find out whether that bet will pay off.

The world's largest retailer will contend next year with a Democratic-led Congress with close ties to organized labor. Democratic leaders say one of their priorities is a bill opposed by Wal-Mart making it easier for workers at the non-union company to organize. Lawmakers may also block Wal-Mart's plans to operate a bank and thwart trade deals that allow the company to import goods at low prices.

Bentonville, Arkansas-based Wal-Mart says it wants to persuade lawmakers that criticism of its labor practices is unwarranted and that free trade helps consumers. The company has enlisted at least one Democratic ally, Senator Blanche Lincoln of Arkansas, and has given money to the Congressional Black Caucus, a group of 43 Democratic lawmakers.

"We're optimistic," says Lee Culpepper, who heads lobbying efforts in Washington for Wal-Mart. "Our opportunity to build relationships will probably lead to an increase" in donations to Democrats.

Wal-Mart has one of the nation's biggest corporate political-action committees, giving $1.2 million to federal candidates for the 2006 elections. While only 32 percent went to Democrats, that was up from 1.7 percent 10 years ago, according to PoliticalMoneyLine, a Washington-based company that tracks money in politics.

"One of the things we decided to do at the beginning of 2005 was to try to do a better job building relationships and political support on both sides of the aisle, but in particular with Democrats," Culpepper says.

Arkansas Ally

In the Senate, Lincoln is considered Wal-Mart's strongest Democratic advocate. Over the last decade, she received almost $100,000 in campaign cash from Wal-Mart, its executives and the heirs of company founder Sam Walton, according to Federal Election Commission data. Lincoln has supported the company's efforts to suspend tariffs on imported goods sold at Wal-Mart's US stores.

Wal-Mart is the "largest employer in my home state," Lincoln said in a statement. "I know they understand their responsibility as an industry leader to set a higher standard with regard to employee and customer benefits, corporate citizenship and community involvement."

Wal-Mart's attempts to woo members of the Congressional Black Caucus include endowing a $1 million scholarship grant administered by the group. Last year, eight members of the caucus who received contributions from Wal-Mart voted against a measure that would have ended the Labor Department's policy of giving the company notice before starting any investigations of alleged wage-and-hour violations. The measure was defeated.

Black Caucus

Members of the caucus, including Representatives Bennie Thompson of Mississippi and Al Wynn of Maryland, didn't return calls seeking comment.

Wal-Mart's efforts to reach out to more Democrats may not be enough to soften the anti-Wal-Mart stance of critics such as Representative George Miller of California and Senator Edward Kennedy of Massachusetts, who will head panels overseeing labor issues. Both have said they will try to pass the Employee Free Choice Act, which would force companies to recognize unions when employees sign a card expressing their desire to organize.

Wal-Mart, which has fought prior attempts to unionize its US workers, says it would oppose such a bill.

Investigations

The company also may be subject to investigations of its labor practices by the labor panels, which have the power to subpoena executives, says Andy Laperriere, political economist at International Strategy & Investment, a Wall Street advisory firm.

"Wal-Mart may get the tobacco-industry treatment from this new Congress," Laperriere says. The company may also face opposition from newly elected lawmakers who benefited from union support in their campaigns.

Democratic Senator-elect James Webb of Virginia says Wal-Mart is a symptom of the failure of US trade policy, which penalizes American workers and industries by flooding the market with cheap imports and making it too easy for companies to export jobs overseas.

Webb and other Democratic lawmakers who seek stricter labor provisions in trade deals may hurt Wal-Mart's ability to get trade-related concessions that help the company curb costs.

"Difficult"

"Trade might be more difficult" with the new Congress, Culpepper says.

Democrats such as Kennedy say voter concerns about job security, flat wage growth and a widening gap between rich and poor were part of the reason Democrats were able to sweep both chambers of Congress for the first time in 14 years in last month's elections.

"Wal-Mart already is in the crosshairs of a lot of Democratic gunslingers these days, and we can expect a lot more rhetoric about the company being irresponsible," says Robert Reich, secretary of labor under former President Bill Clinton.

For now, Wal-Mart, the country's largest private employer, says it supports one of the Democrats' top priorities - raising the national minimum wage of $5.15 an hour for the first time in almost 10 years. Chief Executive Officer H. Lee Scott has said an increase would be good for his customers.

Democratic leaders have said they will try to pass a minimum-wage measure in the first 100 hours of the new session in January.

Banking Application

One of the company's first congressional fights may center on its application with the Federal Deposit Insurance Corp. to own an industrial bank.

Representative Barney Frank, the Massachusetts Democrat who is in line to become chairman of the House Financial Services Committee, has said he opposes allowing commercial companies such as Wal-Mart to own industrial banks, which offer services such as processing credit-card transactions.

"There's a sense that when they do expand into a field, they start a race to the bottom," Frank said in an interview earlier this year.

Culpepper says he expects the FDIC to announce a decision in January and won't comment until then. The company says it wants to own a bank so it can save on the fees it pays third parties to process transactions.

The 2008 presidential race may bring new headaches for the company. So far, at least two Democrats considering White House runs, Senator Barack Obama of Illinois and former Senator John Edwards of North Carolina, have criticized the company's wages and health-care benefits.

"Vital" Battle

"The battle to engage Wal-Mart" is "absolutely vital," Obama said on a Nov. 15 conference call hosted by Wake-Up Wal-Mart, a Washington-based group funded by labor organizations. Culpepper says he met with Obama before the call, though he declined to comment on what was said. Obama spokesman Tommy Vietor says the company tried to persuade the senator that his views about the company were misguided.

Edwards last week refused to hold a book signing at a Wal-Mart in Manchester, New Hampshire, choosing a nearby Barnes & Noble instead - even though the book store pays its employees $7 an hour to start, less than the $7.50 an hour paid by Wal-Mart, according to the Manchester Union Leader newspaper.

"Democrats running for president are lining up to bash Wal-Mart because they want the support of the unions," Laperriere says.