The demonization of Wal Mart

Topics: Regulation
16 Jan 2006

From: Ervan Darnell

The Maryland legislature voted today to force Wal Mart to give its
employees health care[1][2]. Just when the Republicans are scoring zero
on everything they do, I'm reminded that the Democrats are competely
daft (it was a "largely party line vote").

1) Capricious law: It attacks just one company. This begs for further
corruption down the road as the "rule of law" takes another hit as the
government attacks particular corporations. They wrote the law in terms
of corporate size and existing benefit packages, but they knew whom they
were attacking as Wal Mart was the only one that fit all of the
constraints[3] (just like happened in Alameda county, CA, where Wal
Mart, but no one else, was banned from selling groceries). There is an
ugly disingenuity to the whole process as well, of claiming the law is
neutral on its face, when it is not in either its effect or intent, but
no court is willing to invalidate the law (as they would if it
explicitly mentioned Wal Mart). It begs for further dishonesty in
government, if that's possible.

It's also worth comparing this to something like the FMLA. There is a
size cutoff in that bill too, but the size cutoff is reasonable and
doesn't target one company. Also, the size cutoff in there recognizes
the difficulty of filling a position when an employee is gone. That
burden falls harder on a small company than a large one (I despise the
FMLA in many ways, and think the burden can fall hard on large companies
too, depending on how they are structured internally, but that's not my
point here). That is, the burden is non-linear in corporate size. That
is not so in this case. The burden is per employee, strictly. The
relative burden to the company is the same no matter its size. Thus,
the size limit is even more artificial.

2) 8%: They are obligated to spend at least this much. What happens if
they have a healthy work force and don't need to spend that much? The
law has a provision to tax it away. So, here is some built-in cost
push, forcing companies to possibly overspend on health care.

3) Lower salaries: While the news article doesn't say, I expect the
supporters viewed this as free money, requiring only a magic vote to
materialize out of thin air. The result will be, obviously, lower
salaries, or Wal Mart not expanding into certain area (leaving less
desirable shopping alternatives). How does it help an employee to force
them to spend 8% of the salary on health care when they cannot do so
already? Leave it to the Democrats and their nanny state to call this
an improvement.

You might argue that it is now tax advantaged, but that was already
possible with FSAs/HSAs, and in any case were that difference enough to
matter, Wal Mart could improved its situation by offering its employees
lower salaries plus tax-advantaged health insurance.

I suppose the other argument here is the minimum wage one, that at the
bottom there are no replacement goods and salaries and prices must both
rise. That seems doubtful optimism, but even if so it only succeeds in
raising prices on Wal Mart shoppers, who are generally the same
socioeconomic class as Wal Mart employees. That's not progress to tax
the poor to subsidize health care for the poor.

4) Further socializes health care: This moves us in the wrong direction
by moving closer to forcing companies (of all size) to buy health
insurance for their employees. That leaves less discretion, less market
competition, makes it easier to hook more regulations on, leaves
insurance companies disincentivized to provide health maintenance (since
they won't have an employee as a customer indefinitely), etc.

[3] 1/13/06 Newshour
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