Going After Wal-Mart

At over $55,000 per year, the state of Maryland enjoys one of the very highest household median incomes in the country. It is reasonably well insulated from business cycles by its geographical proximity to that well spring of spending: the federal government. Yet despite this, Maryland is running a budget deficit. Its government is so poorly run that Nathan Chapman Jr. a money manager was found guilty of defrauding the state retirement system last year. With this background of achievement, it is no wonder that the legislators of the state feel competent to tell Wal-Mart how to run its business.

This week the Maryland state legislature passed a bill directed against Wal-Mart. The bill specifically states that any private company in Maryland employing more than 10,000 people must spend at least 8% of its payroll on health care. Although there are a couple of companies as large, Wal-Mart is the only one for which the bill has any relevance.

Wal-Mart provides benefits for most its full-time employees. Wal-Mart’s strategy is to hire relatively few full-time employees with full-benefits supplemented by part-time employees including those elderly greeters at the front door who are, in many cases, covered by Medicare. This formula of efficiency and low prices has worked for Wal-Mart which has seen spectacular growth.

Many states will make foolish specific concessions to companies like Wal-Mart to entice them to enter. Maryland must be pretty well off if it not only eschews these advantages, but latches on to the anti-corporate Left-wing zeitgeist and directly penalizes Wal-Mart.

One might have been sympathetic if Wal-Mart were intruding into a small area and driving out Mom and Pop operations, while assuming monopoly control with their relentless efficiency. In the case of Maryland, however, the largest anti-Wal-Mart whiner is Giant Food Corporation that had grown fat in a grocery market oligarchy it dominated until Wal-Mart moved in. So the Maryland legislators get to have it both ways: They hobble the competitor of a politically-powerful Dutch-owned company, Ahod, the parent company of Giant, while at the same time congratulating themselves for championing the working class.

One indication of how little thought went into the legislation is the fact that it is rather poorly crafted. Should the measure of health care be the cost? Though health care has certainly improved over the last decade, costs grew faster. What if Wal-Mart was able to provide a medical plan superior in coverage to a more expensive plan at the cost of 6% rather than 8% of payroll? Maryland’s legislature again revealed the Liberal tendency to measure effectiveness as money spent rather than product or service out.

Wal-Mart’s present status with respect to provision of health care is complicated. The Maryland’s Citizen’s Health Initiative claims Wal-Mart spends 3.5% of its payroll on health care. While Wal-Mart claims that 56% of its workers are covered through its medical plan, while 86% are covered through medical plans of some sort: medical coverage through a spouse or some other alternative.

Wal-Mart with its 15,000 employees in Maryland now has several non-exclusive choices in complying with the Maryland law. They could just pass on additional costs to consumers, hurting customers that tend to be working class people for whom price is critical. Wal-Mart could partially balance increased health care costs by laying-off workers to meet the legislatively mandated 8% number. Or, they could meet the 8% legislative mandate by increasing the generosity of health care benefits for higher-paid full-time workers and still ignore part-time workers.

Most likely they will employ some combination of the above. The immediate loser may be the less-affluent Somerset County, Maryland. Wal-Mart had planned on building a distribution center in the county that would employ 1,000 people. Wal-Mart is now reconsidering these plans. Fortunately, for the Maryland legislature, those potential employees probably do not realize that they lost prospective employment. Maryland legislators can still sip wine at the cocktail parties while they congratulate themselves on their moral sensitivity in using someone else’s money to stand up for the working class. They should be so proud of themselves.

Leave a Reply

You must be logged in to post a comment.