Day By Day

Wednesday, January 18, 2006

Maryland Politics -- The Walmart Debacle

Arnold Kling, author of Learning Economics, explains why the Walmart legislation recently passed by the Maryland assembly is likely to have consequences not anticipated by the liberals who passed it.

Although the motivation of the liberals was to raise the well-being of Wal-Mart workers, it is far from clear that this will be the consequence. Low-skilled workers cannot receive more in compensation than the value of their labor. If Wal-Mart is forced to increase the share of compensation that comes in the form of health benefits, then it will have to decrease take-home pay. If it cannot decrease take-home pay, then it will have to reduce its reliance on low-skilled labor or cut back on operations altogether.

The Wal-Mart law injects politics into the process of setting benefits for Wal-Mart workers. Once the Wal-Mart law takes hold, various suppliers of health care services will have an incentive to apply pressure. Dentists and optometrists will lobby for laws that force Wal-Mart to pay for its workers’ dental care and eyeglasses.

The biggest beneficiaries of the Wal-Mart law are likely to be people who are better off than Wal-Mart workers. For example, owners of other businesses will be able to charge higher prices and earn higher profits.

In the liberal morality tale, Wal-Mart is a villain, and its workers are victims. However, Wal-Mart workers themselves feel lucky to be able to work there. What low-skilled workers need are more Wal-Marts. More Wal-Marts would increase employment for low-skilled workers, and ultimately this could drive up wages for such workers.

Maryland liberals believe that there is something wrong with free markets if Wal-Mart workers do not have enough health insurance. However, if Wal-Mart workers want health insurance badly enough, eventually the market will find a way to provide it. Ironically, one of the initiatives to try to reduce health care costs, which is the key to affordable health insurance, comes from Wal-Mart, which is experimenting with in-store clinics. If Wal-Mart is driven out of Maryland, the state will never be able to take advantage of its health care clinics.

There is more, much more in this eminently sensible article. Check it out here.

I doubt that Dr. Kling's arguments will make much of a difference. I know lots and lots of Maryland liberals and, so far as I can tell, their faith is impenetrable to reason. But I'll keep trying.


George Will rebuts the charge that Walmart pays its workers so little that they are forced to go on public assistance, specifically Medicaid and are thus a burden to the taxpayers.

Eighty-six percent of Wal-Mart employees have health insurance, more than half through the company, which offers 18 plans, one with $11 monthly premiums and another with $3 co-payments. Wal-Mart employees are only slightly more likely to collect Medicaid than the average among the nation's large retailers, who hire many entry-level and part-time workers. In the last 12 months, Wal-Mart, the largest private employer in the nation and in 25 states, estimates it has paid its 1.3 million employees $4.7 billion in benefits. That sum is almost half as large as the company's profits, which last fiscal year were $10.3 billion -- just 3.6 percent -- on revenues of $285 billion. Wal-Mart earns just $6,000 per employee, one-third below the national average. Anyway, Wal-Mart's pay and benefits are sufficient to attract hordes of job applicants whenever it opens a new American store, which it does once every three days.

Read the whole thing here.

This is, as Will asserts, legislative mugging engineered by a corrupt alliance of unions, state legislators, and rent seekers and who suffers in the end? Why, the poor and working class families who will pay more for their purchases.

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