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Friday, January 13, 2006

Wait For the Other Law

Maryland's legislature yesterday overrode a veto on a bill they passed last year that requires any company with 10,000 employees or more to spend a minimum of 8% of their earnings on health care for workers.

As it stands, there are only about a half dozen or so companies in the state with that many workers, and only one who doesn't currently spend that amount on health care, Wal-Mart.

I'm reminded when I read if of the benevolent government in Atlas Shrugs, which can't understand why all the companies are laying people off as they pile more and more altruist requirements on them.

Granted, there are workers at Wally World who can't afford their health package, but then they wouldn't be able to at K-Mart, or Target, or most "big box" retailers either. Why, because generally these aren't considered prime jobs, they are retail, entry level positions. Most folks in those stores, until they are there a while, or are in management don't make great money. Neither do the kids at McDonalds, and Burger King.

But the fact is, this law will kick in another one, that the AFL-CIO (or what's left of it) and United Food and Commerical Workers won't talk about, the law of unintended consequences.

Wal Mart now has a few choices to make as they start spending more on health care (about 25% more). They can eat the cost, which in the low margin retail business is pretty tough to imagine.

They can cut costs, but their supply chain is already the envy of the retail world, so cutting costs there is out of the question, which leave personnel. How many of the 17,000 employees in the state will Wal Mart lay off to make up the cost of the increase in health care?

They could start laying off to get under 10,000. By closing stores that are on the low end of the profitability chain, and moving their distribution centers out of Maryland to another state, they could get under the magic number. If that happens are the 7,000 workers who are affected better off than they were?

The last option, they can raise prices to cover the cost. While that negates any impact to employees, it passes it on to the consumers, who in Wal Marts case are generally the other folks on the low end of the wage scale, they shop there because of affordability.

My personal choice would be the third, start shuttering stores and distribution centers and lay off about 7,500 people. Make the impact huge, and newsworthy. It's the only option that openly displays to the politicians the danger of micromanaging business practices. It might even get the message to the other 29 states that are considering a similar law that it might not be a good idea.
It would also force the legislators to explain why they are doing the bidding of the AFL-CIO and UFCW unions, instead of worrying about making Maryland something other than a tax hell, and business unfriendly environment.

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Blogger LargeBill said...

A lot of the attack on Walmart is statistically based. Problem with that is you can say anything with statistics. One example I've heard cited was a certain percentage of people who don't sign up for their health care plan. That is usually followed by an assumption that those people must be uninsured at all. Problem with that is some of Walmarts employees are covered by their spouses health insurance and that info is not included. My wife cancelled her health insurance when we got married. Should her employer be criticized for not providing her insurance?

Lastly, fully agree the Law of Unintended Consequences is stronger than any other law.

8:39 AM  
Blogger asacan said...

I fully agree with the implications of this law. It just saddens me that this law was brought on by the labor union and Walmart competitors, probably not by the people who will be affected by this law: the employees. It's sad that the "little guy", the one that the union claims to "protect" is who's going to be hurt the most.

I've been forced to join the UFCW (local 770) while I was a high school student living on my own in Los Angeles. I didn't want to join, but I was told that if I didn't I would lose my job. I was making $4/hour when the minimum wage was $3.35/hour (same as federal). Not long after paying my $300+ "initiation fee" (that's more than 75 hours before taxes), I asked my boss for a raise. He went on about how much I deserved a raise, but then explained the new union contract required me to work 1000 hours (25 weeks at full-time) to get a five cent per hour raise.

Then the state was kind enough to step in. The raised the state minimum wage to $4.25/hour. There went any advantage I thought I had earned over the minimum wage. The union counted that as my raise, and my 1000 hours was reset. Not to mention that during the period between the state assembly announcing the increase and when the increase went into effect, cost of living went up, my pay did not. This is how unions and states "help" the little guy.

Incidentally, when I moved back to VA, where the minimum wage was still $3.35/hour, I got a job at Food Lion making $4/hour. In a relative short period of time, I was at $6.35/hour (federal minimum wage had not moved) and had better benefits than what the union "provided".

1:50 PM  
Blogger Jeff H said...

You don't go far enough.

WalMart should simply close all their operations in Maryland, thus robbing the idiots of all the tax dollars they were getting.

2:10 PM  
Blogger Crazy Politico said...

Bill, I agree that they skew the statistics, I posted something along those lines about the abortion debate a few weeks ago. You or I can make them say anything.

Ascan, That's why I work where I do. My last job, was turned over to a union shop. My "benefit" of going union? A 20% loss of hours per year (at the same pay rate), $25 per check in union dues, a health care plan that I didn't need. But I guess they do have a good Christmas party.

Jeff H. That would be the ultimate. Then those folks that were out of work could find out that K-Mart pays an average of $1.50 an hour less they Wal Mart, and Target is about $1 less, even though they have clientel with a higher income at Target. And neither of them have great benefits either.

4:02 PM  

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