Ezra Klein: Wal-Mart and Health Care

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January 13, 2006

Wal-Mart and Health Care

Since Wal-Mart and health care are in the news again, a few tables to help you make sense of how deep their sins actually go. First, here's how Wal-Mart stacks up to the retail sector and the nation generally:

Furman

Not quite as demonic as you've been led to believe, but no kings are they. But here's a more apples-to-apples comparison using large retailers, grocers, and so on:

Comp_large_retailers

Back to utilization of government-entitlement programs:

Walmartuninsured

And now, as a portion of wages:

Wagehealth

I think this is all fairly self-explanatory, so I'll not bother with too much in the way of analysis. Suffice to say that Wal-Mart is worse than other large corporations but not abnormally bad for the industry as a whole. Should they be made to do better? Sure. But it'd be hard to justify laws targeting them and only them unless you're looking at a longer game aimed at nationalized health care. Luckily, according to this quote from the AFL-CIO, that's exactly what's being attempted:

"Last week, the AFL-CIO labor federation announced it intends this year to push legislation similar to Maryland's Fare Share Health Care bill in more than 30 states.' . . . 'An explicit part of the program is to put pressure on organizations nationally to do national reform,' said Gerald Shea, government-affairs adviser to AFL-CIO President John Sweeney. 'If people can't manage the political will to do something nationally to solve this problem, then would they like to deal with us in 50 different ways in 50 different states?'"

Seems like a good strategy to me. For more on all this, read my Tapped post.

January 13, 2006 | Permalink

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» Md. Requires More Health-Care Spending for Wal-Mart from Unpartisan.com Political News and Blog Aggregator
Maryland lawmakers Thursday overrode Gov. Robert Erlich's veto and approved a measure, directed at W [Read More]

Tracked on Jan 13, 2006 4:47:52 PM

Comments

I'm not sure you can take these data out of the context of sources of profitability. How does WalMart's profitability compare to Targets? Does it make 1.5% better profit on its square footage? In which case a law like this might make Target precisely as competitive as WalMart (while arguably providing better goods).

In other words (and I'm definitely looking at this from a different perpsective from you, that of keeping WalMart out of communities because it has a greater negative influence than other retail stores on those communities), would requiring WalMart to invest 8% into health care even the playing field? Or would it tip the playing field, making a more desirable (from a policy standpoint) retailer MORE competitive than WalMart. I believe Costco has already been doing better according to some measures than WalMart. If, by enacting such laws as these, a retailer who follows a worker-friendly approach becomes MORE competitive than wouldn't society as a whole benefit?

Posted by: emptywheel | Jan 13, 2006 4:59:33 PM

I'm unsure if Ezra's calculations (at Am. Prospect) include the effect of tax deductions that the companies take for providing health care - it is a business expense, therefore deductible.

I do agree that good policy would move from an employer-based health care plan to a national plan - but that still requires some entity to pay the costs.

I like the model of Social Security: both employees and employers are required to contribute a set percentage of payroll income for each employee, regardless of the size of the firm. In the case of health care, the employer woulndn't get to decide which of the many (non-transferable) health care plans to choose. Both the employer and the insurance companies need to be removed from the health care issue in order to achieve a uniform outcome.

Posted by: JimPortandOR | Jan 13, 2006 8:12:45 PM

Max Sawicky strikes back here. Wonk fight! Wonk fight!

Posted by: Neil the Ethical Werewolf | Jan 13, 2006 8:34:50 PM

Wal-Mart's contributions and deprivations notwithstanding, the Maryland law is going to do more harm than good, and that effect will compound if it spreads to other jurisdictions (as its proponents hope). One can quite quickly come up with several objections:

First, this is a significant incremental tax on the wages Wal-Mart pays. What happens when you tax something? You get less of it. Wal-Mart has a new and powerful incentive to keep wages down, because it will pay this new tax on any wage increase in the state. What's the best way to keep wages down? Find ways to do without the employee at all.

Second, by increasing the payroll tax on Wal-Mart, Maryland has increased the rate of return (and therefore lowered the investment hurdle) on strategies to shift labor expenses to employers with, er, fewer than 10,000 employees in the state. Who might these employers be? Wal-Mart's vendors. The Wal-Mart dream is to put little RF tags into every product. That way, people can just wander around filling up their cart, and when they leave they walk under a scanner that dings their credit or debit card. You get the vendors to stock the shelves, and then you fire all the employees except for a couple of security guards. Wal-Mart will have reached its apotheosis as a logistics system. The day is coming, but the speed with which it comes depends on two things, really: the costs of RF tags, and the costs of labor. If the first goes down enough and the second goes up enough, it will be more lucrative for Wal-Mart to get to the future faster.

Third, this tax amounts to a new subsidy to the health care system, and reduces the incentive for the state's largest employer to control health benefit costs (at least up to 8% of payroll). This will have the tendency to push up health care costs throughout the system -- why should hospitals and doctors cut their fees if Wal-Mart's benefits administrator is no longer motivated to beat up on them? Without Wal-Mart's bargaining power, smaller employers are likely to face at least some incremental cost-push from providers.

I'm sure there are others.

Posted by: TigerHawk | Jan 14, 2006 1:35:39 PM

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