Maryland’s overwhelmingly Democratic legislature overrode a veto by Republican Governor Bob Erlick and passed a law requiring Wal-Mart to pay at least eight percent of its payroll on health care.
The Maryland legislature passed a law Thursday that would require Wal-Mart Stores to increase spending on employee health insurance, a measure that is expected to be a model for other states. The legislature’s move, which overrode a veto by Gov. Robert L. Ehrlich, was a response to growing criticism that Wal-Mart, the nation’s largest private employer, has skimped on benefits and shifted health costs to state governments.
The vote came after a furious lobbying battle by Wal-Mart and by labor and liberal groups, and is likely to encourage lawmakers in dozens of other states who are considering similar legislation. Many state legislatures have looked to Maryland as a test case, as they face fast-rising Medicaid costs, and Wal-Mart’s critics say that too many of its employees have been forced to turn to Medicaid.
Under the Maryland law, employers with 10,000 or more workers in the state must spend at least 8 percent of their payrolls on health insurance, or else pay the difference into a state Medicaid fund. A Wal-Mart spokeswoman said the company was “weighing its options,” including a lawsuit to challenge the law because it is close to that 8 percent threshold already.
It is unclear how much the new law will cost Wal-Mart in Maryland – or around the country, if similar laws are adopted, because Wal-Mart has not publicly divulged what it spends on health care.
While the law is crafted generically, Wal-Mart is the only private employer in Maryland with anywhere close to 10,000 employees.
Even the liberal Washington Post editorial board understands the absurdity of this law:
The Maryland bill is a legislative mugging masquerading as an act of benevolent social engineering. It is true that skyrocketing health care costs and the growing ranks of uninsured workers represent a burden on the state’s health system that other corporations in effect help subsidize. But Wal-Mart employees, like the employees of other large retailers that employ many low-wage workers, are only slightly more likely to collect Medicaid benefits than the national average. And unlovable as it may be, Wal-Mart serves low- and middle-income people, both by creating entry-level and part-time jobs for people who might otherwise be unemployed and by saving its moderate-income customers a staggering amount of money.
The legislation has prompted imitators in 30 states. Where it passes, no one should be surprised by unintended consequences. Wal-Mart and other targeted firms may shift jobs or planned facilities elsewhere. Many low-wage younger workers may still opt out of health coverage even if offered a more generous plan. In trying to address the national problems of health care and uninsured workers, lawmakers in Maryland and other states could inflict on themselves a new set of problems while failing to solve the underlying one.
Quite right. One imagines that Wal-Mart will be less eager to build stores in Maryland or keep open those in less profitable locales. To the extent that they are paying salaries above the minimum wage, they will be less likely to provide pay raises.
Wal-Mart is a business, not a social welfare program. It hires primarily people with few marketable skills and makes its profits by selling high volumes of merchandise with small markups over wholesale. Its ability to pass on added regulatory costs to customers is limited by the market. This is especially true when said regulatory costs are borne only by them.
