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.
Economics says that ultimately this will reduce the wage income of low-skilled workers in Maryland. That is, Wal-Mart is not going to suddenly increase compensation for low-skilled workers. It either has to cut wages, cut hiring, or both.
How can the state of Maryland justify this interference with how Wal-Mart chooses to compensate workers?
1. The legislators may believe that they know better than workers what is good for them.
2. The legislators allege that Wal-Mart workers receive Medicaid benefits, and the legislators resent this fact.
It seems to me that the appropriate response to (2) is to tighten the eligibility rules for Medicaid. But then, I'm just an economist.