Arnold Kling  

Maryland, Wal-Mart, and Health Care

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Confession of a Broken Planner... Mandated Benefits and Wage Rig...

As the New York Times puts it,


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.


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TRACKBACKS (2 to date)
TrackBack URL: http://econlog.econlib.org/mt/mt-tb.cgi/430
The author at Life, Liberty and the Pursuit of ... in a related article titled Stick It To Wal-Mart writes:
    I see three possible results; Wal-Mart will pay less in payroll (i.e. hire less people), Wal-Mart will pay its employees less or Wal-Mart will raise prices. None of these outcomes actually benefit employees. [Tracked on January 13, 2006 10:10 AM]
The author at Once More Into the Breach in a related article titled http://inthe Md. Senate Overrides Veto on Wal-Mar writes:
    After having increased the cost of health care in Maryland with a 2% surcharge on HMO's, the state legislature now has discovered it can dictate to businesses the percentage of payroll necessary to provide health insurance for their employees. [Tracked on January 13, 2006 12:54 PM]
COMMENTS (49 to date)
Randy writes:

I think its just that the Maryland Senators have a good nose for money - like pigs sniffing out truffles. The only consequences they care about are votes and money.

AJ writes:

Short run supply and demand is relatively fixed; and people and positions are relatively immobile or planned in the short run. In the short run, such moves can have the outcome desired by liberals. Short term results with no consideration of the ultimate consequences epitimizes most liberal policy thinking. Complete ignorance of secondary effects is the dominant norm today. The effects you describe may seem like simple economics, but appear to the average legislator (and voter) as confusing, speculative secondary effects. This explains much of the general support for such programs. Those who want to talk about such effects are often intimidated by the new McCarthyism which labels them as racist or uncaring and so seek social acceptance by acquiescent support of ineffective programs.

Daveg writes:

One question you are ignoring is whether the population is static. You did not ignore this effect in another post discussion state laws related to medical care.

Wal-Mart jobs bring in new people who then go onto consume public resources in excess of the economic activity generated by Wal-Mart. Wal-Mart and their subcontractor have been found numerous times to hire illegal aliens for construction, cleaning and operation of their stores.

These illegals were not in Maryland consuming Medicare and other public resources prior to Wal-Mart entering the picture. Wal-Mart's presence is an attraction to this type of low income worker who then increase the drain on public resources including schools, while paying very little taxes.

When Wal-Mart arrives people see low prices and
think "this is pretty good". Then, five years later, they notice the schools are over crowded, school test scores are going down, crime is up, emergency rooms are overcrowded and closing and taxes are going up. They don't realize those cheap goods were not really so cheap after all.

(My time line may be compresses, and clearly more than just walmart is at fault, but you get the idea).

It should be noted that Wal-Mart often use political leverage to avoid paying even property taxes in the cities in which they reside, so the total tax revenue they generate is very small.

In additional to illegal aliens, low-income workers from near by states may also migrate into Maryland for the work, also putting a drain on the public resource.

By forcing Wal-Mart to pay for at least some of the services its employees consume it will have to make more rational decisions regarding whether to open new stores in Maryland and attract more low income workers into the state. This is the desired effect of the law. If they decide not to open a store then such activity was not a NET benefit to the state.

Furthermore, if the Maryland law does close Wal-Mart it may have the effect of forcing these low income workers into other states thereby further reducing the fiscal burden these workers place on the public infrastructure and service base.

If that is the case this is a perfectly rational decision on the part of Maryland.

Jody writes:

DaveG: Rather than effectively imposing a 8% tax on the poor (who shops at Walmart?), why not just deport illegals? Wouldn't that solve your problem without hurting the people you're trying to protect?

kent writes:

I'm not sure if 1) I understand my state's (Pennsylvania) health care legislated conundrum and 2) if ours is applicable to Maryland or other states. However, I'd love for someone to clarify this (legislative) issue.

It's my understanding that Pennsylvania (and Maryland) have laws that allow state insurance companies (Blue Cross, Blue shield) to pass through mandated costs for covering the uninsured health care (hospital) costs. These costs seem to be shackled to mid-sized, local and regional companies located in the state -- and avoided by large, multinational companies.

Doesn't the newly enacted Maryland law, weird as it appears on the surface, seems to bring some kind of parity to the existing, murkily unfair state health care legislation? Again, clarification of misunderstanding would be greatly appreciated.

Boonton writes:

I don't think Wal-Mart significantly changes the illegal immigrant population in a state or community. Even though some companies contracting with Wal-Mart have been caught using illegals the fact remains being a large corporation much of Wal-Mart's transactions have to be on the books. It is smaller businesses and homeowners who can pick up illegals to do various jobs & have room to work things out in cash with very low probability of being caught by the IRS for cheating on employment taxes.

Furthermore, it isn't really all that clear that working illegals increase the cost of gov't in an area beyond what they add to the economy. To be simplistic, yes the cost of the local school may go up as more kids enroll at it but house values in town go up too as people use home equity loans to rennovate and upgrade their homes on the cheap using alien labor. Yes illegals may consume costs as they show up in ER rooms but the fact remains illegals are probably younger than average and work in physically demanding jobs. While I'm sure you could see illegals coming into an ER if you choose to sit there for a day or two I think the fact is on average illegals are probably healthier & less likely to consume large amounts of healthcare than the aging US population.


The health care issue is a symptom of the fact that the US has a de facto universal entitlement to health care (show up an an ER sick and you have to be treated) but refuses to come up with a universal system to finance it. I've long proposed a universal voucher system where individuals can buy insurance from any company they want on the market. If they or their employer want nicer plans they can add their own money to buy premium plans.

It is a fact that Wal-Mart very blatently uses state welfare plans as a supplement to their low pay. I've read that they even have referral services that will help employees sign up for assistence. I'm not sure how I feel about this.

On the one hand it's good that they try to help their employees but on the other hand isn't offloading their employees onto state welfare rolls very similar to a company that offloads its waste products into a state's clean air? By being permitted to offload Wal-Mart is able to offer lower prices than the competition which only seems to encourage mroe employers to lean towards replacing health benefits for lowincome workers with a brochure explaining how to sign up for Medicaid.

Daveg writes:

DaveG: Rather than effectively imposing a 8% tax on the poor (who shops at Walmart?), why not just deport illegals? Wouldn't that solve your problem without hurting the people you're trying to protect?

First, you pay the tax regardless. The people will receive Medicare. You can either pay it through the general fund or you can tax the company contributing to the problem.

That said, the state of Maryland has very limited control of immigration. It is federal issue, as many state politicians will tell you over and over again.

So, the state must act in ways that are under its control. Forcing companies that bring many low income people into the state to pay for at least some of the services those people consume is something that is within the state's power to do.

So, in this case, that is a rational response by the state.

And do you doubt that if/when the feds try to remove some illegals some will scream that removing people by "force" is not humane and that we need to remove the "attraction" of jobs. When you try to do eliminate the jobs others will say "why put a tax on people when you should just remove the illegals."

Someone always has a reason why you can't do something to reduce illegal immigration.

Jody writes:

DaveG: A general tax as opposed to a tax just on Walmart would fall on the higher income brackets. This is, in implementation, a tax cut for the rich with a tax hike on the poor.

And yes MD can arrest illegals. Or for even cheaper than deporting or the Walmart tax, they can deny services to illegals.

"And do you doubt that if/when the feds try to remove some illegals some will scream that removing people by "force" is not humane..."

Yes, but I would cheer as would many others. I expect the cheers would actually outweigh the sccreams...

Boonton writes:
So, the state must act in ways that are under its control. Forcing companies that bring many low income people into the state to pay for at least some of the services those people consume is something that is within the state's power to do.

Professor Braingerg has a very piece arguing the conservative case against Wal-Mart (see http://www.professorbainbridge.com/ and search). Basically he concluded that Wal-Mart's problems are probably very close to its benefits therefore the proper policy for the gov't is to not hinder Wal-Mart but also not grant it any special favors or breaks as usually happens when a big employer comes to town and promises to create hundreds of jobs etc. etc. While this bill does marginally hurt Wal-Mart (economically it's only an 8% tax if Wal-Mart spent nothing on healthcare but it says it already spends very close to that so it's probably a tax of at best a few percentage points) Wal-Mart has probably more than borken even in Maryland with numerous tax breaks and other incentives they've won from local gov'ts.

Anyway, I don't think Wal-Mart brings in many low income people. First of all why would it? I could see relocating for a $100,000 a year job but who relocates for a $20,000 a year job? I bet if you walked through a typical Maryland Wal-Mart and chatted with the workers there most of them have probably lived in Maryland for years.

Looking at Wal-Mart we can break down the positives and negatives

Positive:

1. Some of its workers were probably unemployed or not even looking for work before it came along. This is a plus even if they are on Medicaid since they are generating income they wouldn't have had and generating tax revenue that the state wouldn't have had.

2. It does lower prices which in effect increases everyone's income because we can all get more for our dollar. This is more potent, though, for the lower income person because every dollar you can save is essential when you're facing poverty.

Negative
1. It does suck jobs out of the community. http://www.professorbainbridge.com/2005/02/walmart_a_devil.html cites a study showing that employment increases when a Wal-Mart opens by about 100 jobs. Since a store has 150-300 workers it's seems that there's an almost instant decrease in other employment when a store opens. Over 5 years that increase falls to about 50 workers as other local businesses close up shop. After 5 years it is as low as 20. An increase but much less dramatic than a local mayor or zoning board might think when confronted with a request for special zoning variances.

2. It probably does lower the general wage level since it is better at driving a hard bargain with employees than many small businesses (especially considering that some small business owners will be showing up looking for work there after being driven out of business). This hurts on several fronts:

a. State Medicaid/Welfare costs go up.
b. Less tax revenue.
c. Of course, lower income

3. Bainbridge makes a novel observation that by driving out small business Wal-Mart actually decreases opportunities for entrepreneurship & encourages an ethic of wage-labor. Is that a good thing considering that the 'new economy(tm)' seems to be based on heavy entrepreneurship?

4. Aesthetically Wal-Mart is horrible. It increases a community's overall 'ugliness' and takes out enjoyable downtown shopping districts replacing them with blighted areas. Economically this should be treated as an externality. No one owns the overall 'beauty' of a town but every small business owner is aware that whether their location is considered a 'charming shopping district' or a 'seedy blighted area' makes a huge difference.


So there's good reason to be skeptical about Wal-Mart and even better reason to take a neutral view of it by gov't neither helping nor harming it. Yet the fact remains that Wal-Mart almost certainly has benefited greatly from selling local boards on granting it exemptions and variances on claims that it will generate hundreds of new jobs or revitalize a neighborhood. As usual, it would be better to be neutral and let the market decide if jobs are generated by twenty small businesses opening or one huge Wal-Mart. The fact is, though, since politicians will not be good economists there is probably some rough justice in this measure. Maryland's taxpayers will probably recoup some of the unjustified favors their local gov'ts have given Wal-Mart over the years.

Randy writes:

Another case where a drawing a line between the responsibilities of the free market and of the socio-political systems would be helpful. Socio-political systems can't create wealth, and the free market won't solve social problems.

GregN writes:

Daveg:

I would guess that Wal-Mart itself doesn't hire many (if any at all) illegal immigrants. The contractors Wal-Mart uses, however, is a different story. The Marlyland law applies to Wal-Mart's payroll, not the payroll of it's contractors.

It would make sense for Wal-Mart to look into using more contractors to lower its Maryland employment level below 10,000. Maryland would be a good test case if 30 other states are considering similar legislation.

Boonton writes:
And yes MD can arrest illegals. Or for even cheaper than deporting or the Walmart tax, they can deny services to illegals.

This is not likely to be as cheap as you suspect. First of all denying police services to illegals breeds crime since illegals will turn to gangs for protections and gangs will prey on them knowing they cannot go to legitimate law enforcement for help. This is why big cities like New York have a 'don't tell' policy when illegals come to the gov't for help.

Denying medical services is also impratical. The only services the state typically gives are emergancy room services. If, for example, an illegal is diabetic she is unlikely to get insulin from the state on a regular basis. She will get such care only when she shows up in a coma at the hospital.

While saying 'let people in a coma die in the street if their illegal and don't have insurance' may get you applause in the bar & on talk radio it's not a policy this country is seriously going to accept nor should it.

Jody writes:

Boon: services was with respect to health care which I thought context made clear. And yes, it is as cheap to implement in the emergency room as I think it because I have a specific mechanism in mind.

Most emergency room visits are not life threatening.

In non life-threatening cases, the hospital already asks you to fill out various insurance forms. Suppose you fail to produce proper insurance. Then the hospital would ask you for a state issued ID (or perhaps from an accompaning guardian). Failing to produce an ID or insurance, the hospital then refuses treatment for the non-life threatening illness. IDs from other states would be permissable, assuming MD could charge the originating state for the associated health care cost.

If a hospital wants reimbursement for treatment from the state, then they just have to attach a photocopy of the ID with the claims form (they already photocopy insurance cards for insurance reimbursements).

The cost for implementing such a mechanism would be very very low and encourage states to do a better job of issuing IDs...

Boonton writes:

So let's say an illegal immigrant is working on your roof and he falls and breaks his arm. Tell me what happens from that point forward in your world. Assume he has maybe $250 cash on him and no insurance and no state issued id. As a second scenero assume he has a fake id on him (which would become more popular if your plan was implemented....many illegals currently have working social security numbers that they either rent from legitiamte immigrants or obtain through other means).

daveg writes:

And yes MD can arrest illegals. Or for even cheaper than deporting or the Walmart tax, they can deny services to illegals.

They can't deny may services to illegals including emergency medical care and schooling. As noted above they can't practically deny police or jail costs.

Anyway, I don't think Wal-Mart brings in many low income people. First of all why would it? I could see relocating for a $100,000 a year job but who relocates for a $20,000 a year job? I bet if you walked through a typical Maryland Wal-Mart and chatted with the workers there most of them have probably lived in Maryland for years.

While I like a lot in your post, the comment above is way off the mark. These labors travel thousands of miles, some of it highly risky to their personal safety, for these 20,000 year jobs.

Go to any contruction site and I gaurentee you will see people who were not in this country even a few months ago. They can't speak a word of english, for example. They also migrate from state to state as work become available.

I don't think Wal-Mart significantly changes the illegal immigrant population in a state or community. Even though some companies contracting with Wal-Mart have been caught using illegals the fact remains being a large corporation much of Wal-Mart's transactions have to be on the books. It is smaller businesses and homeowners who can pick up illegals to do various jobs & have room to work things out in cash with very low probability of being caught by the IRS for cheating on employment taxes.

Obviously it is a collective effect, with many companies hiring illegals. However, Wal-Mart being the biggest employer outside the US government it will have the biggest effect. Wal-Mart contracts out lots of activities to companies that do the "dirty-work" by hiring the illegals.

Boonton writes:
Go to any contruction site and I gaurentee you will see people who were not in this country even a few months ago. They can't speak a word of english, for example. They also migrate from state to state as work become available.

True but the construction of a Wal-Mart store is temporary. The selling point that Wal-Mart uses when the propose entering a community isn't the temporary construction jobs but the long term retailing jobs. Again I just do not think most of their labor is either illegal or 'imported' from outside the state. Construction is a different industry.

Obviously it is a collective effect, with many companies hiring illegals. However, Wal-Mart being the biggest employer outside the US government it will have the biggest effect. Wal-Mart contracts out lots of activities to companies that do the "dirty-work" by hiring the illegals.

First of all I imagine the market will respond in its usual creative ways. Illegals will end up working under multiple layers of protections (sub-contracted companies will hire even smaller companies to provide labor who will then employ illegals).

Second just because something is 'the biggest' doesn't mean that it accounts for the most. Take a simple janitor type job like emptying out trash cans and vacuuming in the off hours. A Wal-Mart store may use 20 such people a week making it the largest employer of such a job. Yet there's probably thousands of people doing this job servicing small office complexes, doctors offices, lawyers offices etc in a state.

I can tell you in NJ I suspect that most illegals are employed either directly or indirectly by individual homeowners who hire contractors out of the yellow pages to do home improvement projects. This borderland between the legit economy and the underground economy involves companies that are often nothing more than a cell phone and a pick up truck or van! I serously doubt Wal-Mart represents anything but a blip in it.

daveg writes:

I can tell you in NJ I suspect that most illegals are employed either directly or indirectly by individual homeowners who hire contractors out of the yellow pages to do home improvement projects. This borderland between the legit economy and the underground economy involves companies that are often nothing more than a cell phone and a pick up truck or van! I serously doubt Wal-Mart represents anything but a blip in it.

This may have been true in the past but I no longer think it is the case.

The kitchen in any restaurant is most likely full of illegals. Any contruction site, food processing plant or farm employs many illegals. Any cleaning company hires many illegals as well as any landscaping company.

While many homes employ an illegal, usually it is just for cleaning and for a few hours a day. It will therefore take 8-10 homes to employ an illegal worker, so I wonder how many private homes are really responsible for this influx. Home landscaping is a similar situation in that the ratio of illegals to home is less than 1. Other jobs are just project based (the home depot parking lot helper guy)

For a long time in CA individual hiring of illegals was probably the biggest factor. I think that has changed over the last decade as companies have become more brash and enforcement has dropped to virtually zero.

Regardless as to whether it is mostly companies or mostly individuals is all still not a good thing.

The fact that private people hire illegals should not excuse Wal-Mart.

(I also want to add that it is much more difficult for states to enforce immigration laws because they can't patrol the borders. Any identification of illegals is subject to claims of profiling. )

Boonton writes:

True but those many small landscaping/cleaning etc companies are more or less able to operate below the radar. A corporation is not usually responsible for confirming the legitimacy of the payroll of a corporation it purchases from. If Wal-Mart has a contract with "Al's Cleaning Service Inc" whose responsible for making sure the workers are documented? Wal-Mart or Al?

Yes I agree many kitchens are filled with illegals but that shows my point again. Most restaurants are small businesses that can operate partially off the books. IMO Wal-Mart just doesn't seem very relevant to the illegal debate.

daveg writes:

Wal-Mart creates the economic activity that draws the illegals (and low income legals from nearby states) into the area - cleaning, construction, landscaping, the small support industries such as warehousing, mexican restaurants, etc.)

I will concede that they Maryland law is not perfectly targeted to this problem because Wal-Mart does hide behind these "front" companies that do much of the hiring. It should go after the smaller (all?) companies.

But, as imperfect as the law is, it will force Wal-Mart to pay into the medical system which it is causing to be burdened, so in that sense it is rational. It is not rational in that it is incomplete, but I don't think that is what is being debated here. I havn't heard anyone argue that they should expand the tax to all companies.

I think the question is, if a state decides that it will grant some minimum form of health care to all residents (Medicade), what is the best way to fund that effort assuming:

a) the state must fund new people entering the state;

b) it can't prevent new people from entering the state.

It seems to be that "taxing" the activities that draws new people into the state to pay for these services is more rational the just a general tax. which is I think what this debate boils down to in the end.

Hit The Bid writes:

In the short run: Ha Ha! Labor won one over capital!

In the Long Run: Lets hope this gets businesses to the table to do whats smart and right and get universal coverage health insurance going in this country. That is the Pure pro-business policy...period.

George writes:

I don't quite see how Wal-Mart is responsible for illegle immigrants. It is being charged that Wal-Mart provides jobs and those jobs attract immigrants. Eliminating the jobs seems like cutting off your nose to spite your face. Perhaps the next policy proposal will be to burn all the cropland in California and sow the fields with salt.

Wal-mart has found a way to provide retail goods and services using minimally skilled labor. It pays that labor low wages and charges rock bottom prices. This drives other retailers out of business and destroys the jobs of their employees. Economically speaking this is a good thing, relatively inefficient firms are destroyed freeing up resources to be used more efficiently.
Additionally workers who would previously have been marginally employable now have jobs.

More importantly the low prices charged by Wal-Mart increase the real income of its customers. I can go to Wal-mart and buy a pair of Levis for roughly 50% of what JC Penneys charges for the exact same jeans, or I can buy a pound of hamburger for 75% of what my local grocery store charges.

That increase in real income allows me to buy other goods and services. Those other G&Ss are produced in part by those displaced workers who formerly worked in retail.

I assume Wal-Mart pays its workers roughly their marginal revenue product. Benefits are a part of what Wal-Mart pays its workers. If the Maryland legislature mandates an increase in benefits then Wal-Mart must either reduce its monetary wages or increase its marginal revenue product. Increased MRP requires either an increase in prices or an increase in productivity, both of which would result in a decrease in quantity of labor demanded. If any of these responses were optimal Wal-mart would have done them already so I don't see how the legislature has done anything but hurt the public through its actions.

daveg writes:

I don't quite see how Wal-Mart is responsible for illegle immigrants. It is being charged that Wal-Mart provides jobs and those jobs attract immigrants. Eliminating the jobs seems like cutting off your nose to spite your face. Perhaps the next policy proposal will be to burn all the cropland in California and sow the fields with salt.

Let just take an extreme hypothetical. If I had a coffee cart that took in US$50,000/year, and I hired an illegal alien from mexico who came over specifically to work at my coffee card and she was paid US$20,000.

And lets say this woman developed cancer one month later and went to an emergency room and received one million dollars in medical treatment. Then she came back to work.

Do you conceed that, under this extreme senario, my econmoic activity was a net loss to society - that society would have been better off if I did not create this job and hire this illegal immigrant?

Do you at least see how it is possible that immigrants could be a drain on society if the numbers add up a certain way?

Once we conceed that, then we can just argue about the numbers, but if you can't see how it is possible that creating a job that brings in people who are less productive than the resources they consume then I don't think we are going to get very far.

Now also add that the government is paying my to run my coffee stand (which is does for many farms). Then can you really see how unproductive my "job" was for society?

Randy writes:

DaveG,

The problem with your scenario is that it is not the free market activity's (Walmart) fault that the illegal immigrant was given a million dollars of free medical care. It was the fault of the socio-political system that granted the right to free medical care. Walmart's responsibility in this is simply to create wealth. And if the socio-political system penalizes Walmart, they will simply reduce the amount of wealth that Walmart can create, thus limiting the amount of wealth available for such redistributive transactions as providing free health care.

daveg writes:

The problem with your scenario is that it is not the free market activity's (Walmart) fault that the illegal immigrant was given a million dollars of free medical care. It was the fault of the socio-political system that granted the right to free medical care.

My coffee stand is operating within the known laws of the US, and we should review policy from the perspective of those laws and the closed system that is the United States (or whatever country we are talking about).

You must be able to analyise and make policy that takes into account the laws and other environmental considerations surrounding the econmic activity.

If you refuse to do that then you are being obtuse. If you can't do then your models are garbage. Really.

Boonton writes:

Do you conceed that, under this extreme senario, my econmoic activity was a net loss to society - that society would have been better off if I did not create this job and hire this illegal immigrant?

Do you at least see how it is possible that immigrants could be a drain on society if the numbers add up a certain way?

It's only a net drain if she got cancer from being exposed to your coffee beans! If it's a given she was going to get cancer then society starts the game at -$1M. If she generated $4,166 worth of activity ($50K per year, you getting $30K and she $20K divided by 12 'cause she worked only a month) then it remains that society was better off with the coffee stand.

daveg writes:

It's only a net drain if she got cancer from being exposed to your coffee beans! If it's a given she was going to get cancer then society starts the game at -$1M. If she generated $4,166 worth of activity ($50K per year, you getting $30K and she $20K divided by 12 'cause she worked only a month) then it remains that society was better off with the coffee stand.

Presume she would have contracted cancer whether she worked in the coffee shop or not. Maybe it was already there but was not detected until after she came to the US.

So, if she stayed in Mexico then mexico would have been responsible for the treatment when it was finally detected.

It was only the act of "actracting" her to the US with the propect of a job that transfored the responsiblity for the treatment from mexico to the US.

My coffeeshop was created an external cost that was far in excess of its value, from the perspective of the US economy.

Boonton writes:

I think the scenero here is much more limited than daveg's example.

Suppose Joe works at a small store and has health benefits. Wal-Mart comes to town & offers him a job. The pay is the same but he rejects it because he wants the healthcare, especially considering his wife may have a baby.

A year later the store is suffering financially, the management cuts back on the healthcare leaving Joe with a plan that costs a lot & offers him crappy service. Now Wal-Mart points out that they will help him get on Medicaid & then his family (let's imagine he has children) will have even better options than his crappy job's plan. So Joe takes the deal.

In this very limited case Wal-Mart is indirectly tapping the state's welfare programs as a way to supplement their payroll. In this very limited scenero society may experience a net loss which might justify a small tax.

Of course Joe's original employer might be able to help him with Medicaid but economies of scale are prohibitive. Is it worth it for a business to invest in getting its handful of low income employees educated about state options? Isn't the cost of doing this a lot cheaper on a per-employee basis if the business has thousands of low income employees?

Boonton writes:

daveg,

Well take a step back, if you say society is all of humanity then obviously the analysis I presented holds. Whether or not she gets $1M in care the fact is we are all better off for the $4100 or so she generated due to your coffeeshop.

If you limit it to just the US then perhaps you have a point. But it is highly unlikely you imported her directly from Mexico. She was most likely here anyway and was going to have cancer here anyway so better that $4100 was made than $0.

Even if you want to consider that your shop attracted her accross the border let me ask you is there any reason your coffee shop with its low pay would attract people more prone to such dramatic illnesses? Out of a 1,000 coffee shops just like yours maybe 1 might attract such a sick person. Out of 1,000 shops that only hire legal I would suspect they would see maybe 2. In other words, the analysis only works if you have reason to assume the illegal population is especially sicker as a whole than the US one. In fact it is probably more healthy on average for reasons I gave before.

daveg writes:

If you limit it to just the US then perhaps you have a point.

Man, that was like pulling teeth!

Now, we can argue the numbers as you start to do, but at least we can acknolwege that if the public services consumed by the immigrant are greater than the economic activity it is a net negative to the US.

Now, everyone here says the problem is that "we have the crazy public policy of treating sick people in this country when they can't afford it." I guess the implication is that we should let them drop dead.

Well, you can all take satisfaction in the knowledge that is exactly what this woman would have done had she stayed in Mexico, thus arriving at the correct economic solution.

And just for the recored, Wal-Mart did agree to pay 11 million dollars (slap on the wrist) in fines for hiring illegal labor, one of the very few companies be fined in this manner over the last few years.

Matt writes:

I don't quite understand how illegal aliens came to be such a big issue in this discussion. Wal-Mart is unlikely to have a lot of illegal aliens because you have to be able to speak English well to work at Wal-Mart. Construction, meat packing, and other physical labor jobs are far more likely to attract illegal aliens.

So beyond the initial build of the Supercenter, there really isn't much that Wal-Mart can do relating to illegal immigrants, other than sell the same products it does to legal immigrants and naturalized citizens.

Randy writes:

daveg,

Re; A closed system.

Good point, but it doesn't really change my analysis. You're simply moving the fault from an action on the part of the socio-political system (creating a right to free health care) to a failure to act on the part of the socio-political system (failing to maintain a closed system). There is still no reason to blame the free market activity. And again, penalizing the free market activity will simply limit its ability to create wealth, and consequently limit the total wealth available to the socio-political system, consequently limiting its ability to solve this problem, or any other problem.

daveg writes:

Hmmm... I guess Wal-Mart don't have to be cleaned at night. No wonder they are so dirty.

They probably don't need to unpack boxes and perform other manual tasks.

And they must have paid that 11 million dollar fine for no real reason.

Anywhere there is low wage jobs you will find illegal immigrants.

Javier writes:

This whole discussion about immigrants is irrevlant for people who actually include immigrants in the social welfare function. I want the immigrants to come here and get jobs because it probably helps improve their standard of living. I don't particularly care if they put a drag on the safety net because I want that safety net to benefit those in need, not just Americans.

Also, I'm fairly confident that immigration benefits the economy overall, even though it may depress the wages of the lower quintile.

But again, I don't see why it should matter. Many immigrants are escaping pretty desperate poverty. That's a good thing in my book.

daveg writes:

Good point, but it doesn't really change my analysis. You're simply moving the fault from an action on the part of the socio-political system (creating a right to free health care) to a failure to act on the part of the socio-political system (failing to maintain a closed system).

In the abstract I would agree with you. That is, if employers where simply innocent actors hiring illegal without knowing they were here.

It should be the states job to keep the illegals out and employers should just be free to act.

But that is not really the case. Employers actively recruit people from mexico. There are "head hunters" that specialize in bringing in illegal crews, for example.

Tyson Foods actively markets jobs in the US on the other side of the border, for example.

Also, employers lobby to prevent enforcement of the laws on the books.

So, at that point I no longer feel the employeers are innocent actor trying to function within a system encumbered with bad policy.

daveg writes:

Here is an example of how the coffee stand application is ineffeciant in an absolute sense.

The woman lives in mexico which, despite the fact that it claims to be socialist, is actually must more free market in the sense that there are few if any real social benefits to be had there. That is the "right" policy from the standpoint of the free market person, even if that is more of an accident than a real policy. Mexico is just no good at providing social welfare benefits.

The results of my coffee shop is that the woman worker with non-visible cancer is "pulled" into an ineffcient market such as the US which has mistaken gauranteed medical care to everyone, at least on an emergency basis.

The results is that economic resources are misused and overall net wealth is reduced on a universe wide basis.

Bruce Moomaw writes:

Max Sawicky at http://www.tpmcafe.com/story/2006/1/13/173011/432 :

"The chief motive in Maryland rests in the failure of Wal-Mart and others to provide adequate health insurance, resulting in a higher cost for taxpayer-financed Medicaid. Arnold's conservatarian solution: kick 'em off Medicaid! What a card."

resigned writes:

The sad fact of it is though that most of the uninsured do not work at walmart, but rather at small businesses. Of those, does anyone know what the age distribution is? What the basic prices are for insurance/month? What I worry about with this kind of law is that Walmart could respond in either slowing wage growth of it's non-minimum wage employees, while increasing the costs of its products. This results in poor benefits to its employees. Perhaps a better solution would have been to encourage Walmart to make an insurance pool for its employees. Since it employs so many people, it would allow insurance companies to charge lower rates for coverage due to the pool (the pool results in lower risk for the insurance companies). If necessary, it could use its leverage of size to force different insurers compete for entrance into the pool. Since it is not offering insurance, just the pool, its costs are minimal. Heck, for a fee, it might even allow its shoppers to enter its pool for lower rates.

Paul Zrimsek writes:
Wal-Mart creates the economic activity that draws the illegals (and low income legals from nearby states) into the area - cleaning, construction, landscaping, the small support industries such as warehousing, mexican restaurants, etc.)

I will concede that they Maryland law is not perfectly targeted to this problem....

Darn that economic activity anyway! Then again, it's nice to find a problem liberals actually know how to solve.

Randy writes:

daveg,

Your argument is an interesting and philosophical rationalization. The Maryland legislature is going after Walmart because it can. They want money, Walmart has money, and the left has made Walmart an easy target. But the legislature is about to find out that it has underestimated Walmart. Those Arkansas boys are tough. There's going to be a hell of a fight, and the only people that will lose are the people of Maryland.

Roger M writes:

Obviously, the Maryland legislature wants to immitate France. 5% unemployment isn't high enough. They admire France's 10%+ unemployment, which it achieved through years of tough business regulations. In a few years, Maryland will achieve the honor of riots similar to what its mentor enjoyed this fall.

Roger M writes:

I forgot to add the rationale for immitating France: When the economy is good, socialists find it hard to argue for greater government intervention and regulation. They must destroy the economy (as the Fed did in 1929) so that they can blame capitalism and argue for greater state control of business. That's the French way!

Dr. Dan writes:

Economist Henry Aaron's recent book on health care rationing makes it very clear that we spend too much on health care. But neither he nor any of the other economists who write about health care have proposed a workable model to reduce costs. Nor has the market been able to do so. So we remain the only industrialized country without some form of universal health care. Wal Mart can shifts its health care costs to our ERs because we can't turn away the uninsured. Or, for those not smart enough to go to the ER, too bad. Wal Mart can surely afford some form of better insurance. From what I've read, they remind me of the Chicago meatpacking plants in Sinclair's famous novel.

Grzegorz writes:

Dr. Dan writes:

So we remain the only industrialized country without some form of universal health care. Wal Mart can shifts its health care costs to our ERs because we can't turn away the uninsured.

To quote Dr. Sowell:
"It is amazing that people who think we cannot afford to pay for doctors, hospitals, and medication somehow think that we can afford to pay for doctors, hospitals, medication and a government bureaucracy to administer universal health care."

How does the good doctor propose we pay for universal health care? Is UHC funded through higher statutory taxes, cutting discretionary spending, means testing?

I see a real need for catastrophic healthcare; I see trouble with universal health care.

If the doctor sees a run on services now because those without insurance receive “free” care why would the demand for the same services decrease if someone other than the patient paid?

BTW, nothing is “free”, there are always trade-offs.

Keeping prices lower than they would be under supply and demand produces shortages. I am confident that this statement has been borne out throughout history. It's human nature to pursue free services. In the case of healthcare, you'd have more patients sitting in waiting rooms and less time in doctors' offices.

David writes:

I don't see anyone in the gov't going after the HIGH costs of medical care or the insurance companys who charge so much for coverage that rarely pays, or the lawyers who back it all up. And guess what, they're all turning a profit, no matter what they say.

Chris Bolts writes:

"It is amazing that people who think we cannot afford to pay for doctors, hospitals, and medication somehow think that we can afford to pay for doctors, hospitals, medication and a government bureaucracy to administer universal health care."

That's an interesting quote. For the entire week of January 15th to January 21st The Arizona Republic is running a series on the so-called "failing and unsustainable" system of employer-provided healthcare. It's obvious that this is an attempt to guilt legislators into once again passing legislation to implement a nationalized healthcare system.

What I find troubling is that when there is a discussion about healthcare, the reporters always criticize the US for being the only industrialized nation for not having a nationalized healthcare system (for instance the timeline that is supposed to detail the history of the US healthcare system starts with a timeframe that states that most European countries between 1880-1912 had implemented a nationalized healthcare system. This obviously has nothing to do with the US system and was only put in there to show how "backward" we are as a nation.), but these same reporters never do a comparative analysis between our semi-private system and the nationalized systems to get a better understanding of the costs and benefits of said systems as well as the tradeoffs of implementing each program. On top of that, these same reporters seem to think that if government is the only buyer of healthcare it can hold down the costs while providing top quality care, but as evidenced by the spiraling costs of Medicare and Medicaid this is proving not to be the case.

And just a quick quip from one of the articles in yesterday's edition of the AZ Republic, a family who had over $40000 in medical bills was able to negotiate with the medical providers and knock that bill down to $6000, a whopping 85% in savings. My wife, who used to work in medical billing, said events such as this occurred frequently. If that doesn't tell us that costs of medical care are out of line with medical care demanded, I don't know what does.

Roger Cain writes:

I think Walmart has been a great plus for our communities. The employees would have had no income if it hadn't come and would be on government assistance. We have to travel 25 miles but in our rural area, that is normal to travel long distances to shop. The prices are a bit lower overall but you have to buy enough at one trip to cover the expense of driving. When Walmart first tried to come in the other merchants fought it. Now they are some of the best customers and new stores are opening up, more because they are competing with Walmart and providing better service that they did before. It was a delay of 5-10 years but is effective nevertheless. The towns which were in the throws of dying are booming now. Specifically, Chillicothe and Bethany, MO.

Roger writes:

I think Walmart has been a great plus for our communities. The employees would have had no income if it hadn't come and would be on government assistance. We have to travel 25 miles but in our rural area, that is normal to travel long distances to shop. The prices are a bit lower overall but you have to buy enough at one trip to cover the expense of driving. When Walmart first tried to come in the other merchants fought it. Now they are some of the best customers and new stores are opening up, more because they are competing with Walmart and providing better service that they did before. It was a delay of 5-10 years but is effective nevertheless. The towns which were in the throws of dying are booming now. Specifically, Chillicothe and Bethany, MO.

stan wasbin writes:

Mr. Kling--

I appreciated your fine piece, "A Political Prescription," which appeared in THE ORANGE COUNTY REGISTER Jan. 22, 2006. But, one statement jumped out at me: "... if Wal-Mart workers want health insurance badly enough, eventually the market will find a way to provide it."

What little remains of a free market in private health insurance cannot effectively compete against public insurance -- which now covers 1 in 3 Americans. The 1000 state & federal mandates(and counting)on private health plans render the notion of competition a joke. Furthermore, private NON-GROUP health insurance plans reject around 15-20% of new applicants.

I prefer an American variation on the Swiss model. Would appreciate your feedback.

Thank you.

Dan Verona writes:

Does MD have any numbers to support their claim? I have been unable to find any. What are Wal-Mart health care contributions and how do they compare on a per employee basis to other retailers? How many Wal-Mart employees use gov't services and how does this compare to other groups? How many Wal-Mart employees gave up health care benefits to go to work for Wal-Mart? How many got health care benefits for the first time perhaps because they were unemployed or uninsured? Seem hard to believe that people quit jobs with health care benefits for the higher pay at Wal-Mart. If employees, prior to joining Wal-Mart, had little or no health care insurance at all, maybe the presence of Wal-Mart has reduced the total number of people using MD gov't services. What percentage of Wal-Mart employees had no prior health insurance at all and how does that compare to other employers? How will we ever know unless we have some real numbers? All I have seen is anecdotal stuff. Is this a debate of theory only? That can be fun, but--- . Don't we really want to know if MD subsidize Wal-Mart, or more accurately, which party produces goods and services and exactly who is the dead weight? Which option creates a better economy - a marginal increase in Wal-Mart operations or a marginal increase in MD goverment programs?

Are there any numbers that yield the 8% solution? Why not 7% or 9%? Maybe it should be a negative number? Maybe Wal-Mart is doing more to solve the uninsured problem than any other business. Wow! How will we know?

It appears the problem, the solution and the legislation are all based on guesswork. It won't be the first time a gov't program produces the opposite of what it intends to do. It would be nice to see some numbers.

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