Sunday, April 10, 2005

Mandating Employee Benefits

A Washington Post editorial discusses a proposed Maryland statute that would force Wal-Mart to spend more on health insurance for it's workers. The editorial suggests the state legislature is likely to pass the bill. One of the concerns voiced by the editorial is that the statute would force only this one employer, Wal-Mart, to increase spending. This seems a valid concern.

Whether only one employer is forced to increase specific employee benefits, or all employers are so coerced, what might economics tell us about the consequences of such a law? The state legislators who support the proposed bill are likely to tell us they seek to make things better for the state's workers by helping them to be better able to obtain health insurance. Do we expect their goals to be achieved? Are there likely to be unintended consequences that should lead the lawmakers to doubt the wisdom on the proposed statute?

Doesn't it seem that forcing employers to pay more for employee benefits is very much like imposing a minimum wage? After all, the statute would seem to be increasing what an employer has to pay to hire another hour of labor. If this makes sense, then wouldn't we predict that the results of making this proposal a law would be that Wal-Mart would want to reduce the amount of labor employed? And, wouldn't Wal-Mart hiring less labor mean that while some workers might be better able to afford health insurance, there would be other workers who were less able to afford health insurance? Would you predict other inintended consequences? What might happen in the long run? Would Wal-Mart want to decrease payments to other types of employee benefits? Could there be an impact on the ability of Wal-Mart employees to be successful in their efforts to unionize?

1 comment:

James Sayno said...

Wow - a bill that will specifically target out one business in the entire state. If that is not an breach of government authority, I am not sure what is.

The problem is that we have made it easy for our government to do these types of things. For example, there are many local governments that are passing No Smoking in Business Establishment laws. This outlaws smoking in all businesses in a certain area. Lots of people these days do not like smokers or smoke, so they vote for these bans. This directly infringes on the business owner's right to decide for themselves whether to have a smoking or non-smoking establishment. Many of my friends are in favor of these type of laws. I do not smoke either, but I don't think it is right for me to tell someone else they can't do it in their own business.

So lawmakers in Maryland are targeting Wal-Mart. As the editorial said, it is very easy to take shots at the giant. They have become unpopular in many circles, and instead of attempting to defeat them on the commerical playing field, they would rather get them in the political arena.

Economically, let's assume that Wal-Mart is already paying competitive wages. they are the state's largest single employer. If they were not paying competitive wages, those workers would go elsewhere for employement.

Imposing a new health care spending measure on them will make them either a) hire fewer workers or b) pass the cost on to workers in the form of lower wages.

In the end, the employees will lose. The company will grumble but find other ways to make profit.