Thursday, January 19, 2006

Attention Wal-Mart Shoppers

Wal-Mart is in the news.


Why? Because they are a major employer in Maryland, one who employs about 15,000 people.

The entire state has a little over 5M citizens. They have about 2M folks who are employed, so 1 out of every 130 workers is employed by Wal-Mart.

In other words, if you live in Maryland, and know at least 130 adults, chances are somebody you know has a blue vest hanging in their closet.

So what’s the beef? (Apologies to Clara Peller)

Well it seems that some folks think Wal-Mart doesn’t contribute enough for health insurance for their employees. In fact, the people under the gold dome want to pass a LAW requiring employers of a certain size (10,000 by coincidence) to contribute at least 8% of payroll to health care.

OK, so how many employers would be affected by this law?

Uh, that would be four.

Johns Hopkins University, Giant Food, Northop Grumman and Wal-Mart.

Of the four, Wal-Mart is the largest employer and (allegedly) the only employer that does not meet the 8% of payroll threshold for funding employee benefits.

Much has been made of the fact that Wal-Mart provides (according to some) very little in the way of employee health coverage. This same crowd complains about the number of Wal-Mart workers who go without health care, or rely on taxpayer funded programs for their care.

Some have even suggested that top management take a pay cut to fund the cost of health care for their workers.

Right . . .

Here’s an eye opener.

In 2004 Lee Scott (CEO of Wal-Mart) earned $17.5M in pay including bonuses, stock options and other incentives.

The top 5 executives at Wal-Mart & Sam's earned an additional $24M in compensation for a total of $41.5M spread over 6 executives.

That same year Wal-Mart employed approximately 1.2M people (USA).

If the top executives worked for nothing, the 1.2M employees could be paid an extra $35 per year.

That doesn't buy much in the way of health care . . .

So what might happen if this bill passes?

Wal-Mart could comply with the law. In order to fund the benefit package they could raise prices. This could lead to sales erosion which could cause layoffs or store closings.

Or they could simply adjust payroll by cutting back on hours for existing employees, and maybe let others go entirely.

They could also say goodbye to Maryland, pack up and leave. Then Maryland would see their unemployment rolls swell from the current 4.5% to about 5.25%. And of course there is a loss of the tax base from the shuttered store fronts no longer paying property taxes. There would also be a loss of sales tax revenues, state unemployment taxes and who knows what other revenue sources the state would lose.

So just what is the potential economic impact of losing the states largest employer? It’s really hard to say.

But even scarier is this. If this bill passes, what’s to keep the state from lowering the threshold to say 5,000 employees or maybe 1000?

This is one area where government needs to leave things alone and be content with what they have.

UPDATE: Be sure to read Bob's follow-up, here.
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