Beating Up on Wal-Mart

Thursday, January 12, 2006

AMERICAN BUSINESS has few whipping boys so irresistibly whippable as Wal-Mart Stores Inc., whose treatment of employees, competitors and suppliers conjures cold-eyed corporate heartlessness. It's hard to root for Wal-Mart; one might as easily cheer on Scrooge or the shark in "Jaws." But state lawmakers in Maryland are preparing to impose legislation on the retailer so arbitrary that it may achieve the near-impossible feat of casting Wal-Mart as the victim.

The Maryland bill would force firms with more than 10,000 in-state employees to spend at least 8 percent of their payrolls on workers' health insurance plans or make compensatory payments to the state. Only three other Maryland employers have more than 10,000 workers on their payrolls -- Johns Hopkins University, Northrop Grumman Corp. and Giant Food Inc. -- and they already meet or exceed the 8 percent threshold. Apparently, only Wal-Mart, with about 15,000 full- and part-time employees in Maryland, does not; thus the bill applies uniquely to Wal-Mart.

Maryland's legislature passed the bill last year, but Gov. Robert L. Ehrlich Jr. (R) vetoed it. Lawmakers, urged on by big unions, appear on the verge of overriding the veto despite furious lobbying by Wal-Mart. The legislators, joined by Giant Food (Wal-Mart's unionized competitor), insist disingenuously that they are not singling out the big-box retailer but are merely setting a standard. Yet hundreds of smaller companies in Maryland that fail to meet the 8 percent spending threshold for health care are untouched by the legislation; in total their uninsured employees may be a greater drain on the state's health system than Wal-Mart's. The bill's backers say that Wal-Mart, because it is so large, bears a special obligation to set a good example. But since when do states have the right to penalize firms simply because they are big and successful?

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.

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