The Wal-Mart Bill

An excellent article about Wal-Mart and Maryland. Maryland's newly enacted law forces companies that employ over 10,000 to spend at least 8% of their payroll on health care or kick any shortfall into a special state fund. Wonder of wonders, Wal-Mart is the only employer in the state to be affected. Wal-Mart now reconsidering a distribution center that would have employed 800 in one of Maryland's poorest county, Somerset.

The rural county is Maryland's poorest, with per capita personal income 46% below the state average and a poverty rate 130% above it. Somerset's enduring problem is weak labor demand that greatly limits its 25,250 residents' economic opportunities.
There are just 0.8 jobs per household in Somerset, barely half the 1.5 figure that applies to the rest of the state. Somerset's top 10 list of employers features sectors like food services (average annual compensation per employee: $9,637), poultry and egg production ($14,320) and seafood preparation and packaging ($19,190).

Hanke and Walters forecasted the economic effect the distribution center would have on the county.

• The center's 800 employees would have created an additional 282 jobs among "upstream" suppliers and "downstream" retailers and service establishments; all told, the center would have boosted county employment by 14% and private-sector employment by 20%.

• Total annual employee compensation in Somerset would have risen by $46.5 million, or 19%.

• Annual output (or "gross county product") would have risen by $128.3 million, or 19%.

• State and local tax receipts would have increased by $19.2 million annually; this would include $8.5 million in property taxes, $5.6 million in sales taxes, and $1.4 million in personal income taxes.

Those losses, though dramatic, probably understate the full extent of the damage in this case. They do not include forgone employment and income from construction of the facility and related infrastructure improvements. What is more, Wal-Mart's tentative plans for a second distribution center in Garrett County, in mountainous western Maryland, also appear dead. Garrett, with a poverty rate that is 70% above the state's, is only slightly better off than Somerset.

Given the enormous beneficial economic impact Wal-Mart would have made to the county, why would Maryland thrust it's nasty little fingers in Wal-Mart's wallet? Most states offer incentives to businesses to entice them to their states. What's different about Wal-Mart? Hanke and Walters have the answer:

How could our legislators turn a blind eye to such areas? Partly, of course, they are simply eager for Big Labor's votes and money and therefore subservient to its interests. The Service Employees International Union actually helped draft what became known as the "Wal-Mart bill." Unable--so far--to organize workers at the company, the union's immediate national strategy is to limit Wal-Mart's competitive reach by raising its costs. Maryland was a shrewdly chosen place to kick off this campaign.

So, what's the problem? Surely Wal-Mart is big and rich enough to pay up. Wal-Mart bills have been drafted in 33 other states. What would happen if lawmakers in some of these states set the threshold for companies to be hit with mandated health benefits as low as 1,000 workers? How many small businesses would go bankrupt because they couldn't pay?