No Wal Mart Law For Maryland - Road to the Middle Class

U.S. District Judge J. Frederick Motz ruled that the law violates the Employment Retirement Income Security Act (ERISA), a federal law that sets minimum standards for pensions and health plans.

So that’s all right. Wal-Mart won’t have to pay a tax if its health benefits don’t reach a minimum 8 percent of payroll. You can imagine that Wal-Mart’s PR guys were delighted. “BREAKING NEWS,” they crowed.

But we sober souls need to think long and hard about health insurance and employee benefits and their interaction with government benefits.

The purpose of government benefits is to help people in need. That is a noble idea. The trouble is that when you give people “economic outpatient care” they respond by working less and consuming more.

Over the last century the government has constructed a huge structure of benefits and the result is a lot of people on the lam, doing a minimal amount of work and cunningly using the system to extract the maximum of free services.

It is said that if you finish high school, don’t have child out of wedlock, don’t get divorced then your chance of being poor is pretty small.

But the whole apparatus of government benefits is set to assure that if you do drop out of high school, do have children as a teenager, do get divorced, then things won’t be too hard for you.

When you have a vast apparatus of means-tested government services supplemented by a raft of employer-paid first-dollar employee benefits then you have destroyed the market in basic human needs. You no longer know how much health care people would buy if they had to pay for it, and how they would balance their consumption of health care against other human needs.

For instance, Americans are buying gigantic houses and SUVs these days. Would they be buying smaller houses if they paid a bigger share of their health care costs out-of-pocket?

We know that whenever the government meddles with a market in products or services that sooner or later the supply of products and services gets out of whack.

Wal-Mart is a company that knows that it must mark itself to market every day. It must mark itself to market when it buys products for its customers, and it must mark itself to market when it hires new employees.

Most of all, Wal-Mart has been very careful not to make rash promises to its employees. It has held off giving them first-dollar health insurance or defined benefit pension programs. It doesn’t take a rocket scientist to figure out why. Make an open ended promise like that and you will likely end up destroying the company and the jobs it provides.

Does Wal-Mart take advantage of its employees? I hope so. That’s the idea of the market economy. You buy low and sell high. Still, when Wal-Mart opens a store it generally gets thousands of people applying for the hundreds of jobs. That has to mean something. It has to mean that some people really value a Wal-Mart job.

But the message hasn’t got to the politicians yet.

Sphere: Related Content |

Christopher Chantrill blogs at www.roadtothemiddleclass.com. His Road to the Middle Class is forthcoming.