Maryland, Wal-Mart, and Health Care

I think its just that the Maryland Senators have a good nose for money – like pigs sniffing out truffles. The only consequences they care about are votes and money.

One question you are ignoring is whether the population is static. You did not ignore this effect in another post discussion state laws related to medical care.

Wal-Mart jobs bring in new people who then go onto consume public resources in excess of the economic activity generated by Wal-Mart. Wal-Mart and their subcontractor have been found numerous times to hire illegal aliens for construction, cleaning and operation of their stores.

These illegals were not in Maryland consuming Medicare and other public resources prior to Wal-Mart entering the picture. Wal-Mart’s presence is an attraction to this type of low income worker who then increase the drain on public resources including schools, while paying very little taxes.

When Wal-Mart arrives people see low prices and
think “this is pretty good”. Then, five years later, they notice the schools are over crowded, school test scores are going down, crime is up, emergency rooms are overcrowded and closing and taxes are going up. They don’t realize those cheap goods were not really so cheap after all.

(My time line may be compresses, and clearly more than just walmart is at fault, but you get the idea).

It should be noted that Wal-Mart often use political leverage to avoid paying even property taxes in the cities in which they reside, so the total tax revenue they generate is very small.

In additional to illegal aliens, low-income workers from near by states may also migrate into Maryland for the work, also putting a drain on the public resource.

By forcing Wal-Mart to pay for at least some of the services its employees consume it will have to make more rational decisions regarding whether to open new stores in Maryland and attract more low income workers into the state. This is the desired effect of the law. If they decide not to open a store then such activity was not a NET benefit to the state.

Furthermore, if the Maryland law does close Wal-Mart it may have the effect of forcing these low income workers into other states thereby further reducing the fiscal burden these workers place on the public infrastructure and service base.

If that is the case this is a perfectly rational decision on the part of Maryland.

I’m not sure if 1) I understand my state’s (Pennsylvania) health care legislated conundrum and 2) if ours is applicable to Maryland or other states. However, I’d love for someone to clarify this (legislative) issue.

It’s my understanding that Pennsylvania (and Maryland) have laws that allow state insurance companies (Blue Cross, Blue shield) to pass through mandated costs for covering the uninsured health care (hospital) costs. These costs seem to be shackled to mid-sized, local and regional companies located in the state — and avoided by large, multinational companies.

Doesn’t the newly enacted Maryland law, weird as it appears on the surface, seems to bring some kind of parity to the existing, murkily unfair state health care legislation? Again, clarification of misunderstanding would be greatly appreciated.

DaveG: Rather than effectively imposing a 8% tax on the poor (who shops at Walmart?), why not just deport illegals? Wouldn’t that solve your problem without hurting the people you’re trying to protect?

First, you pay the tax regardless. The people will receive Medicare. You can either pay it through the general fund or you can tax the company contributing to the problem.

That said, the state of Maryland has very limited control of immigration. It is federal issue, as many state politicians will tell you over and over again.

So, the state must act in ways that are under its control. Forcing companies that bring many low income people into the state to pay for at least some of the services those people consume is something that is within the state’s power to do.

So, in this case, that is a rational response by the state.

And do you doubt that if/when the feds try to remove some illegals some will scream that removing people by “force” is not humane and that we need to remove the “attraction” of jobs. When you try to do eliminate the jobs others will say “why put a tax on people when you should just remove the illegals.”

Someone always has a reason why you can’t do something to reduce illegal immigration.

So, the state must act in ways that are under its control. Forcing companies that bring many low income people into the state to pay for at least some of the services those people consume is something that is within the state’s power to do.

Professor Braingerg has a very piece arguing the conservative case against Wal-Mart (see http://www.professorbainbridge.com/ and search). Basically he concluded that Wal-Mart’s problems are probably very close to its benefits therefore the proper policy for the gov’t is to not hinder Wal-Mart but also not grant it any special favors or breaks as usually happens when a big employer comes to town and promises to create hundreds of jobs etc. etc. While this bill does marginally hurt Wal-Mart (economically it’s only an 8% tax if Wal-Mart spent nothing on healthcare but it says it already spends very close to that so it’s probably a tax of at best a few percentage points) Wal-Mart has probably more than borken even in Maryland with numerous tax breaks and other incentives they’ve won from local gov’ts.

Anyway, I don’t think Wal-Mart brings in many low income people. First of all why would it? I could see relocating for a $100,000 a year job but who relocates for a $20,000 a year job? I bet if you walked through a typical Maryland Wal-Mart and chatted with the workers there most of them have probably lived in Maryland for years.

Looking at Wal-Mart we can break down the positives and negatives

Positive:

1. Some of its workers were probably unemployed or not even looking for work before it came along. This is a plus even if they are on Medicaid since they are generating income they wouldn’t have had and generating tax revenue that the state wouldn’t have had.

2. It does lower prices which in effect increases everyone’s income because we can all get more for our dollar. This is more potent, though, for the lower income person because every dollar you can save is essential when you’re facing poverty.

Negative
1. It does suck jobs out of the community. http://www.professorbainbridge.com/2005/02/walmart_a_devil.html cites a study showing that employment increases when a Wal-Mart opens by about 100 jobs. Since a store has 150-300 workers it’s seems that there’s an almost instant decrease in other employment when a store opens. Over 5 years that increase falls to about 50 workers as other local businesses close up shop. After 5 years it is as low as 20. An increase but much less dramatic than a local mayor or zoning board might think when confronted with a request for special zoning variances.

2. It probably does lower the general wage level since it is better at driving a hard bargain with employees than many small businesses (especially considering that some small business owners will be showing up looking for work there after being driven out of business). This hurts on several fronts:

a. State Medicaid/Welfare costs go up.
b. Less tax revenue.
c. Of course, lower income

3. Bainbridge makes a novel observation that by driving out small business Wal-Mart actually decreases opportunities for entrepreneurship & encourages an ethic of wage-labor. Is that a good thing considering that the ‘new economy(tm)’ seems to be based on heavy entrepreneurship?

4. Aesthetically Wal-Mart is horrible. It increases a community’s overall ‘ugliness’ and takes out enjoyable downtown shopping districts replacing them with blighted areas. Economically this should be treated as an externality. No one owns the overall ‘beauty’ of a town but every small business owner is aware that whether their location is considered a ‘charming shopping district’ or a ‘seedy blighted area’ makes a huge difference.

So there’s good reason to be skeptical about Wal-Mart and even better reason to take a neutral view of it by gov’t neither helping nor harming it. Yet the fact remains that Wal-Mart almost certainly has benefited greatly from selling local boards on granting it exemptions and variances on claims that it will generate hundreds of new jobs or revitalize a neighborhood. As usual, it would be better to be neutral and let the market decide if jobs are generated by twenty small businesses opening or one huge Wal-Mart. The fact is, though, since politicians will not be good economists there is probably some rough justice in this measure. Maryland’s taxpayers will probably recoup some of the unjustified favors their local gov’ts have given Wal-Mart over the years.

Daveg:

I would guess that Wal-Mart itself doesn’t hire many (if any at all) illegal immigrants. The contractors Wal-Mart uses, however, is a different story. The Marlyland law applies to Wal-Mart’s payroll, not the payroll of it’s contractors.

It would make sense for Wal-Mart to look into using more contractors to lower its Maryland employment level below 10,000. Maryland would be a good test case if 30 other states are considering similar legislation.

Boon: services was with respect to health care which I thought context made clear. And yes, it is as cheap to implement in the emergency room as I think it because I have a specific mechanism in mind.

Most emergency room visits are not life threatening.

In non life-threatening cases, the hospital already asks you to fill out various insurance forms. Suppose you fail to produce proper insurance. Then the hospital would ask you for a state issued ID (or perhaps from an accompaning guardian). Failing to produce an ID or insurance, the hospital then refuses treatment for the non-life threatening illness. IDs from other states would be permissable, assuming MD could charge the originating state for the associated health care cost.

If a hospital wants reimbursement for treatment from the state, then they just have to attach a photocopy of the ID with the claims form (they already photocopy insurance cards for insurance reimbursements).

The cost for implementing such a mechanism would be very very low and encourage states to do a better job of issuing IDs…

And yes MD can arrest illegals. Or for even cheaper than deporting or the Walmart tax, they can deny services to illegals.

They can’t deny may services to illegals including emergency medical care and schooling. As noted above they can’t practically deny police or jail costs.

Anyway, I don’t think Wal-Mart brings in many low income people. First of all why would it? I could see relocating for a $100,000 a year job but who relocates for a $20,000 a year job? I bet if you walked through a typical Maryland Wal-Mart and chatted with the workers there most of them have probably lived in Maryland for years.

While I like a lot in your post, the comment above is way off the mark. These labors travel thousands of miles, some of it highly risky to their personal safety, for these 20,000 year jobs.

Go to any contruction site and I gaurentee you will see people who were not in this country even a few months ago. They can’t speak a word of english, for example. They also migrate from state to state as work become available.

I don’t think Wal-Mart significantly changes the illegal immigrant population in a state or community. Even though some companies contracting with Wal-Mart have been caught using illegals the fact remains being a large corporation much of Wal-Mart’s transactions have to be on the books. It is smaller businesses and homeowners who can pick up illegals to do various jobs & have room to work things out in cash with very low probability of being caught by the IRS for cheating on employment taxes.

Obviously it is a collective effect, with many companies hiring illegals. However, Wal-Mart being the biggest employer outside the US government it will have the biggest effect. Wal-Mart contracts out lots of activities to companies that do the “dirty-work” by hiring the illegals.

I can tell you in NJ I suspect that most illegals are employed either directly or indirectly by individual homeowners who hire contractors out of the yellow pages to do home improvement projects. This borderland between the legit economy and the underground economy involves companies that are often nothing more than a cell phone and a pick up truck or van! I serously doubt Wal-Mart represents anything but a blip in it.

This may have been true in the past but I no longer think it is the case.

The kitchen in any restaurant is most likely full of illegals. Any contruction site, food processing plant or farm employs many illegals. Any cleaning company hires many illegals as well as any landscaping company.

While many homes employ an illegal, usually it is just for cleaning and for a few hours a day. It will therefore take 8-10 homes to employ an illegal worker, so I wonder how many private homes are really responsible for this influx. Home landscaping is a similar situation in that the ratio of illegals to home is less than 1. Other jobs are just project based (the home depot parking lot helper guy)

For a long time in CA individual hiring of illegals was probably the biggest factor. I think that has changed over the last decade as companies have become more brash and enforcement has dropped to virtually zero.

Regardless as to whether it is mostly companies or mostly individuals is all still not a good thing.

The fact that private people hire illegals should not excuse Wal-Mart.

(I also want to add that it is much more difficult for states to enforce immigration laws because they can’t patrol the borders. Any identification of illegals is subject to claims of profiling. )

Wal-Mart creates the economic activity that draws the illegals (and low income legals from nearby states) into the area – cleaning, construction, landscaping, the small support industries such as warehousing, mexican restaurants, etc.)

I will concede that they Maryland law is not perfectly targeted to this problem because Wal-Mart does hide behind these “front” companies that do much of the hiring. It should go after the smaller (all?) companies.

But, as imperfect as the law is, it will force Wal-Mart to pay into the medical system which it is causing to be burdened, so in that sense it is rational. It is not rational in that it is incomplete, but I don’t think that is what is being debated here. I havn’t heard anyone argue that they should expand the tax to all companies.

I think the question is, if a state decides that it will grant some minimum form of health care to all residents (Medicade), what is the best way to fund that effort assuming:

a) the state must fund new people entering the state;

b) it can’t prevent new people from entering the state.

It seems to be that “taxing” the activities that draws new people into the state to pay for these services is more rational the just a general tax. which is I think what this debate boils down to in the end.

I don’t quite see how Wal-Mart is responsible for illegle immigrants. It is being charged that Wal-Mart provides jobs and those jobs attract immigrants. Eliminating the jobs seems like cutting off your nose to spite your face. Perhaps the next policy proposal will be to burn all the cropland in California and sow the fields with salt.

Wal-mart has found a way to provide retail goods and services using minimally skilled labor. It pays that labor low wages and charges rock bottom prices. This drives other retailers out of business and destroys the jobs of their employees. Economically speaking this is a good thing, relatively inefficient firms are destroyed freeing up resources to be used more efficiently.
Additionally workers who would previously have been marginally employable now have jobs.

More importantly the low prices charged by Wal-Mart increase the real income of its customers. I can go to Wal-mart and buy a pair of Levis for roughly 50% of what JC Penneys charges for the exact same jeans, or I can buy a pound of hamburger for 75% of what my local grocery store charges.

That increase in real income allows me to buy other goods and services. Those other G&Ss are produced in part by those displaced workers who formerly worked in retail.

I assume Wal-Mart pays its workers roughly their marginal revenue product. Benefits are a part of what Wal-Mart pays its workers. If the Maryland legislature mandates an increase in benefits then Wal-Mart must either reduce its monetary wages or increase its marginal revenue product. Increased MRP requires either an increase in prices or an increase in productivity, both of which would result in a decrease in quantity of labor demanded. If any of these responses were optimal Wal-mart would have done them already so I don’t see how the legislature has done anything but hurt the public through its actions.

DaveG,

The problem with your scenario is that it is not the free market activity’s (Walmart) fault that the illegal immigrant was given a million dollars of free medical care. It was the fault of the socio-political system that granted the right to free medical care. Walmart’s responsibility in this is simply to create wealth. And if the socio-political system penalizes Walmart, they will simply reduce the amount of wealth that Walmart can create, thus limiting the amount of wealth available for such redistributive transactions as providing free health care.

Do you conceed that, under this extreme senario, my econmoic activity was a net loss to society – that society would have been better off if I did not create this job and hire this illegal immigrant?

Do you at least see how it is possible that immigrants could be a drain on society if the numbers add up a certain way?

It’s only a net drain if she got cancer from being exposed to your coffee beans! If it’s a given she was going to get cancer then society starts the game at -$1M. If she generated $4,166 worth of activity ($50K per year, you getting $30K and she $20K divided by 12 ’cause she worked only a month) then it remains that society was better off with the coffee stand.

I think the scenero here is much more limited than daveg’s example.

Suppose Joe works at a small store and has health benefits. Wal-Mart comes to town & offers him a job. The pay is the same but he rejects it because he wants the healthcare, especially considering his wife may have a baby.

A year later the store is suffering financially, the management cuts back on the healthcare leaving Joe with a plan that costs a lot & offers him crappy service. Now Wal-Mart points out that they will help him get on Medicaid & then his family (let’s imagine he has children) will have even better options than his crappy job’s plan. So Joe takes the deal.

In this very limited case Wal-Mart is indirectly tapping the state’s welfare programs as a way to supplement their payroll. In this very limited scenero society may experience a net loss which might justify a small tax.

Of course Joe’s original employer might be able to help him with Medicaid but economies of scale are prohibitive. Is it worth it for a business to invest in getting its handful of low income employees educated about state options? Isn’t the cost of doing this a lot cheaper on a per-employee basis if the business has thousands of low income employees?

If you limit it to just the US then perhaps you have a point.

Man, that was like pulling teeth!

Now, we can argue the numbers as you start to do, but at least we can acknolwege that if the public services consumed by the immigrant are greater than the economic activity it is a net negative to the US.

Now, everyone here says the problem is that “we have the crazy public policy of treating sick people in this country when they can’t afford it.” I guess the implication is that we should let them drop dead.

Well, you can all take satisfaction in the knowledge that is exactly what this woman would have done had she stayed in Mexico, thus arriving at the correct economic solution.

And just for the recored, Wal-Mart did agree to pay 11 million dollars (slap on the wrist) in fines for hiring illegal labor, one of the very few companies be fined in this manner over the last few years.

daveg,

Re; A closed system.

Good point, but it doesn’t really change my analysis. You’re simply moving the fault from an action on the part of the socio-political system (creating a right to free health care) to a failure to act on the part of the socio-political system (failing to maintain a closed system). There is still no reason to blame the free market activity. And again, penalizing the free market activity will simply limit its ability to create wealth, and consequently limit the total wealth available to the socio-political system, consequently limiting its ability to solve this problem, or any other problem.

This whole discussion about immigrants is irrevlant for people who actually include immigrants in the social welfare function. I want the immigrants to come here and get jobs because it probably helps improve their standard of living. I don’t particularly care if they put a drag on the safety net because I want that safety net to benefit those in need, not just Americans.

Also, I’m fairly confident that immigration benefits the economy overall, even though it may depress the wages of the lower quintile.

But again, I don’t see why it should matter. Many immigrants are escaping pretty desperate poverty. That’s a good thing in my book.

Here is an example of how the coffee stand application is ineffeciant in an absolute sense.

The woman lives in mexico which, despite the fact that it claims to be socialist, is actually must more free market in the sense that there are few if any real social benefits to be had there. That is the “right” policy from the standpoint of the free market person, even if that is more of an accident than a real policy. Mexico is just no good at providing social welfare benefits.

The results of my coffee shop is that the woman worker with non-visible cancer is “pulled” into an ineffcient market such as the US which has mistaken gauranteed medical care to everyone, at least on an emergency basis.

The results is that economic resources are misused and overall net wealth is reduced on a universe wide basis.

The sad fact of it is though that most of the uninsured do not work at walmart, but rather at small businesses. Of those, does anyone know what the age distribution is? What the basic prices are for insurance/month? What I worry about with this kind of law is that Walmart could respond in either slowing wage growth of it’s non-minimum wage employees, while increasing the costs of its products. This results in poor benefits to its employees. Perhaps a better solution would have been to encourage Walmart to make an insurance pool for its employees. Since it employs so many people, it would allow insurance companies to charge lower rates for coverage due to the pool (the pool results in lower risk for the insurance companies). If necessary, it could use its leverage of size to force different insurers compete for entrance into the pool. Since it is not offering insurance, just the pool, its costs are minimal. Heck, for a fee, it might even allow its shoppers to enter its pool for lower rates.

daveg,

Your argument is an interesting and philosophical rationalization. The Maryland legislature is going after Walmart because it can. They want money, Walmart has money, and the left has made Walmart an easy target. But the legislature is about to find out that it has underestimated Walmart. Those Arkansas boys are tough. There’s going to be a hell of a fight, and the only people that will lose are the people of Maryland.

I forgot to add the rationale for immitating France: When the economy is good, socialists find it hard to argue for greater government intervention and regulation. They must destroy the economy (as the Fed did in 1929) so that they can blame capitalism and argue for greater state control of business. That’s the French way!

Dr. Dan writes:

So we remain the only industrialized country without some form of universal health care. Wal Mart can shifts its health care costs to our ERs because we can’t turn away the uninsured.

To quote Dr. Sowell:
“It is amazing that people who think we cannot afford to pay for doctors, hospitals, and medication somehow think that we can afford to pay for doctors, hospitals, medication and a government bureaucracy to administer universal health care.”

How does the good doctor propose we pay for universal health care? Is UHC funded through higher statutory taxes, cutting discretionary spending, means testing?

I see a real need for catastrophic healthcare; I see trouble with universal health care.

If the doctor sees a run on services now because those without insurance receive “free” care why would the demand for the same services decrease if someone other than the patient paid?

BTW, nothing is “free”, there are always trade-offs.

Keeping prices lower than they would be under supply and demand produces shortages. I am confident that this statement has been borne out throughout history. It’s human nature to pursue free services. In the case of healthcare, you’d have more patients sitting in waiting rooms and less time in doctors’ offices.

“It is amazing that people who think we cannot afford to pay for doctors, hospitals, and medication somehow think that we can afford to pay for doctors, hospitals, medication and a government bureaucracy to administer universal health care.”

That’s an interesting quote. For the entire week of January 15th to January 21st The Arizona Republic is running a series on the so-called “failing and unsustainable” system of employer-provided healthcare. It’s obvious that this is an attempt to guilt legislators into once again passing legislation to implement a nationalized healthcare system.

What I find troubling is that when there is a discussion about healthcare, the reporters always criticize the US for being the only industrialized nation for not having a nationalized healthcare system (for instance the timeline that is supposed to detail the history of the US healthcare system starts with a timeframe that states that most European countries between 1880-1912 had implemented a nationalized healthcare system. This obviously has nothing to do with the US system and was only put in there to show how “backward” we are as a nation.), but these same reporters never do a comparative analysis between our semi-private system and the nationalized systems to get a better understanding of the costs and benefits of said systems as well as the tradeoffs of implementing each program. On top of that, these same reporters seem to think that if government is the only buyer of healthcare it can hold down the costs while providing top quality care, but as evidenced by the spiraling costs of Medicare and Medicaid this is proving not to be the case.

And just a quick quip from one of the articles in yesterday’s edition of the AZ Republic, a family who had over $40000 in medical bills was able to negotiate with the medical providers and knock that bill down to $6000, a whopping 85% in savings. My wife, who used to work in medical billing, said events such as this occurred frequently. If that doesn’t tell us that costs of medical care are out of line with medical care demanded, I don’t know what does.

I think Walmart has been a great plus for our communities. The employees would have had no income if it hadn’t come and would be on government assistance. We have to travel 25 miles but in our rural area, that is normal to travel long distances to shop. The prices are a bit lower overall but you have to buy enough at one trip to cover the expense of driving. When Walmart first tried to come in the other merchants fought it. Now they are some of the best customers and new stores are opening up, more because they are competing with Walmart and providing better service that they did before. It was a delay of 5-10 years but is effective nevertheless. The towns which were in the throws of dying are booming now. Specifically, Chillicothe and Bethany, MO.

Does MD have any numbers to support their claim? I have been unable to find any. What are Wal-Mart health care contributions and how do they compare on a per employee basis to other retailers? How many Wal-Mart employees use gov’t services and how does this compare to other groups? How many Wal-Mart employees gave up health care benefits to go to work for Wal-Mart? How many got health care benefits for the first time perhaps because they were unemployed or uninsured? Seem hard to believe that people quit jobs with health care benefits for the higher pay at Wal-Mart. If employees, prior to joining Wal-Mart, had little or no health care insurance at all, maybe the presence of Wal-Mart has reduced the total number of people using MD gov’t services. What percentage of Wal-Mart employees had no prior health insurance at all and how does that compare to other employers? How will we ever know unless we have some real numbers? All I have seen is anecdotal stuff. Is this a debate of theory only? That can be fun, but— . Don’t we really want to know if MD subsidize Wal-Mart, or more accurately, which party produces goods and services and exactly who is the dead weight? Which option creates a better economy – a marginal increase in Wal-Mart operations or a marginal increase in MD goverment programs?

Are there any numbers that yield the 8% solution? Why not 7% or 9%? Maybe it should be a negative number? Maybe Wal-Mart is doing more to solve the uninsured problem than any other business. Wow! How will we know?

It appears the problem, the solution and the legislation are all based on guesswork. It won’t be the first time a gov’t program produces the opposite of what it intends to do. It would be nice to see some numbers.