Politics from the Palouse to Puget Sound

Sunday, January 29, 2006

'Rat Finks

As I reported last week, the unholy alliance of Democrats and labor unions are out to ruin Wal-Mart (and consumers) in Washington by forcing it to pay 9% of its payroll towards health care. This is all just a facade to force Wal-Mart to unionize, as the local fights (i.e. Pullman) are failing miserably.

The unions lust after Wal-Mart’s 1.3 million U.S. workers and their dues to reinvigorate the dying private sector labor movement. They will stop at nothing to force Wal-Mart to accede to the their demands. The ‘Rats, for their part, lust after all those union dues that will be coming their way at election time, in addition to being able to tout a “victory” in the health care crisis. Like the ambulance-chasing attorneys, the ‘Rats want to get the government’s snout deep into Wal-Mart’s trough. And let’s face it; they have a few political debts to pay off to the unions, starting with the 2004 gubernatorial election and the rejection of I-912.

This effort was running into a few roadblocks last week, with editorials in the Tacoma News-Tribune, The Wall Street Journal, and even the ultra-lib Seattle P-I condemning the proposed legislation.

Naturally, it was time for a leak to the press!!!! Someone on the ‘Rat-controlled House committee considering the bill leaked a copy of a confidential state report that detailed the numbers of employees of large Washington companies using state health care to the Seattle Times. The Slimes, which can always be counted on to carry the Red Banner of Socialism forward, printed a story Tuesday that used this confidential information to discredit Wal-Mart. Elitist columnist Danny Westneat joined in Wednesday to pile on further.

Here are some of my thoughts on the “facts” about Wal-Mart’s health care numbers:

  • Funny, when something confidential gets leaked from the White House (i.e “Plamegate”) we get special prosecutors, grand juries, and indictments. Ah, but since the ‘Rats did the leaking here, I doubt Queen Christine will lift a finger.

  • The numbers of Wal-Mart employees on Medicaid are TEN times that reported three years ago. Hmmmmm, I smell a ‘Rat. No one knows the source of the numbers, the methodology used, etc., etc.

  • The Slimes piece only trumpeted the fact that Wal-Mart’s numbers were twice that of the second place company (ironically enough unionized and PARD darling Safeway), but these were only RAW numbers, not percentages of overall employees. That HAS to be the determining factor. Of course Wal-Mart will have big numbers. They are the biggest retail employer in the state. How many employees are covered under spouse or family member’s policy? How many employees refused health coverage that was offered? How many were on Medicaid?basic Health BEFORE they started working at Wal-Mart? These are all important things to consider that the Times article flippantly did not include (or perhaps the leaked report did not cover).

  • For example another PARD darling, Target, has 814 employees on Medicaid. No mention was made in the article of how many employees Target has in Washington. Ditto with Fred Meyer. So I did some rough estimates. Target averages around 200 employees per store. There are 31 Target stores in Washington. That equals 6,200 employees. So possibly 13% of Target employees are on Medicaid. The percentages could be even higher than that. To quote TV Rerun, “Where’s the outrage” over that? Didn’t we just read recently “PARD wouldn’t fight a Target coming to Pullman”? HYPOCRITES!!

  • Perusing the table of employers with employees on Medicaid and Basic Health in the Times, it reinforces what everyone’s common sense already tells them. Fast food (15% of McDonald’s employees are on Medicaid), retail, and temping are not the best jobs in the economy. I speak from experience, having done all three at one time in my life. These jobs for the most part are entry-level or transitional. The low wages and benefits reflect the low skills required and expendable work force.

  • Earlier this week, Ford announced massive layoffs and plant closings. Can’t people see what happens when you let big labor dictate wages and benefits, not the market? One of the things that have stung Ford and other American car makers the most are the union provisions that workers replaced by technology get to keep their “jobs”. This has meant that tens of thousands of workers making salaries in excess of $50,000 a year spend each day watching DVDs.

  • There is always a price to pay down the road for that kind of policy, and now Ford is paying it. If this Wal-Mart legislation succeeds, the people of Washington will be paying it also. Wal-Mart will be forced to lower total employment and wages. It will also be forced to raise prices. Contrary to liberal urban legend, Wal-Mart cannot afford to pay more in wages and benefits because its business model uses very low profit margins, around 3-4%. It makes up for this in volume. But the key to Wal-Mart’s success is keeping costs down. If Wal-Mart if forced to pay more for health care, then it will be forced to raise prices and lower wages to compensate. Wages and benefits come out of the same pot, as each worker is worth a certain amount of total compensation. As benefits go up, then wages will go down. Therefore, this legislation will most disproportionately impact those people on low- or fixed-incomes that the ’Rats claim they are protecting.

  • Total compensation, including wages and benefits, is a contract that is worked out between employer and employee. When did good benefits become a “right” versus a privilege? By what legal basis does the government intervene in this contract? Insurance of any kind is up to the individual.

  • Mark my words. This legislation starts us on a slippery slope that will result in the ruination of many small businesses in Washington. If someone doesn’t like the benefits that Wal-Mart offers, then they can go work at Costco or somewhere else. No one puts a gun to anyone’s head forcing him or her to work at Wal-Mart. And yet, Wal-Mart always has a steady stream of job applicants. Why?

    Let’s say, however, that the numbers in the Times are correct. Does that mean Wal-Mart is an evil company? Hardly. The information below is from Jason Furman’s paper “Wal-Mart: A Progressive Success Story”. Remember, Furman is a Democrat himself, the former Director of Economic Policy for the Kerry-Edwards 2004 campaign. I passed this on to Michelle Dupler for her Daily News story on the wrap-up of the appeal hearing. Due to a glitch, my comments didn't make it into the paper.
    "Wal-Mart’s health benefits are similar to or better than benefits at comparable employers. Some key comparisons are summarized in Table 2." (click to view larger version)
    "Wal-Mart is relatively unusual in that it offers health insurance both to full- and part-time employees. By comparison, only 60 percent of firms economywide offer health benefits and only 17 percent of firms offer health benefits to part-time workers. Target, for example, does not offer benefits to people working less than 20 hours per week. Wal-Mart, however, has longer waiting periods for eligibility for benefits than many other firms, 6 months for full-time workers and 24 months for part-time workers.

    Wal-Mart pays about 70 percent of the cost of health benefits, similar to the retail industry and somewhat below the national average.

    Substantially more Wal-Mart employees are eligible for health insurance than in the retail sector as a whole and even slightly more than the nationwide total. Wal-Mart employees, however, are less likely to take up their health insurance.

    As a result, 48 percent of Wal-Mart’s workers have health insurance, compared to 46 percent in the retail industry as a whole. Dube and Wertheim find similar results. They adjust health coverage to match Wal-Mart’s geography and find that 45 percent of retail employees and 53 percent of large retail employees have employer-sponsored health insurance. The retail industry has lower employer-sponsored health insurance than the economy as a whole, a fact that reflects the generally lower compensation in the retail sector and the greater likelihood that a retail employee will be covered through a spouse’s more generous employer-sponsored policy.

    Wal-Mart reports that 548,000 of its employees have health insurance, covering a total of 948,000 people. Some 34 percent of Wal-Mart employees are offered health insurance but choose not to enroll, either because they are covered through another family member, prefer to be on Medicaid than pay the premium, or choose not to have health insurance.

    In total, as shown in Table 4, 5 percent of Wal-Mart employees are on Medicaid, which is similar to the percentage for other large retailers and is comparable to the national average of 4 percent. The children of Wal-Mart employees receive Medicaid and S-CHIP slightly less often than the retail sector as a whole and slightly more than the national average. The fraction of children is relatively large, reflecting the expansion of public health coverage for children in low- and moderate-income families. The fact that Wal-Mart employees top the Medicaid rolls in a number of states is simply a reflection of Wal-Mart’s enormous size, not the higher likelihood that its employees will be on Medicaid.""For some Wal-Mart employees, Medicaid is the sensible choice. A family policy costs $1,800 annually for a Wal-Mart worker, similar to the cost for other retailers. A Medicaid eligible worker has the choice of taking home an additional $1,800 in take-home pay and being insured through Medicaid or taking home less pay and instead getting Wal-Mart’s insurance. The beneficiary of choosing Medicaid is the worker – who gets to keep an additional $1,800 – not Wal-Mart (see the further discussion of this issue below).

    Wal-Mart workers, like other workers in the retail sector, are paid less than the economywide average wage. They have to pay for food, housing, transportation and numerous other costs. It is not surprising that in a choice-based system they would choose to get more money in the form of wages and less in the form of health benefits.

    Moreover, our fiscal system gives much less of an incentive for low-income employees to get employer provided health insurance. High-income employees face a lower marginal tax rate on health benefits than wages. For low-income employees it can be the exact opposite.

    Consider a company that wants to compensate a woman in the 25 percent bracket with an additional $3,000. If she chooses to get it in the form of wages, she will pay 25 percent in taxes and keep the remaining $2,250. If she chooses to get it in the form of better health benefits, she will get a $3,000 policy. Compare that to a low-income mother. She is in the 0 percent tax bracket so she would keep the entire $3,000 if she gets wages. But if she gets the $3,000 in the form of health benefits, she will lose her Medicaid. This is like a large effective tax on the provision of benefits."
    So, Wal-Mart's Medicaid and Basic Health numbers tend to be higher because employees choose to decline company-sponsored insurance they are otherwise eligible for. But overall, that ability to choose makes Wal-Mart, in my opinion, a superior retailer. You can't fault the company for the health care decisions its employees make. I'd be willing to bet that Wal-Mart's health care plan is better than any other retailer in Pullman. Even WSU does not offer benefits to employees that work less than 20 hours a week.

    Lost in all this debate is the fact that the state is competing with Wal-Mart for health care, and as pointed out in the Furman paper, the state is winning. Wal-Mart critics can't blame workers for doing something that makes the most financial sense for them. Democrats are the ones that have pushed for more spending on health care programs for low-income families, and now liberals like Annabel Kirschner are "outraged" that people are actually using it. It's a bit ironic.

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