Skip to main content

Latest Wal-Mart Attack Doesn't Make Sense

Maryland's health care requirements may simply result in higher prices and fewer jobs.


(WMT) - Get Walmart Inc. Report

is under attack again.

This time it's Maryland that's entering the battle. The state's legislature last week passed a bill, over its governor's veto, that will require Wal-Mart to spend more money on employee health care in the state.

The measure would require companies with more than 10,000 employees to spend at least 8% of their payroll on health benefits, or pay the balance into a state low-income health insurance fund. The sponsor of this bill in Maryland says she hopes that all 49 other states will pass similar measures.

Forgetting politics for a moment, and my own stock portfolio (I own 200 shares of Wal-Mart, and have for years), the logic of this kind of legislation escapes me.

First, when the government raises costs on businesses, the company just passes the costs on to their customers in the form of higher prices. Does the state of Maryland think its consumers would like to pay more for towels, socks and groceries?

Second, doesn't the state legislature realize these higher costs will have an impact on Wal-Mart's employment decisions? If it costs more in benefits to hire employees, the company will simply hire fewer people. Then the state of Maryland might have to foot the bill for unemployment benefits for those who don't get jobs, as well as all their health care bills.

When I first heard the story of this illogical legislation, I figured the CEO of Wal-Mart might decide to simply pull out of Maryland. That would send a message. But then other bumble-headed state legislatures might decide to use the same strategy to wage war on Wal-Mart, which wouldn't be good for shareholder value.

The legislature in Maryland probably figures that Wal-Mart will be forced to accept its decision. But they should check recent history before pushing Wal-Mart too far. In Quebec, Wal-Mart employees in one store voted to unionize. After the vote, Wal-Mart pulled up its trucks to the store, loaded up all the merchandise, and closed the store overnight -- leaving hundreds of workers jobless.

The union organizers in that community were ostracized for denying bargain-seeking Quebecers their favorite place to shop, and for denying jobs to the former store employees. The legislature of Maryland might find itself in the same position.

Scroll to Continue

TheStreet Recommends

There's a pretty good argument to be made that even a low-paying job in your own neighborhood provides a better financial and emotional lifestyle than a welfare check from the government.

I guess state legislators and union leaders figure that if companies can't afford to provide the great health care benefits and salaries that


enjoy, their constituents are better off with no jobs at all, and with more expensive stores in which to spend their unemployment checks.

I just don't get that logic. And in another case of the government affecting corporate affairs, I don't get the logic of restricting visas to enter the United States for skilled, talented foreigners. Those immigration visas have been reduced by 50% since 9/11. I'm not sure if that protects us against terrorists, but it


keep out talented workers who could help our economy grow -- and provide jobs for others.

Before arguing against that principle, take a look at Canada, which offers practically unlimited immigration to educated people willing to make an investment in a business there. Canada has a growing economy and surpluses for trade and its federal budget.

The U.S. has always served as a beacon to people who are willing to work hard, and work their way up. The Constitution guarantees equal opportunity, not equal results. The government's job -- at the federal, state, and local level -- is to encourage, not restrict, that opportunity. And that's The Savage Truth.

At the time of publication, Savage was long Wal-Mart, although holdings can change at any time.

Terry Savage is an expert on personal finance and also appears as a commentator on national television on issues related to investing and the financial markets. Savage's personal finance column by the Chicago Sun-Times is nationally syndicated, and she released her fourth book, The Savage Number: How Money Do You Need? in June 2005. Savage also was the first woman trader on the Chicago Board Options Exchange and is a registered investment adviser for stocks and futures. A Phi Beta Kappa graduate of the University of Michigan, Savage currently serves as a director of the Chicago Mercantile Exchange Corp. She also has served on the boards of the McDonald's and Pennzoil corporations.