The Homa Files

Ken’s Take: Yesterday,  Walmart jumped on the Obamawagon and threw its support behind employer mandated healthcare insurance – the provision that layers additional taxes on any company that doesn’t offer its employees health insurance.

For sure, Walmart isn’t being altruistic.  This is a straightforward strategic-political gambit. 

Walmart already provides health insurance to the majority of its employees – essentially, all full-timers.  They might have to extend coverage to part-timers – or, they might be hoping that part-timers are outboarded from legislation — or, they just hire fewer part-timers (since their advantage over full-timers gets minimized)..

More important, few smaller retailers provide health benefits today.  All of these guys – Walmart’s competitors – will get slammed with higher taxes. In other words, their costs go up, theor margins go down, and Walmart gets a huge competitive advantage.  The small guys won’t be able to compete.

Also, there may be a quid pro quo for Walmart politically. 

Specifically,  if union “card check” gets passed, Walmart will have to be priority one for unionization.  That would be a way bigger problem than employer mandated healthcare insurance. 

My bet: Team Obama prizes the healthcare plan more than card check and cut a deal with Walmart to back off card check. 

Problem for Walmart: administration has a tendency to change rules and break promises.  Could backfire on Walmart.

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Excerpted from WSJ, “ Everyday Low Politics” – Wal-Mart buys protection by selling out its competitors”. July 2, 2009

The employer-mandate endorsement falls into the self-interest department. A boost in the minimum wage helps Wal-Mart because most of its workers already earn well over the wage floor, and it hurts smaller, less-profitable competitors that can’t afford to pay more. On health care, an employer mandate will also reduce the margins of their rivals. This is especially true for businesses of a slightly smaller size that cannot insure on the same scale or currently don’t reach the 55% of the 1.4 million Wal-Mart employees who are insured through the company. (Another 40% or so are covered by spouses or the likes of Medicaid.)

The Wal-Mart-Stern-Podesta troika made sure to specify that “shared responsibility” must be “fair and broad in its coverage,” with an emphasis on the latter. The Mom & Pop stores that liberals accuse Wal-Mart of running out of town may get hit hardest. Democrats say they’ll exempt certain small businesses, size details to be determined. But if the mandate is limited to large employers, it won’t reduce the number of uninsured. According to the Kaiser Family Foundation, 99% of firms with more than 200 workers provide health benefits, only 62% of smaller firms.

Businesses are also largely indifferent whether compensation comes in the form of wages or benefits, so an employer mandate — an indirect tax on employment — may cause wages to rise more slowly. Or it may simply mean fewer jobs.

Full article:
http://online.wsj.com/article/SB124649408574683287.html

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This entry was posted on July 2, 2009 at 7:50 am and is filed under Health Care / Medical Insurance, Walmart. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.