Uninteded Consequences of the Left and Wal-Mart

[Annie]

http://www.tcsdaily.com/article.aspx?id=011606A

This is the first of a series of essays written for liberals by a libertarian/conservative. That is, I would like liberals to read it, knowing that you will be inclined to disagree.

Most of my friends are liberals. This series is the conversation I wish that I could have with them. I wish they would let me finish my train of thought before interrupting. I wish that they would consider my arguments, rather than try to bury them in rhetorical put-downs.

Chances are, you will look for some errors in my reasoning, so that you can dismiss everything that I have to say. All of us tend to read this way. We overlook flaws in the arguments of sympathetic writers, and we go all-out to find the flaws in arguments of others. In psychology, this double standard is known as confirmation bias. What it means is that we tend to seek support for what we already believe, rather than to seek out information that might undermine our beliefs. Confirmation bias helps to account for the persistence of disagreement.

When I say that “liberals should know better,” what I mean is that liberals are inclined to over-estimate some things and to under-estimate others. For example, in January of 2006, liberals in the state of Maryland rejoiced over passage of a law requiring Wal-Mart to pay higher health benefits to its workers. I think that they would have less smug satisfaction if they considered how this actually is likely to play out.

Although the motivation of the liberals was to raise the well-being of Wal-Mart workers, it is far from clear that this will be the consequence. Low-skilled workers cannot receive more in compensation than the value of their labor. If Wal-Mart is forced to increase the share of compensation that comes in the form of health benefits, then it will have to decrease take-home pay. If it cannot decrease take-home pay, then it will have to reduce its reliance on low-skilled labor or cut back on operations altogether.

The Wal-Mart law injects politics into the process of setting benefits for Wal-Mart workers. Once the Wal-Mart law takes hold, various suppliers of health care services will have an incentive to apply pressure. Dentists and optometrists will lobby for laws that force Wal-Mart to pay for its workers’ dental care and eyeglasses.

The biggest beneficiaries of the Wal-Mart law are likely to be people who are better off than Wal-Mart workers. For example, owners of other businesses will be able to charge higher prices and earn higher profits.

In the liberal morality tale, Wal-Mart is a villain, and its workers are victims. However, Wal-Mart workers themselves feel lucky to be able to work there. What low-skilled workers need are more Wal-Marts. More Wal-Marts would increase employment for low-skilled workers, and ultimately this could drive up wages for such workers.

Maryland liberals believe that there is something wrong with free markets if Wal-Mart workers do not have enough health insurance. However, if Wal-Mart workers want health insurance badly enough, eventually the market will find a way to provide it. Ironically, one of the initiatives to try to reduce health care costs, which is the key to affordable health insurance, comes from Wal-Mart, which is experimenting with in-store clinics. If Wal-Mart is driven out of Maryland, the state will never be able to take advantage of its health care clinics.

In news reports on the Wal-Mart law, legislators were quoted as saying that one of their goals is to prevent Wal-Mart from taking advantage of the availability of Medicaid for its workers. A more straightforward approach would be to tighten the eligibility standards for Medicaid so that those making as much income as Wal-Mart provides its workers would be ineligible. Of course, such eligibility standards would apply to workers at other firms, not just the hated Wal-Mart.

The law requires Wal-Mart to spend 8 percent of its payroll on health care, whether or not this is enough to keep its workers from needing to rely on Medicaid. If Wal-Mart came up with a way to provide outstanding health care to its workers for 6 percent of its payroll, it would be in violation of the law unless it found a way to waste the other 2 percent on unnecessary health care. Conversely, if Wal-Mart offers a really lousy health plan, it would be in compliance with the law as long as it spent 8 percent.

If the Wal-Mart law is for the benefit of Wal-Mart workers, then why is it that they are not the ones rejoicing over its passage? Why does the law specify a spending percentage, which would seem to be of greater interest to Wal-Mart's competitors? Why did the pressure for the law come from people who do not work at Wal-Mart?

Liberals see the market as an arena in which evil corporations inflict their greed on innocent victims. I wish you would see that motives matter less than consequences. I wish you could see that greed is at work when laws are passed that regulate markets, because regulations always produce winners and losers. I wish you could see that those winners and losers are often not who you think they are. I wish you could see that competitive behavior and free choice are forces that operate in the market as a check against greed. Finally, I wish you could see that greed is most difficult to restrain when it is exercised through the medium of government.

Arnold Kling is author of Learning Economics.

 

[Hobbit]

I wish people would see that the success of the workers and the success of the company they work for is one and the same. Now, I don't like Wal-Mart post-Sam Walton because they turned mean and their quality dropped, but if I don't like a store for something they do, I don't try to make it illegal, I just stop giving them my business.

 

[ScreamingEagle]

Political interference such as this is just another reason to separate health insurance from employers. There is no reason to have an individual's health insurance provided by his employer.

Health insurance/care should be sold just like any other product is sold on the free market. That is the only way many health costs will come down and new health products/services will be produced.