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Wal-Mart enemies cutting off their noses

Updated: May 3, 2013 12:14PM

Wal-Mart is under attack again. This time it's the state of Maryland, whose legislature passed a bill and then overrode the governor's veto, that will require Wal-Mart to spend more money on employee health care in Maryland.

The measure requires companies with more than 10,000 employees to spend at least 8 percent of their payroll on health benefits or pay the balance into a state low-income health insurance fund.

The sponsor of the bill said she hopes all 49 other states will pass similar measures.

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

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

Unintended consequences

Second, don't state legislators realize these higher costs will have an impact on Wal-Mart's employment decisions? If it costs more in benefits to hire employees, Wal-Mart management 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 self-defeating legislation, I figured the CEO of Wal-Mart was probably mulling a decision simply to pull out of Maryland. That would send a message.

But then other bumble-headed state legislators might decide to use the same strategy to wage war on Wal-Mart, and that wouldn't be good for shareholder value.

Maryland lawmakers probably figure that Wal-Mart will be forced by business considerations to accept its decision. But they should check recent history before pushing Wal-Mart too far.

In Quebec, Canada, 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 leaders in that community were ostracized for denying bargain-seeking locals 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.

Or consider what's going on in Chicago, which has only one Wal-Mart store, and that one is under construction. Windy City labor leaders have successfully lobbied the City Council to prevent Wal-Mart from opening more stores, relying on arguments similar to ones heard in Maryland about employee benefits. So city-dwellers have to shop at Wal-Mart in the suburbs, which enjoy the sales tax revenues -- and the jobs.

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

I just don't get that logic.

The visa puzzle

To switch topics, 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 percent since 9/11. I'm not sure if that protects us against terrorists, but it does 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, a federal budget surplus and a trade surplus.

The United States 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 levels -- is to encourage, not restrict, that opportunity. And that's The Savage Truth.

Terry Savage is a registered investment adviser. Distributed by Creators Syndicate.

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