Writing today in the Wall Street Journal, Steve H. Hanke and Stephen Walters point out that Maryland’s recent decision to force Wal-Mart to pay a larger share of employee health insurance costs will, not surprisingly, only end up hurting the poorest residents of that state.
As the authors point out, prior to the laws passage, WalMart was planning to build a distribution center in rural Somerset County that would have employed 800 people. That decision is now being reconsidered, and the cost to the people of Somerset if it is reversed would be severe:
The rural county is Maryland’s poorest, with per capita personal income 46% below the state average and a poverty rate 130% above it. Somerset’s enduring problem is weak labor demand that greatly limits its 25,250 residents’ economic opportunities.
There are just 0.8 jobs per household in Somerset, barely half the 1.5 figure that applies to the rest of the state. Somerset’s top 10 list of employers features sectors like food services (average annual compensation per employee: $9,637), poultry and egg production ($14,320) and seafood preparation and packaging ($19,190).
It is hard to exaggerate how much the planned distribution center might have meant to Somerset’s economy. Using an input-output model, we forecast the “ripple effects” of the new income and spending that could have emanated from Wal-Mart’s facility as follows:
? The center’s 800 employees would have created an additional 282 jobs among “upstream” suppliers and “downstream” retailers and service establishments; all told, the center would have boosted county employment by 14% and private-sector employment by 20%.
? Total annual employee compensation in Somerset would have risen by $46.5 million, or 19%.
? Annual output (or “gross county product”) would have risen by $128.3 million, or 19%.
? State and local tax receipts would have increased by $19.2 million annually; this would include $8.5 million in property taxes, $5.6 million in sales taxes, and $1.4 million in personal income taxes.
So how is it that the legislators found it so easy to turn a blind eye to the obvious economic impact this law would have ? The authors contend it has alot do with the somewhat unique nature of the state of Maryland:
Some estimate that as much as a third of the state’s economic activity stems from federal employment and purchases. Over 150,000 Marylanders–six times the population of tiny Somerset–are on the federal (nonmilitary) payroll; they are concentrated in central Maryland, near the nation’s capital. Nearly 268,000 more Marylanders draw checks from state and local government.
With so many workers in a sector where revenues appear to arrive automatically and inefficiency never leads to bankruptcy, our state’s resulting political culture is quite predictable. Many Marylanders are simply unmindful of the necessities of survival in the private sector: pleasing customers, controlling costs and satisfying shareholders. Thanks to the federal tax dollars collected from the rest of the country and spent in Maryland, the prevailing view of economic reality is inverted: The public sector is seen as the engine of prosperity, with the private one along for the ride.
Unfortunately, while many Marylanders are shielded from the realities of the market economy, it appears that the citizens of Somerset County will be getting an all-too-personal lesson.
Related Posts:
Little Tyrannies
Well That Didn’t Take Long At All
Stupid Is As Stupid Does
Hell Freezes Over
Targeting WalMart
Wal-Mart And The War Against The Poor
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