BUSINESS
06/04/2013 12:20 pm ET Updated Jun 05, 2013

California Takes On Walmart's Taxpayer Subsidized Profits: Forbes

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For years, Wal-Mart—and other large retail operators—have been piling up huge profits by controlling their labor costs through paying employees sub-poverty level wages. As a result, it has long been left to the taxpayer to provide healthcare and other subsidized benefits to the many Wal-Mart employees who are dependent on Medicaid, food stamp programs and subsidized housing in order to keep their families from going under.

With Medicaid eligibility about to be expanded in some 30 states, as a result of the Affordable Care Act, Wal-Mart has responded by cutting employee hours—and thereby wages—even further in order to push more of their workers into state Medicaid programs and increase Wal-Mart profits. Good news for Wal-Mart shareholders and senior management earning the big bucks—not so good for the taxpayers who will now be expected to contribute even larger amounts of money to subsidize Wal-Mart’s burgeoning profits.

But, at long last and in a move gaining popularity around the nation, the State of California is attempting to say ‘enough’ to Wal-Mart and the other large retailers who are looking to the taxpayers to take on the responsibility for the company’s employees—a responsibility Wal-Mart has long refused to accept.

(Click through to see the entire post from Forbes)

It’s about time.

Legislation is now making its way through the California legislature—with the support of consumer groups, unions and, interestingly, physicians—that would levy a fine of up to $6,000 on employers like Wal-Mart for every full-time employee that ends up on the state’s Medi-Cal program—the California incarnation of Medicaid.

The amount of the fine is no coincidence.

A report released last week by the Democratic staff of the U.S. House Committee on Education and the Workforce, estimates that the cost of Wal-Mart’s failure to adequately pay its employees could total about $5,815 per employee each and every year of employment.

“Accurate and timely data on Wal-Mart’s wage and employment practices is not always readily available. However, occasional releases of demographic data from public assistance programs can provide useful windows into the scope of taxpayer subsidization of Wal-Mart. After analyzing data released by Wisconsin’s Medicaid program, the Democratic staff of the U.S. House Committee on Education and the Workforce estimates that a single 300- person Wal-Mart Supercenter store in Wisconsin likely costs taxpayers at least $904,542 per year and could cost taxpayers up to $1,744,590 per year – about $5,815 per employee.”

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Says Sonya Schwartz, program director at the National Academy for State Academy for State Health Policy, “There are concerns that employers will be gaming this new system and taking less and less responsibility for their workers. This may make employers think twice.”

Of course, the California Retailers Association, where Wal-Mart Stores is listed as a board member company, is not quite so pleased with the legislation. According to Bill Dombrowski, chief executive of the Association, ”It’s one of the worst job-killer bills I’ve seen in my 20 years in Sacramento, and that says a lot. The unions are fixated on Wal-Mart, but that’s not the issue here. It’s a monster project to implement the Affordable Care Act, and having this thrown on top is not helpful.”

One wonders if we will ever see the day when Americans will stop falling for the hostage-taking narrative consistently put forward by those whose job it is to defend the indefensible. At the first suggestion of finally putting a chink in Wal-Mart’s policy of profiting at the taxpayers’ expense—a practice that should have every American thinking about what passes for free-enterprise in the United States today—the response is to always threaten to take away jobs if we dare to challenge their business practices, even if those practices cost us billions.

While the unions may, indeed, be “fixated” on Wal-Mart, it is hard to miss the fact that Mr. Dombrowski did not even attempt to explain why it is acceptable policy for taxpayers to continue subsidizing Wal-Mart’s ever expanding profits. Nor does Dombrowski attempt to deal with the fact that, according to a Los Angeles Times report, an additional 130,000 people working for large and profitable firms will go onto California’s Medi-Cal rolls over the next few years, bringing the total number of Medicaid recipients in the Golden State who are employed by large companies to just under 400,000 people.

Note that these are not people who rely on ‘government handouts’ because they do not wish to work. Rather, these are people who show up to do their jobs for as many hours a week as their employer will permit them to work.

Interestingly, the federal law imposes a penalty on companies with more than 50 employees who do not provide health insurance to an employee working over 30 hours per week. The feds also penalize a company when its workers buy their own healthcare coverage on an exchange and receives a government subsidy to do so.

However, there is no penalty imposed by the federal government on a company when a company’s workers become eligible for Medicaid.

Think that this ‘oversight’ had anything to do with Wal-Mart’s early support of the Affordable Care Act?

The result is that companies like Wal-Mart are actually encouraged by the federal policy to pay their workers even smaller sums without providing healthcare benefits so that even more of their workers will qualify for Medicaid.

What I always find fascinating is that the very people who are so critical of the subsidies provided by Obamacare to lower-earning Americans (how many times have these people reminded us that “someone is paying for these subsidies”) never seem to have much of a problem with the subsidies we pay to support Wal-Mart’s massive profits by picking up the healthcare tab for so many of the company’s employees. But then, those who support taxpayers doing the job that Wal-Mart should be doing tend to be the same folks who are quick to suggest that nobody is forcing workers to take a job at Wal-Mart. Apparently, these people are operating under the opinion that a Wal-Mart worker earning below the federal poverty level wouldn’t readily move to a better paying job if such a job were available to that worker.

The good news is that the proposed California legislation has a very good chance of becoming law. While the proposed legislation will require a 2/3 vote in both the Senate and Assembly, Democrats currently have supermajorities in both legislative bodies in the state.

Let’s hope that California gets this done and other states are quick to follow California’s lead. This is legislative action whose time is long overdue.

Contact Rick at thepolicypage@gmail.com and follow me on Twitter and Facebook.

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