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Change is Good

Via Nathan Newman comes tell of some innovative methods being used or proposed to force Wal-Mart into the realm of the socially conscious. Montana is considering a plan whereby large retailers would face an additional tax on receipts unless they proved their employees made a living wage. George Miller Ken Toole, the Congressman state senator behind the proposal, sensibly argues that since the state has to subsidize what underpaid Wal-Mart employees can't buy (health insurance, etc), Wal-Mart might as well be forced to fund the effort.

I'm a big fan of ideas like this (I hope Monsieur Singer will pop by to tell us about its chances in the Leg), not least because they seem so karmically delicious. Montana, however, is small enough that Wal-Mart could easily absorb the costs of such a proposal without having to change their business practices. California, on the other hand, is not. If we passed a similar bill, it'd have the same effect of our auto standards. When we decreed that cars sold here had to meet a much-higher emissions bar than they did nationwide, the effect was similar to a federal mandate -- automakers can't make one car for our market and one car for all others, we're too large.

In the same vein, Wal-Mart would find that the costs of complying with the law, when added with the costs of their flailing public image, would be pretty high. It might indeed be cheaper to simply let the stores unionize, or at least defuse that pressure by jacking wages up, rather than remaining hostage to hostile legislatures and bad publicity.

Posted by Ezra Klein on February 25, 2005 1:40 PM | Permalink

COMMENTS (10)

Ezra- Just a clarification for your readers. Cong. George Miller is doing wonderful work investigating Wal-Mart and its sweetheart deals with the Department of Labor, but he is not directly involved in the Montana legislation. State Senator Ken Toole deserves the name recognition on that one.

Posted by: Nathan Newman | February 25, 2005 1:49 PM

[Ken Toole] sensibly argues that since the state has to subsidize what underpaid Wal-Mart employees can't buy (health insurance, etc), Wal-Mart might as well be forced to fund the effort.

Er, can we please please please stop using taxes as social policy (from both sides of the aisle)? If you want Wal-Mart to pay people more, raise the minimum wage, or require employers to provide health insurance, or whatever.

Posted by: Ugh | February 25, 2005 2:55 PM

Ezra,

Matt Harwood from TWM. I just entered the blogger's den. Check it out if you get a chance: www.woodshavingsdaily.blogspot.com

Posted by: Matt Harwood | February 25, 2005 3:05 PM

Ugh, don't be so coy. If I proposed a law requiring you to buy health insurance for your employers, wouldn't you decry it as a "health insurance tax"? In fact, I imagine most businesses reflexively label as a "tax" any legislative action that costs them money, even one relatively innocent like a minimum wage hike. I'm not quite sure why you're pretending that this isn't exactly what would happen.

As to the point Ezra is making, though I think it does have a vindictive elegance to it, I fear that it falls prey to two of the bugaboos of modern political life: Texas and Ahnuld. Replace "California" with "Texas" and suddenly you're talking not about additional restrictions but a major excuse to wimp out of restrictions that exist elsewhere. And what if some inept politician gets a hold of a major state governorship and allows for polluters to pay fines in one-ounce increments of body oil, for example? It's a little dumb, but the point is, it works both ways, and California (or Texas) is big enough that companies could cater exclusively to it and give the rest of the country the finger.

Posted by: diddy | February 25, 2005 4:33 PM

Well you could think of it that way, but at least hiking the minimum wage or requiring health insurance for employees puts that exact issue on the table; and doesn't clutter it up with ancillary issues such as "how much should the tax be, what's the tax base" and others that aren't present in a straight up or down policy decision. (not to mentiond it complicates the code, state or federal, producing more deadweight loss)

And to put the issue as Ezra (paraphrasing Toole, I believe) does, "state has to subsidize what underpaid Wal-Mart employees can't buy (health insurance, etc), Wal-Mart might as well be forced to fund the effort" is also disingenious. Do they have evidence that Wal-Mart is a net drain on the state's finances? Barring their entry, would their employees all have higher paying jobs with health insurance? How far does the "cost the state money" rationale carry as a reason for passing laws (tax or otherwise)?

Posted by: Ugh | February 25, 2005 4:54 PM

My understanding is that the cost of Wal-Mart's low wages upon the state of California has been, if not accurately calculated, at least estimated. For people slightly smarter than me, of which there are many, it seems that it wouldn't be to hard to calculate, based upon Wal-Mart's wages and the number of their workers in any given state and compared with that states various standards for assistance, the amount that Wal-Mart costs consumers in the form of a back-door tax.

The question of whether Wal-Mart is a "net drain" on a particular state's finances poses a problem for me. Whether or not a given retailer's sales tax receipts are over the amount that their workers require in financial assistance is just a way to draw attention from the fact that they are using their immense wealth and power to keep their workers in poverty and get subsidized by the state to do so.

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