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Dick Davis Column: Pay or Play Destroys Jobs |
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Written On: March 2006 |
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Written By: By Richard S. Davis - President, Washington Research Council |
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Reform movements require villains. Without Enron and soft money bagmen, Sarbanes-Oxley and McCain-Feingold would simply be hyphenated odd couples. With villains, real or imagined, they became the law of the land, complete with heavy-handed and unintended consequences.
Backers of the latest "pay-or-play" health care dodge have slapped a black hat on the Wal-Mart smiley face and painted a bull's-eye on its back. Unions and some less successful competitors have labored diligently to demonize the retail giant. Now, they hope to leverage those efforts to win legislation dictating health care spending by large businesses, fundamentally altering labor relations.
A group called Americans for Health Care fronts for the union-backed campaign. They want to force employers to pay a fixed share of their payroll for health care or pay the difference into a state health care fund. "Fair Share Health Care"—the rhyme makes for a nice chant—got a boost when Maryland legislators required businesses with more than 10,000 employees to pay 8 percent toward health care. In January, Maryland's Democratic legislature overrode the Republican governor’s veto of the scheme. Only Wal-Mart will be affected.
Well, Wal-Mart and the community of Princess Anne, Maryland, which had hoped for an 800-job Wal-Mart distribution center, are now put at risk. As local hardware store owner Sherry Harris told the Baltimore Sun, "$12 an hour to start looks really good to a lot of people."
Similar measures have been introduced in some 30 states. In highly-unionized New Jersey, supporters want to mandate a whopping 15 percent of payroll. And the definition of a "large" varies from 10,000 employees in Maryland to 1,000 in Rhode Island. It doesn’t matter. Once they’ve established the precedent, advocates will quickly move to expand the number of businesses affected and the costs will rise.
A more complicated pay-or-play plan in Washington failed to get traction in 2005. The Washington Research Council found the proposal, reaching businesses with as few as 50 employees, would have eliminated 17,000 jobs. Supporters came back in 2006 with a modified Maryland plan, targeting firms with more than 5,000 workers and setting the tax at 9 percent of payroll.
Pay-or-play advocates claim to be fighting a "race to the bottom" in employer-based health insurance. Leaked and unverifiable data identified large businesses, including Wal-Mart, with employees receiving state assistance for themselves or their dependents. That's hardly surprising for public and private employers hiring entry-level, part-time, and low-skilled workers. Destroying those jobs with expensive mandates does neither the worker nor the taxpayer any favor. While it ignores basic health care reforms aimed at cost control, the Maryland plan hamstrings American businesses in global competition. States adopting the plan send a negative message to firms seeking to locate or expand.
There is no race to the bottom; there is, however, a race to rein in runaway health care expenses. Employers tailor their benefit plans to attract and retain good workers. And employees match their own interests with job opportunities. Health insurance is one factor among many. Some workers place a higher value on flexible hours, the opportunity to get work experience and develop skills, a workplace close to home, or even just a chance to get out of the house a few days a week.
With pay or play, employers lose the flexibility they need to control health insurance premiums, engage in cost sharing plans that increase employee choice and responsibility, and invest in wellness programs that cannot be credited against the tax.
The unions have their own agenda. As the costly benefits won in past bargaining agreements prove unsustainable, labor would like government to step in to secure them without negotiation. Pay or play paves the way.
In January, John Sweeny, president of the AFL-CIO, told the National Press Club, the goal is national health care plan. "But if they won’t give us [one]," he said, "we will 'give them hell' in all 50 states." The Oregon AFL-CIO filed an initiative to put its version of Fair Share hell on the ballot. A similar effort is likely in Washington.
While the target may be on Wal-Mart's back, the imagined villain is just a vehicle. If pay or play prevails, few will be smiling.
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