Guest Editorial

'Pay or play' legislation: unions play, workers and taxpayers pay

BY DON C. BRUNELL

As our legislature heads toward the home stretch, union leaders are pressing their "pay or play" legislation requiring companies in Washington state with more than 5,000 employees to spend 9 percent of their payroll on employee health care benefits. It is organized labor's latest salvo at Wal-Mart, a company whose employees have repeatedly rejected joining the union.

There are two interesting aspects to this effort. First, supporters are using confidential employer information mysteriously "leaked to the press" from state files. Even though the Dept. of Employment Security sent out a letter warning legislators that leaking the confidential information could violate state or federal law and carry a $5,000 penalty, somehow it seeped out.

Second, employer mandate bills like those being pushed by the AFL-CIO in Washington and 33 other states will do nothing to improve access to affordable health care, will result in job losses, and will cost taxpayers millions in legal fees.

The Employment Policies Institute, a Washington, D.C. based non-profit research organization, recently released a study showing that, if passed nationwide, employer mandates will cost 315,000 jobs.

Case in point: In Maryland, lawmakers approved a union-backed measure that requires companies that employ more than 10,000 people to spend at least 8 percent of their payroll on health care. Wal-Mart is the only company in the state affected by the legislation.

The legislation effectively killed Wal-Mart's plan to open a distribution center in Somerset County that would have employed 800 people. The rural county is Maryland's poorest, with per capita income less than half the state average. According to The Wall Street Journal, the center's "ripple effect" would have created an additional 282 jobs, boosting the county's private-sector employment by 20 percent and producing an additional $19.2 million in state and local tax revenues.

In addition, Wal-Mart's plan for a second distribution center in western Maryland also appears dead. That center was planned for Garret County, which has a poverty rate 70 percent above the state average.

As one Wal-Mart spokesman put it, "You have to...question how business-friendly is a state like Maryland when they pass a bill that...takes a swipe at one company that provides 15,000 jobs."

Most of the people in Maryland who supported the measure did so secure in the knowledge that it wouldn't negatively affect them. More than 150,000 Maryland residents are federal employees and nearly 268,000 work for state and local government.

Unfamiliar with the need to control costs, remain competitive, or appease shareholders, they apparently neither understand nor appreciate the consequences of increasing costs on private sector companies. And because the 1,000 or more jobs killed by the anti-Wal-Mart law were largely in the poorer sections of the state, those job deaths are causing barely a ripple.

But those folks may be affected after all by shelling out millions of their tax dollars to defend the law in court.

The Retail Industry Leaders Association recently filed suit in Baltimore's federal district court asserting that Maryland's "pay or play" law violates federal law. The plaintiffs point out that the federal Employee Retirement Income Security Act of 1974 (ERISA) requires that multi-state companies like Wal-Mart pay uniform benefits for all their employees.

But if the unions get their way, several states will have approved several different requirements. For example, in Maryland, companies with more than 10,000 workers must pay 8 percent on health benefits. In New Hampshire, the threshold is 1,500 employees and requires 10.5 of payroll. Then there is Washington where the legislation targets companies with 5,000 or more employees to spend 9 percent of payroll on employee health care.

Proposing legislation that is already embroiled in legal battles elsewhere and headed to the U.S. Supreme Court - litigation that would surely follow here - is neither a solution nor a responsible use of Washington taxpayers' hard earned money.

Every company in America is struggling to deal with the soaring cost of health care. What is forgotten is that every Wal-Mart associate in America - both full-time and part-time - can become eligible for health coverage for $23 per month, an approach which has helped 160,000 previously uninsured Americans get private insurance.

That hardly sounds like a recalcitrant employer who should be punished because unions have failed in their organizing efforts. Using poorly aimed legislation to get even makes the situation worse, not better.

Don C. Brunell is president of the Association of Washington Business.

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