Thursday, July 2, 2009

ObamaCare Pits Big Business Against Small Competitors

It came out yesterday that Walmart is all for a government mandate requiring businesses to provide healthcare to workers or pay a tax if they don't. Why would Walmart and other big businesses support this? No doubt it is because they are good citizens who care and trust the government right?

Actually, they like it because it adds significant operating costs for their smaller sometimes "mom and pop" competitors. Since 99% of large companies already offer insurance it's not a big deal to them.

Currently, mom and pops can get away with hiring part-timers without incurring the cost of offering them health insurance. Part-timers could be anyone from high school kids to temp workers making, say, between $8 and $12 an hour. Depending on how the law mandating that these small employers offer coverage is written and who is exempt, the cost of hiring these employees could go up significantly. This cost would of course have to be passed on to consumers in the form of higher prices for the goods they sell. This would make them even less competitive on prices with Walmart. If the law exempts business with less than 10 employees, for example, or some other arbitrary threshold it means the companies who can't downsize to that level will feel the pain. So you'll have mega retailers and very small retailers and those in the middle will be in a no mans land because they'll have to increase prices relative to the behemoths and the very small. As their prices go up, Walmart, with its everyday low prices looks even better. Goodbye Mom and Pop. Hello Walmart.

Yet another unintended consequence of Obama's policies. Onward and upward I say.

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