Wednesday, May 26, 2004

Healthcare Watch: India vs Walmart

The Christian Science Monitor has an article reviewing the state of healthcare in India. India is experiencing rapid urbanization and the irony is that villagers are leaving behind better healthcare in rural regions to pursue job opportunities in the city.

For centuries, these two worlds have been symbiotic. Slums provide housecleaners, cooks, and drivers for the middle class. The middle class, meanwhile, tolerates the slums as a source of cheap labor.

But this system is buckling under the pressure of India's burgeoning urban population, particularly over issues of health. Urban slums are the fastest-growing sector of India's population, expanding five times faster than rural areas. How the government deals with this problem could have widespread implications, both for the country's ability to attract foreign investors and to convince upwardly mobile citizens that life is safe enough to remain in India.

"When you analyze the urban slums and the statistics that slums will be growing at faster rates than other [areas], this is a serious concern," says Prasan Kumar Hota, secretary of family welfare in the Indian Health Ministry.

Urbanization is a global phenomenon. In wealthier nations, most citizens already live in major urban areas or suburbs. But for poorer countries, the epic migration of villagers to cities is straining clean water supplies, sewer systems, and hospitals. Of the roughly 2 billion people to be added to the world's population over the next 30 years, more than 90 percent will be living in the cities and towns of poor countries, according to The Challenge of Slums, a recent report by the UN agency Habitat.

In India, there is a cruel twist. Decades of rural programs have brought clinics and healthcare to villagers. But now villagers are often leaving behind better healthcare in search of better jobs. In a recent survey in the state of Gujarat, for example, researchers found that 60 percent of surveyed villages had vaccinated their children, compared with 30 percent of slum dwellers.

A small collection of government bureaucrats, private volunteer groups, and feisty community leaders are starting to address the imbalance, one slum at a time.

This article is in part an answer to critics who say that the market will solve healthcare problems. What reality shows is that people given the choice between taking available healthcare or optimizing their income will choose to optimize their income. Therefore since a market works by supply and demand based on consumer choice, consumers will take short-term risks and become uninsured because healthcare is considered a separate issue from compensation. This flies in the face of conventional economic wisdom which is to treat healthcare as a part of total compensation along with payroll.

This is true from an employer's point of view, but not from an employees point of view. Which is why corporations can set up situations were they minimize compensation by reducing healthcare benefits while employees accept this in order to maximize payroll income. An example of this? Walmart in Chicago.

According to USA Today Walmart is again attempting to gain permission to set up shop in Chicago.

Wal-Mart asks to expand in 'new territory' of Chicago
By Debbie Howlett, USA TODAY

CHICAGO — Wal-Mart will try today, for the second time this month, to get approval from the City Council to build two stores within the city limits...

The Rev. Michael Pfleger, the pastor of St. Sabina Catholic Church a mile from the South side Wal-Mart site, sees a need for economic development. But not at any cost, he says.

"The mentality that the economy is so bad something is better than nothing — that's a slave mentality," Pfleger says. "We want jobs, but we want good jobs."

Dan Drezner has an article about Walmart trying to move into Chicago, but he focuses on (1) Jesse Jackson (2) the effects of competition from Walmart on local businesses.

My concerns are as follows (a) even thought I despise Jesse Jackson he's just a red herring here and (b) the issue isn't one of local-business competition but unfairly government-subsidized competition.

Even though traditionally medical insurance has been a part of total compensation from an employers point of view, Walmart's wage practices are made viable because it encourages its employees in order to get on Medicaid - a government funded health insurance program for the very poor.
A snapshot of Georgia's program for uninsured children shows that it's packed with kids of Wal-Mart employees. A state survey found 10,261 of the 166,000 children covered by Georgia's PeachCare for Kids health insurance in September 2002 had a parent working for Wal-Mart Stores. That's about 14 times the number for next highest employer: Publix, with 734.

Wal-Mart is the state's largest private employer. But when the top four companies on the list are measured by number of PeachCare children per the number of employees in Georgia, Wal-Mart still dominates.

Imagine potential employees of Walmart as contractors making bids for jobs at the corporation. Now all of them have fixed costs: food, health, etc. They are trying to get that job at Walmart and in order to do so they must make an attractive bid - low enough to get Walmart's employee contract but high enough to meet their costs. Now since employees do not see medical insurance typically as a part of total compensation in practice, what they will do is in order to get the bid they will put their families on Medicaid and bid less. This benefits Walmart.

If there was a law saying that employees could not get on Medicaid or had sliding scale limited eligibility, then these employees would not take Walmart jobs because they couldn't afford to. Then Walmart would have to raise wages in order to attract employees. However by systematically exploiting the Federal social programs Walmart can pass the cost of its employees compensation to taxpayers.

Nathan Newman has some more on the topic of Walmart stealing healthcare from taxpayers.

As a conservative I am against expanding social entitlement spending and doubly against corporate subsidies by the Federal Government. Furthermore this may be a violation of anti-trust or anti-competitive laws, since effectively the corporation is using its subsidized labor prices to lower its retail prices and thus undercutting other employers who do have to bear medical insurance costs as part of the compensation package for their employees. That Walmart is doing this in order to run out of business small companies who already have to pay systematically higher per capita insurance costs than large corporations is doubly an outrage against conservative law&order sensibilities.

Be a conservative therefore and oppose government subsidies to Walmart!


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