Walmart, DC face off on minimum wage

2013-07-16T00:00:00Z Walmart, DC face off on minimum wageThe Associated Press The Associated Press
July 16, 2013 12:00 am  • 

WASHINGTON - A bitter standoff between Walmart and Washington, D.C., officials over the city's effort to impose a higher minimum wage on big-box retailers is fueling a wider debate:

How far should cities go in trying to raise pay for low-wage workers - and should larger companies be required to pay more?

Walmart, the nation's largest private employer, is fuming about a "living wage" bill approved by the D.C. Council that has an unusual twist - it would apply only to certain large retailers, forcing them to pay employees at least $12.50 an hour. That's nearly 50 percent higher than the city's minimum wage of $8.25 an hour.

The measure is being cheered by unions and worker advocates who have long complained about Walmart's wages and working conditions.

Opponents call it an unfair tactic that will discourage companies from doing business in the city.

Walmart has threatened, if the bill becomes law, to cancel plans for three of the six stores it hopes to build in some of the city's poorest neighborhoods that are sorely in need of economic development. The measure is now before Mayor Vincent Gray.

Some economists say targeting large retailers or other industries that can afford to increase wages may be an effective way to raise pay to even higher levels than a broad-based minimum wage. The district's bill applies to stores of 75,000 square feet or larger and annual corporate revenues of at least $1 billion.

"A large retailer can more easily absorb a pay hike than a corner store," said Arindrajit Dube, an economics professor at the University of Massachusetts-Am-herst and a supporter of raising the minimum wage. Large stores are "less likely to shut down or cut back on employment" in response to such an increase, he said.

But Dube cautioned that a targeted increase might make it harder for Walmart and other big box stores to pass on the wage hike as a price increase, since smaller retailers could still keep prices low.

The minimum wage in the nation's capital already is higher than the federal rate of $7.25 an hour. Other cities and states that have sought to raise the minimum wage above what is required have applied the increase to all businesses.

No other city has singled out certain businesses for higher wage rates. The Chicago City Council tried to pass a similar measure seven years ago, but it was vetoed by then-mayor Richard M. Daley. Opponents have suggested the district's bill may be subject to a legal challenge, but those prospects are uncertain.

Many Walmart workers already make $12.50 an hour - the rate set by the district's bill - or more, but the average sales associate earns $8.81 per hour, according to IBISWorld, an independent market-research group.

Walmart spokesman Steven Restivo questioned why the district measure excluded unionized stores such as Safeway and Giant, suggesting the bill is specifically targeting nonunion stores. He said most of the company's 1.4 million workers are full time, and about 75 percent of the store's management teams started as hourly associates. The average pay of full-time workers is between $50,000 and $170,000 a year, Restivo said.

David Neumark, an economics professor at the University of California-Irvine, has argued that raising the minimum wage is bad for workers because it discourages employers from hiring and leads to fewer jobs. He said Walmart's low prices are more important to helping low-income workers.

"We can talk about wages, but if you can lower prices, that's as good as raising wages," Neumark said. "And, of course, helps a lot more people."

Forcing Walmart to raise its salaries could create more gradual pressure on smaller businesses to boost wages over time, said Michael Reich, an economics professor at the University of California-Berkeley.

"A lot of people would be trying to get jobs at Walmart," he said. "That labor market pressure is going to raise wages at smaller stores, just because Walmart is such a big employer."

But business groups call the idea outrageous and unfair.

"By any analysis this is a really flawed proposal that's also very discriminatory," said David French, senior vice president of the National Retail Federation.

"The assumption is that retailers make a lot of money, therefore they can pay higher wages and therefore you can impose higher costs by fiat," he said. "That doesn't necessarily reflect reality."

Retailers are typically low-margin businesses, French said. While they move a lot of products, he said retail profitability is less than many other similarly situated businesses. The district measure could also affect other retailers like Best Buy and Macy's.

Business groups are also concerned that a precedent-setting law in Washington, D.C., could influence similar laws elsewhere.

"The assumption is that retailers make a lot of money, therefore they can pay higher wages and you can impose higher costs. That doesn't necessarily reflect reality."

David French, National Retail Federation

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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