City Journal Summer 2014

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Eye on the News

Scott Beyer
Stop Walmart First, Help the Poor Second
Washington’s new law will hurt low-income people much more than it hurts the big retailer.
11 July 2013

The Washington, D.C. city council has just passed legislation making the nation’s capital officially hostile to Walmart. The Large Retailer Accountability Act was proposed by city council chairman Phil Mendelson, who was determined to let big-box retailers know that “you’ve got to pay a fair wage to your employees.” The law targets any city store with a net worth of over $1 billion, with a nonunionized workforce, and occupying a space of more than 75,000 square feet—but since no other big-box retailers operate in D.C. today, it’s a safe bet that Mendelson had Walmart in mind. Such stores must now pay wages of $12.50 an hour—$4.25 above D.C.’s minimum wage, itself a dollar higher than the federal rate.

Walmart is currently constructing three stores in Washington and planning three more. All would be located east of Georgia Avenue, the unofficial border between D.C.’s black east side and white west side. Two would be in the southeast, across the Anacostia River. Together, they would provide 1,800 jobs and $15 million in annual sales taxes. These are areas in dire need of jobs and economic activity. In southeast D.C., some neighborhoods barely have economies to speak of; they accommodate residents through a motley mix of liquor stores, convenience stores, and fast food. The lack of basic services underscores the area’s broader social problems: in Ward 8, which covers much of the southeast, one-third of the population is impoverished and 22 percent unemployed. (Similar conditions can be found in the “food deserts” of west- and south-side Chicago, where Walmart has also tried opening, and in southeast San Francisco, where a store opening has been rumored.)

But Mendelson objected because Walmart would pay some workers less than the city’s median hourly wage for retail salespeople. “Often our debate on the council is only about the number of jobs, not about the quality of those jobs,” he said. Mendelson’s bill typifies the opposition that Walmart faces as it tries expanding from the suburbs into major cities. In 2007, community resistance killed proposed stores in Queens and Staten Island. In California, similar efforts have kept stores out of San Francisco, San Diego, and Los Angeles. Unions, antipoverty advocates, and wealthy progressives argue that Walmart hurts small businesses and keeps wages down for the poor. Their cure for these alleged ills is to impose onerous and expensive mandates, including requirements to pay a “living wage.” In response, the retailer has attempted to build support with community outreach and charitable giving. In D.C., for example, Walmart has donated millions to neighborhood programs and signed a “community benefits agreement” that guarantees training and hiring of local workers. In New York, Walmart has contributed an estimated $13 million to local charities and other organizations since 2007.

Urban progressives rail against Walmart from their own well-serviced neighborhoods—many of which have big-box retailers, like Target and KMart, that pay roughly what Walmart does. But Walmart is one of the only major retailers offering less fortunate areas the groceries and cheap goods that these progressives can easily obtain. And now the retailer might reconsider its move into Washington. A Walmart regional general manager says that the bill’s passage will force the company to abandon its plans for the three additional stores and that it might even “jeopardize the three stores already under construction.”

If Washington and other cities with high poverty and unemployment rates really want to turn things around, they should embrace economic development. Sure, an entry-level job at Walmart won’t make anyone rich. But it can lead to managerial positions that pay over $100,000 annually; indeed, three-quarters of the company’s managers began as low-level employees. Even if that weren’t the case, low-paying jobs would still offer a boost to areas like southeast D.C., where so few jobs exist. Mayor Vincent Gray can veto the legislation, and he should. Otherwise, the city’s poor will see Walmart driven further into the suburbs, away from where it’s so badly needed.

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