s

How Washington D.C.’s Attack on Walmart Hurts the Poor

July 15, 2013 J

By Steven Russell

Last Wednesday, Washington D.C.’s  city council approved a bill to raise the minimum wage requirement for large retailers from $8.25 to $12.50 an hour. The measure is largely seen as an attempt to attack Walmart, which has spent three years planning to open six new stores in the district. Why would lawmakers want to force Walmart, rather than every business in D.C., to raise the wages it pays to its employees? The answer: local unions. And the decision, if approved by the mayor, is going to hurt the poor in D.C. for years to come.

Supporters of the bill are quick to claim that raising the minimum wage on large retailers protects their employees from the exploitive practices of greedy corporations, which do not pay their workers a “living wage.” But the way lawmakers have specifically targeted large retailers demonstrates that they aren’t concerned about instituting a living wage at all—otherwise, they would have raised minimum wages across the board. In reality, the decision is a way for elected officials in D.C. to maintain their popularity with unions. The unionized grocery stores in D.C. and other unions in general understandably do not want Walmart to enter the D.C. market. As the poster child of a non-unionized workforce, Walmart is able to sell its goods at a cheaper price through a combination of lower wages and increased efficiency. The new competition directly threatens the business of unionized grocery stores and insults other unions in the area.

It’s true—Walmart’s arrival in the D.C. area may be bad news for certain stores in the market. But for D.C. residents, especially the young and unemployed, it is extremely beneficial. Walmart’s new stores are expected to create almost 1,800 jobs to the area. In some of the proposed store locations, unemployment is as high as 23%. Teen unemployment in D.C. is over 50%. Walmart’s new stores combat these problems by providing entry-level positions that allow these groups to earn wages and gain on-the-job experience. What’s more, the lower prices caused by competition from Walmart helps customers trying to make ends meet. One study found that Walmart’s entry into a market lowers the average price of groceries in the area by 15%. In these tough economic times, lower prices and more jobs are exactly what D.C.’s teens and poor desperately need.

Instead, the committee has all but ruined these opportunities. Walmart has already cancelled three of its D.C. projects and is threatening to do the same to the remaining three should the bill be signed into law by Mayor Gray.  Although the loss of six stores may seem bad enough, the long-term precedent created by the commission’s decision is even worse. As was stated earlier, Walmart had spent three years planning to enter the D.C. market. During that time, it worked closely with politicians and donated over $3.8 million to local organizations in the area. Despite these efforts, elected officials suddenly turned on Walmart and actively sought to prevent it from doing business in the district. There is little reason to feel bad for corporations, but what kind of precedent does this set for other large retailers that are considering the D.C. market? It makes little business-sense for other large retailers to invest in D.C. if they could be driven out by politicians at any moment. As such, the commission’s decision will likely destroy far more job opportunities than the 1,800 provided by Walmart as other large retailers decide to stay out of D.C.

It is understandable that unions do not want Walmart’s competition. It is also understandable that politicians have capitalized on union opposition to Walmart’s arrival. But government officials need to realize that denying Walmart access to the D.C. market does more than force wealthy D.C. residents to drive to Virginia or Maryland for cheaper groceries. It hurts the job prospects of D.C.’s unemployed and keeps prices artificially high for everyone. Although it seems likely Mayor Gray will veto the legislation, the damage by the committee’s decision may have already been done.

 

Like this post? Chip in $5 to AFP.