Living Wage Bill an Imposition

walmart_iconBy Matthew Moses

Owners and managers of a business should have the last word in how they want to run their operations.  Regardless if the business is a small ‘mom and pop’ store or a large corporation, if they are following the laws they should not be told how to conduct themselves by an outside entity. Well this is exactly what is happening in Washington D.C. A ‘living wage’ bill has been passed by the Council members in the District at a vote of 8 to 5 and now currently awaits the approval of Mayor Vincent C. Gray and then a congressional review period. This bill through the D.C. Council’s Large Retailer Accountability Act (LRAA), will force large retailers who make corporate sales of $1 billion or more and that are operating in spaces of 75,000 square feet or more, to pay their employees 50% above the minimum wage in the District. Washington D.C.’s minimum wage is currently $8.25, so large retailers would have to pay their employees no less than $12.50 an hour.

In light of this, Wal-Mart has announced that if the bill is passed they will cancel plans for three un-built stores and stop building three other stores that are currently under construction in D.C. Development and retail experts say that Wal-Mart has already spent close to $1 million dollars per location in plans, designs, and construction. My fear is that this bill will do more to hurt the business economy and the residents in the District than it will to help it. Further, my belief is that it is not fair for businesses like Wal-Mart and other large retailers to be singled out and targeted because of the size and profit of their operations.

Typically, large retailers like Wal-Mart tend to have very tight profit margins, meaning their revenues minus costs equal a slim net profit. For example Wal-Mart reported a net income of $17 billion profit on sales of $470 billion in its last fiscal year. That net income drops so far because of expenses like payments to suppliers, employee wages and benefits, taxes paid, and building and capital expenses of their sites. Regardless, people may think that $17 billion is a really large number, why wouldn’t they be able to pay their employees 50% more in wages? When in actuality if you take their $470 billion in revenue and divide it by their net income of $17 billion you come out with a profit of only 3.6%. So just because they make a lot of money does not mean that they can afford to pay their employees more because they would have to make cuts or raise prices to compensate for the higher wages. This leads me to believe that Wal-Mart is not unjust in wanting to discontinue plans for stores in the District, because why would they choose to operate at tighter profit margins or even at a loss?

Proponents for the bill feel that Wal-Mart should have no trouble raising their wages and wonder why they have maintained their low pay scale. Sam Walton founded the business in the rural South and has struggled moving operations into cities with higher costs. Some say that typically in the more southern cities the cost of living is very low, so it is easier to live on the low-wages that Wal-Mart offers. On the contrary, when the business moves to cities like D.C. or New York where the cost of living is extremely high, those low wages are nearly impossible to live off of. Those who are for the bill suggest that Wal-Mart and other large retailers should adjust and tailor their pay scales to the economic condition of the city in which they are operating in. This is seen as plausible and is one of the major reasons Council members have voted in favor of the bill, despite the uproar brought by the businesses affected.

Wal-Mart may not be the only large retailer upset over the bill, as Deputy Mayor Victor Hoskins of D.C. said three other large retailers have also recently discussed their disinterest in coming to the District. This lack of business diversity ultimately hurts business competition in the area. Competition forces businesses to offer lower prices to consumers and to maintain a sense of strong business integrity. This also limits resident’s choices when it comes to shopping for necessary goods at an affordable price. As of right now many residents travel outside out of D.C. for the majority of their purchases because the lack of competitive prices and needed items. I’m sure that people in the area will be more than pleased to have a reliable source where they can find their needed goods, at an affordable price, in an area close to their homes.

Wal-Mart brings benefits to a community via shopping, as well as a large amount of much needed jobs to the area. Washington D.C. is among the highest in the nation in unemployment rates, according to the D.C. Fiscal policy Institute the cities unemployment is at 16%.  The 6 stores that Wal-Mart is contemplating on canceling would bring up to 1800 jobs to the district. I am pretty sure that someone who is unemployed would much rather make $8.25 an hour than $0.00, low-wage job or no-wage job? For those who feel $8.25 is not livable may have an argument but most Wal-Mart employees add little or no value to the product, so they do not really utilize a skill set that demands higher wages. Wal-Mart spokesman Steven Restivo said “most of the company’s 1.4 million employees work full time, and about 75 percent of management started as hourly associates.” So employees are not stuck at the minimum wage position, there is definitely opportunity for advancement in the business. The benefits of the community don’t stop there as Wal-Mart’s potential stores are estimated to bring up to $15 million dollars in tax revenue to the community, due to its high volume of sales.

Now if the benefits that these large retailers could bring to the District are not enough, then think about some consequences. If the wages for Wal-Mart employees are raised above those of neighboring small businesses that labor pressure would force small businesses to also raise their wages. Unless you feel that people would rather work at a small business for less money than you can make at Wal-Mart, then the small business would have no problem hiring employees. If indeed small businesses are forced to raise their employee wages because of the labor pressure inadvertently applied by this bill, it would be highly unlikely that they would be able to absorb the costs.

In my opinion, this living wage bill will ultimately do more to hurt the community than it will to help it. I feel that businesses, regardless of their size should have the right to run their operations as they please. The value that Wal-Mart and other large retailers bring to the District outweighs any possible adverse effects of the ‘Living wage bill’. As I feel this bill is meant to target privately owned, successful large businesses. It forces Wal-Mart and other large retailers to make a choice between not coming to the District at all or building fewer stores, both of which is hurtful to potential employees in the district where the unemployment rate is sky high.

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One Comment to “Living Wage Bill an Imposition”

  1. I think that the solution to the raising of the minimum wage to a more livable wage amount requires a system wide change that no only focuses on the corporations, because I do agree that some businesses will suffer if they are forced to pay a certain wage. In contrast to Wal-Mart’s wages is the wage amount that Costco pays their employees, which is substantially higher. Wal-Mart can pay their employees more, and instead of building a Walmart in every single city, maybe a Walmart in every other city, while simultaneously raising the wages. Look at Hawaii as an example. We have a Walmart in almost every single town here on this small island, while there is only 3 Costcos. Costco pays $17 per hour. Walmart pays $9 per hour. So wouldn’t it stand to reason that Walmart could raise their wages and close some stores considering the very high cost of living in Hawaii?

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