The D.C. City Council recently passed a bill entitled the “Large Retailer Accountability Act,” stipulating that any retailers occupying more than 75,000 square feet, and with sales of at least $1 billion, must pay a minimum wage of $12.50 an hour. (That’s $4.25 more than the D.C. city government’s minimum wage of $8.25, but I digress). The bill targets one company: Wal-Mart. In response, the company said it would abandon its plans to build in D.C. entirely, although Mayor Vincent Gray will have to make a decision whether to veto the City Council’s bill or not.
Wal-Mart has spent over three years developing and implementing a business plan to construct six stores in Washington. The city council’s anti-Wal-Mart argument, which is building steam nationally, goes something like this: “Wal-Mart is a huge and rich company, and so the only reason they’ve decided to not pay their workers higher wages is greed.”
This is an overly simplistic line of thinking that ignores basic economics. Wal-Mart is well-known for having very low prices. But it can only keep prices low by reducing costs in other areas. These costs savings are passed on to consumers. For many people in more impoverished rural areas, shopping at Wal-Mart is their only viable outlet to acquire reasonably priced retail goods.
Demonstrating an incredible amount of ignorance and hubris, D.C. Councilman Vincent Orange triumphantly declared, “We’re at a point where we don’t need retailers. Retailers need us.”
I wonder if Vincent Orange would repeat those comments in some of the same neighborhoods in which Wal-Mart wants to build. For one thing, at least three of the neighborhoods that Wal-Mart wants to build in (58th and East Capitol, Bladensburg Road and New York Avenue, and Alabama Avenue SE) sorely lack places where residents can go and buy ordinary household items like towels, tires, socks, fertilizer and, especially, groceries. Many liberals decry the existence of “food deserts” in urban areas—locations without stores selling a diverse and healthy array of foods. In recent years, Wal-Mart has expanded its business into the grocery game. The provision of ordinary consumer goods for poor neighborhoods is not to be sneered at. Neither is the prospect of new jobs, however much they pay.
Secondly, the theory that Wal-Mart’s emergence will mean pain for small business is dubious. There aren’t many clothing retailers or furniture stores where Wal-Mart wants to go, and I don’t think Wal-Mart’s existence threatens places like laundromats, convenience stores or car washes. Moreover, D.C.’s more moneyed residents are already doing tons of shopping at high-end chain stores like Trader Joe’s or Crate & Barrel, which nobody would describe as small businesses. Would any D.C. council member propose a ban on purchasing goods from Amazon.com if it really wanted to get serious about small businesses? Of course not.
Critics of Wal-Mart should consult Chicago, another liberal big city which initially fought Wal-Mart, but later relented and allowed the company in. The editorial board of the Chicago Tribune criticized D.C.’s decision:
Here, making peace with the nation’s biggest retailer has worked better than trying to score cheap political points at the expense of jobs and economic development…
When local pols tip the scale through such targeted legislation, a city’s reputation as a place to do business suffers. Job seekers who might otherwise find work miss out. Consumers lose the opportunity to see for themselves if a new store provides better service at lower prices.
Washington, trust us. We almost went there and did that. Be smart. Stand down.
As the Tribune makes clear, the biggest issue here is economic freedom and prosperity. Subjecting business practices to political whims on the scale that the D.C. city council wants to do is toxic to encouraging new business development. In this, D.C. is discouraging more businesses than just Wal-Mart. Let the Wal-Marts be built, and let consumers and job-seekers decide whether the perceived costs outweigh the benefits..
