The Pull-Out Method
When Walmart announced in late 2010 that it was planning to open stores in the District, two schools of thought quickly defined the ensuing debate. There were the unions and activists, who said Walmart pays exploitative wages and undercuts local businesses. And there was Walmart, which said, essentially, no, we don’t.
This week should have been Walmart’s chance to prove it was right. On Wednesday, the D.C. Council approved the Large Retailer Accountability Act of 2013 on a second vote, following its initial vote in favor of the bill last month and setting it up for the mayor’s signature or veto. If it becomes law, it will require all large retailers in D.C—those with more than 75,000 square feet and parent companies that gross at least $1 billion per year, with an exemption for companies with collective bargaining agreements—to pay a “living wage” of $12.50 an hour. Walmart, it goes without saying, meets the criteria.
Walmart could have responded by grinning and bearing it, and conceding that while it didn’t like the bill, it can indeed afford to pay a decent wage, as it’s long insisted it does. Instead, the company announced Tuesday that if the living wage bill is enacted, Walmart will cancel plans for three of its six D.C. stores and reconsider its options for the other three, which are already under construction.
“Like any business, we have a responsibility to our customers, employees and shareholders to re-evaluate our options when it looks like local rules may significantly change,” wrote Walmart Regional General Manager Alex Barron in a Tuesday Washington Post op-ed. “The LRAA would clearly inject unforeseen costs into the equation that will create an uneven playing field and challenge the fiscal health of our planned D.C. stores.”
This was, to be sure, a purely political move. This wasn’t Walmart deciding, after the law took effect, that it could no longer profitably operate some of its planned stores. It was an announcement the day before the final Council vote on the bill that amounted to a threat: Kill this bill, or else.
Of course, Walmart has every right to oppose the bill, as it’s done in press releases nearly every day in the leadup to the votes. If legislation will cost a company money, and the company has the resources to fight it, it would be foolish not to. But scrapping half its D.C. stores if the bill passes sends another message, one that undercuts Walmart’s insistence that it can pay a competitive wage.
The big business community has argued that the living wage bill would make the District a less attractive place for stores to set up shop, that it’s “great economic development for Maryland and Virginia,” in the words of D.C. Chamber of Commerce President Barbara Lang. But when I ask Walmart spokesman Steven Restivo why the law might prevent the company from opening all of its planned stores in the District, his answer has more to do with fairness than with dollars and cents.
“It impacts some businesses and not others,” Restivo says. “So you’re arbitrarily setting wage standards that directly compete with others that don’t have that hurdle imposed on them. From a fairness standpoint, we don’t think it makes sense to pick winners and losers.”
It’s a perfectly logical argument—there’s no good reason why a unionized store or one with 74,999 square feet of space should be allowed to pay $10 an hour while a nonunionized, 75,001-square-foot store isn’t—but it doesn’t address why a store in D.C. that would have been profitable to the company now no longer is.
Restivo tries again. “It sets a bad precedent,” he says. “It sends the wrong signal to business in general. Just look at how many times the definition of ‘large retailer’ has changed, which sends a message to business that government is going to change the rules of the road whenever it sees fit.”
Again, a reasonable point, but not one that speaks to those dollars and cents. On a later call, Restivo does address the numbers. “You’re telling a handful of businesses that your wage floor now is at least $4 higher than everybody else,” he says, referring to D.C.’s $8.25-an-hour minimum wage. “We’re not talking 50 cents or a dollar. It’s more than $4 per hour that they’re arbitrarily setting for just a handful of businesses.”
Just how much of a wage increase would the living wage represent for Walmart? It’s hard to say, since Walmart won’t disclose its starting wages—”for competitive reasons,” Restivo says. But the average full-time hourly wage for Walmart workers is $12.04 in Maryland and $12.39 in Virginia, according to Restivo, plus benefits for employees who work at least 30 hours a week. That means the average Walmart employee in the region—Restivo says most Walmart workers are full-time—is likely making more than the living wage, since the legislation allows retailers to deduct prorated benefits from the mandated wage.
Of course, starting wages might be considerably lower than average wages. But let’s remember that the $12.50 living wage only amounts to $26,000 a year for a 40-hours-a-week worker, minus deductions for benefits. That’s hardly an exorbitant salary, and it’s one Walmart should be able to pay if its wages are as competitive as it claims.
The trouble is, the stores that Walmart is threatening to kill are the ones the city needs the most. Wages aside, the principal objection to Walmart’s arrival in the city is that it will drive local businesses under. (There’s some debate about the extent to which this occurs: A 2009 Loyola University Chicago study found that a Walmart in Chicago caused the loss of about 300 jobs and 40 percent of nearby businesses, while Walmart contends its stores have actually helped foster local business.) The two D.C. stores Walmart expects to open this year, on Georgia Avenue and H Street NW, are both within walking distance of a plethora of existing retail.
But the neighborhoods where Walmart is threatening to axe its planned stores, at the Skyland Town Center and Capitol Gateway in Ward 7 and on New York Avenue NE in Ward 5, have little in the way of existing business, and there’s a powerful need for grocery and other retail that Walmart would provide—as well as jobs for nearby residents. These stores, closer to the city’s borders, would also reduce so-called retail leakage by serving customers who would otherwise travel to suburban big-box stores, as well as commuters from outside the city who would start paying into D.C. tax coffers. If Walmart does pull out of these stores, D.C. will be stuck with the stores that could provide undesirable competition but at risk of losing those that’d be most helpful.
“Walmart is pulling out of Skyland and Capitol Gateway, and I’m pissed off,” Ward 7 Councilmember Yvette Alexander told me immediately after she learned of the company’s plans. Alexander was one of five councilmembers voted against the bill last month, and she voted against it again on Wednesday.
It’s possible that Walmart was never all that committed to some of these stores. In 2011, when the company was planning only four stores in the District, Mayor Vince Gray issued an ultimatum: Open a store at Skyland, or forget about the other D.C. stores you want. But now, with construction already underway at Walmart’s three most desirable locations, that threat no longer carries much weight, so the company might not mind losing Skyland and the others—or at least using them as a bargaining chip to pressure Gray to veto the bill.
Hours after Walmart issued its threat, Gray responded with a statement hinting at a possible veto. “The cancellation of three planned stores will surely set us back,” he said. “I strongly urge the Council to consider whether this legislation will actually promote strong economic development in the District and expand job opportunities for District residents.”
Political considerations aside, the wage issue remains. If Walmart succeeds in getting Gray to veto the bill, it will have scored a victory without having to close any stores. But if the bill passes and Walmart halves its D.C. presence, it’s essentially admitting that its business model doesn’t allow it to pay a meager living wage.
So here goes, Walmart: I’m calling you out. Either you can afford to pay competitive wages—in which case your threats are little more than the expected posturing to try to kill the bill and keep your profit margins as big as possible—or you can’t, in which case your claims to the contrary over the past years have been disingenuous. But you can’t have it both ways.
Photo by Darrow Montgomery