Job-Killing Living Wages

Washington DC’s city council has “tentatively” passed an ordinance that would raise the minimum wage from $8.25 ($1 more than the federal minimum wage) to $12.50 per hour. But this ordinance only applies to “non-union shops that are at least 75,000 square feet and whose parent companies gross above $1 billion annually.” Guess what company fits that description.

The left excuses this discrimination by calling it a “living wage” ordinance. But why is it that only employees of WalMart, and not employees of smaller retail shops, supermarkets, restaurants, or other businesses?

Ironically, over the last decade three successive Washington DC mayors worked hard to attract WalMart to build stores in inner-city neighborhoods. WalMart was reluctant to build in those areas due to crime, but finally agreed to open six stores in the district. “We’ve been praying for food in this neighborhood for about 40 years,” said the resident of one neighborhood where WalMart was planning to build.

Residents of this and other neighborhoods would not only benefit from WalMart’s low prices but also from the hundreds of jobs that each store would require. Certainly $12.50 an hour is more than $8.25, but $12.50 times zero jobs is a lot less than $8.25 times 600 jobs. Not surprisingly, WalMart is now threatening to abandon at least three if not all six of the stores it was planning to build in the city.

Meanwhile, the left-wing Grist magazine chortles over a requirement in Cape Cod, Massachusetts for any big-box retailers to do an “economic impact analysis” before receiving a permit to build. The retailers will presumably be denied permits if the analysis shows that existing businesses might be harmed by the lower prices and wider selection of goods offered by new superstores.

These policies set the standards all wrong. The only valid way of judging WalMarts and other major retailers is from the point of view of consumers, not employees and certainly not their competitors. Retailing evolves quickly, and for more than a hundred years, stores not willing to adapt and evolve have sought protection from the government instead. J.C. Penney faced this problem more than 100 years ago; A&P faced it 90 to 100 years ago; the first supermarkets faced it 75 years ago. Today it’s WalMart, but WalMart’s own business is threatened by on-line retailers such as Amazon (which makes the Antiplanner wonder how WalMart feels about proposals to tax Internet sales, which benefit big stores but would put many small shops out of business).

A hundred years ago, people bought their groceries by going to a counter and giving a man their order, and he would hand them their goods from behind the counter. Very few retail businesses work that way today because it is expensive and reduces consumer choice (not to mention impulse buying). If Cape Cod’s rule had been in general use a hundred years ago, though, that’s probably the way we would still be shopping.

People who don’t like WalMart should just not shop there, and people who think WalMart doesn’t pay enough should just not work there. Otherwise, they should get out of the way and let others make their own decisions.

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35 thoughts on “Job-Killing Living Wages

  1. LazyReader

    For a company that makes so much money and has a reputation for rolling back prices, it’s amazing the company makes more money than several countries. Walmarts revenue’s is greater than the nation of Norway yet Norway can afford to give it’s citizens decent healthcare. That may be cause of the store’s love of part time workers.

  2. LazyReader

    It would have been great if they had built the stores in these blighted DC areas. I guess Whole Foods was not particularly interested.

    Whole Foods, the grocery store for pretentious upper class urbanites and those who aspire to be same, wants to make it clear to the world that it is not just a grocery store but a shopping experience. To combat this trend of apparent snobbishness, Whole Foods is offering more price promotions and discounts in all of its stores, and lately it has held many of its grocery prices flat despite its own costs rising. The idea is for customers to feel that while there may be certain product prices that are going up, they are finding plenty of good deals to make up for that, said executives, who call the strategy “price perception.” Not the wisest business model to let your costs rise.

    Second of all why denounce a magazine “Grist” as “left” it’s not like left wing journalism isn’t good. Arianna Huffington, the creator of the most influential progressive media platform. When she started off, she didn’t have the Huffington suckered 9,000 bloggers and celebrities to write for her for free ( a media empire built off the backs of people who write for free) and then sold the Huffington Post to the corporate behemoth AOL for more than $315 million… as she spent the last decade denouncing corporate greed.

  3. Dan

    So the Walmartization of the workforce – part-time, no benefits, food stamps – is cheaper on the public coffers than living wages? Really?

    DS

  4. C. P. Zilliacus

    The Antiplanner wrote:

    But why is it that only employees of WalMart, and not employees of smaller retail shops, supermarkets, restaurants, or other businesses?

    And the stores in the District of Columbia run by Safeway and Giant (a subsidiary of Dutch Royal Ahold) are apparently exempt (grandfathered). That grandfathering was (apparently) put in place because their employees belong to a union, but pay lots of their employees less than the $12.50 per hour that this proposed D.C. law would force WalMart to pay its D.C. workforce.

    The Washington Post story includes this:

    he D.C. Council bill would require retailers with corporate sales of $1 billion or more and operating in spaces 75,000 square feet or larger to pay their employees no less than $12.50 an hour. The city’s minimum wage is $8.25.

    While the bill would apply to some other retailers — such as Home Depot, Costco and Macy’s — a grandfather period and an exception for those with unionized workforces made it clear that the bill targets Wal-Mart, which has said it would open six stores, employing up to 1,800 people.

  5. C. P. Zilliacus

    Dan wrote:

    So the Walmartization of the workforce – part-time, no benefits, food stamps – is cheaper on the public coffers than living wages? Really?

    Dan, I am not entirely opposed to an across-the-board raise in minimum wages. But if WalMart is forced to pay its workers $12.50 per hour, then Safeway, Royal Ahold (Giant), Home Depot, Costco, Harris Teter, Whole Foods, 7-11 and any others operating in the District of Columbia should have to pay their workers $12.50 per hour as well.

    But I have a major problem with a government action that appears to target only one business (and I should state for the record that I do not exactly approve of many of WalMart’s business practices).

  6. bennett

    The discrimination against Walmart in this ordinance gives opponents of living wages all they need to combat it. They can point to it and say, “this isn’t about living wages, it’s about hating Walmart.”

    How is Walmart any worse that other retailers that only hire part-time min-wage workers? How is Walmart worse than all the other retailers that give no benefits to their employees? Should we discriminate against Walmart because they have more success than their competition (most of whom operate on the same or marginally better level)? I’m all for living wages, but I don’t know why Walmart should be the only retailer held accountable for paying these wages. I don’t understand how a system of obvious inequity is going to solve an inequity problem.

    Maybe I should start a campaign that helps people understand how shopping at Walmart and other similar retailers is not in their self-interest. I know, the toilet paper is super cheap, but if people can broaden their perspective and look beyond the TP, they would realize that players like Walmert are a part of more problems than they are solutions.

  7. C. P. Zilliacus

    bennett wrote:

    The discrimination against Walmart in this ordinance gives opponents of living wages all they need to combat it. They can point to it and say, “this isn’t about living wages, it’s about hating Walmart.”

    I believe it is all about hating WalMart.

    It’s certainly not about encouraging economic development in the District of Columbia.

    Maybe I should start a campaign that helps people understand how shopping at Walmart and other similar retailers is not in their self-interest. I know, the toilet paper is super cheap, but if people can broaden their perspective and look beyond the TP, they would realize that players like Walmert are a part of more problems than they are solutions.

    I don’t usually shop at WalMart for an assortment of good reasons, starting with slow check-out queues.

  8. bennett

    I can deal with long and slow lines. I think people need to understand the high costs of low prices. Dan hit the tip of the ice berg right on the head with his comment, but it goes much, much deeper.

  9. C. P. Zilliacus

    bennett wrote:

    I think people need to understand the high costs of low prices.

    Unfortunately (or maybe not), those with the lower price usually win in our society.

    My bigger gripe with WalMart (and lots of owners of McDonalds franchises (and there are many McDonalds in the District of Columbia) and many others) is that those low prices are in part a consequence of the unwillingness to fund certain fringe benefits for their employees, starting with health insurance.

    That frequently becomes a burden on society.

  10. Frank

    The Seattle push to increase the minimum wage to $15 an hour

    Sheer stupidity. According to the BLS, about half of minimum wage workers are in the food service industry (which recently went on strike in Seattle) and are under 25 and without children. Many live at home and are teens or are in college and don’t have rent or mortgages or other expenses that older people incur over time. Many supplement hourly wages with tips. Minimum wage earners are also a small segment of the workforce, around 5% if memory serves. Most have a minimum wage job, develop skills and gain experience, and go on to higher paying jobs.

    Raising the minimum wage to $15 in Seattle will have all kinds of untended consequences, from lower employment, increased automation, business failure, or possibly higher rents as people bid them up and/or landlords realize they can charge even more. Price inflation will ensue.

    While these folks have good intentions, to borrow a slur from msetty, they are “economic ignoramuses”as they ignore economic realities and consequences, but as they say, the road to hell…

  11. Iced Borscht

    While these folks have good intentions

    I dunno, I’m not so sure such people do have good intentions. Are they truly being attentive to those who are suffering or are they trying to collect recognition for their supposedly good deeds? I often wonder.

  12. Delbert

    If it is really about “hating Walmart,” isn’t there a pretty good case that such a law would be unconstitutional on substantive due process grounds? We’ve just had a Supreme Court strike down a major federal law because it was purportedly motivated only by “animus.” The same logic could be deployed here. And I honestly cannot think of a rational basis for a minimum wage law that targets three or four businesses out of the many thousands in a city, regardless of whether any “hate” is present.

  13. MJ

    For a company that makes so much money and has a reputation for rolling back prices, it’s amazing the company makes more money than several countries. Walmarts revenue’s is greater than the nation of Norway yet Norway can afford to give it’s citizens decent healthcare. That may be cause of the store’s love of part time workers.

    Norway has the luxury of sitting back and getting fat off of oil royalties. Walmart has to actually provide goods their customers are willing to pay for to earn their profits. As for why their revenue is larger, it’s called a scale effect.

  14. MJ

    So the Walmartization of the workforce – part-time, no benefits, food stamps – is cheaper on the public coffers than living wages? Really?

    Yes. Those workers are free to stop collecting welfare at any time. They are also free to look for other, better-compensating jobs. Both options would be easier on the public coffers. Government-sanctioned/initiated theft is neither morally nor financially superior.

  15. MJ

    The ignorance and mendacity of the DC Council is astounding. Congratulations on contributing to “food deserts”. Not to mention employment deserts.

  16. MJ

    I dunno, I’m not so sure such people do have good intentions. Are they truly being attentive to those who are suffering or are they trying to collect recognition for their supposedly good deeds? I often wonder.

    There is a certain amount of “signaling” being engaged in by the DC Council. I don’t know if this constitutes good intentions or just political shrewdness. However, as CPZ (and many of the news stories) mentions, there is clearly more going on in terms of motivation. In addition to the traditional “stick it to the man” motives, there is also a fair amount of cronyism (protecting favored local firms) and union payback involved, as evidenced by the specific provisions and exemptions from the law.

    If it is really about “hating Walmart,” isn’t there a pretty good case that such a law would be unconstitutional on substantive due process grounds? We’ve just had a Supreme Court strike down a major federal law because it was purportedly motivated only by “animus.” The same logic could be deployed here.

    I doubt that Walmart would bring suit (really, what’s the use), but if some other party were interested I’m sure that they could get the law struck down as being unconstitutional. It blatantly violates equal protection. There is precedent for this as well, in cases where local governments tried to use their zoning powers to limit retail competition and their efforts were overturned by the courts.

  17. Dan

    Those workers are free to stop collecting welfare at any time. They are also free to look for other, better-compensating jobs. Both options would be easier on the public coffers.

    Divorced from reality statement on worker choice notwithstanding, Wonkblog has a decent analysis of the situation.

    Median wages are lowering in this country, yet productivity continues to increase. I doubt this can continue, especially when corporations try the “living wages are, like, bad!!!!!!!!!!!!!!!!!!!!!!!!1one” ruse. In the information age, being susceptible to such hokum is unacceptable.

    DS

  18. Sandy Teal

    A lot of bad Econ 201 analysis on this site today.

    Wal-Mart does kill jobs. In ECON 201 that is called “Efficiency” and “Consumer Surplus”. Just about every cost you apply to a business kills jobs — taxes, theft, bad workers, interest rate, etc. But the whole point of the free market system is not to create jobs, but to create consumer surplus.

    The fact is that if Wal-Mart comes to DC, it will wipe out lots of small grocery/convenient stores and kill jobs. But consumers will save a huge amount of money. Competition is mean, fierce, and brutal. If government doesn’t get in the way and the competition just pumps up consumer surplus, then the winners will the consumers.

    Maybe that is ECON 501?

  19. bennett

    “The fact is that if Wal-Mart comes to DC, it will wipe out lots of small grocery/convenient stores and kill jobs. But consumers will save a huge amount of money… then the winners will the consumers.”

    Yeah! Forget those people who loose their purchasing power and their jobs. Forget quality of life. Competition is brutal! Who care if your life is ruined? Deal with it!

    Lets just play the Econ Theoretical Vacuum Game: Ivory Tower Edition. It’s all a mathematical balancing act. There is no place for qualitative or subjective inputs because we can know everything we need about humanity with algebraic calculations.

    p.s. We’re not in this together. Get rich or die trying!

  20. Dan

    But consumers will save a huge amount of money.

    And many will save as they go into poverty. Or has the Walmart effect ended now that they are ubiquitous?

    DS

  21. JOHN1000

    The supporters of the government forcing Walmart to pay a government-mandated wage show their phoniness. If Walmart allows a union, where the workers get lower pay than the mandated wage (a portion of which goes to the union bosses), it will all be okay. The union bosses kick some of that money to democratic politicians and Walmart gets to build its stores.

    A clever way to commit bribery.

  22. Sandy Teal

    Those small family run grocery stores charge very high prices, do not meet disability accessibility requirements, do not meet health requirements for unpackaged food, often use unpaid child labor and violate overtime regulations. But DC wants Wal-Mart to meet all those regulations plus pay more than anyone else.

    In Econ 201 students usually learn that you can “create jobs” by requiring companies to dig holes and fill them back in. Or running around breaking windows so that they must be repaired. But that is not real value and society is poorer, not richer, for having those policies.

  23. Frank

    Thinly veiled racism and urban elitism on this thread. It really comes down to not liking Walmart’s suburban and rural brown, black, and low-SES customers who can’t afford higher-end stores like Macy’s, which rates exactly the same as Walmart in employee satisfaction on Glassdoor; high-priced (and higher paying?) Safeway scores lower. Why isn’t the discussion centered on these terrible (average, really) places to work?

  24. MJ

    Divorced from reality statement on worker choice notwithstanding, Wonkblog has a decent analysis of the situation.

    Median wages are lowering in this country, yet productivity continues to increase. I doubt this can continue, especially when corporations try the “living wages are, like, bad!!!!!!!!!!!!!!!!!!!!!!!!1one” ruse. In the information age, being susceptible to such hokum is unacceptable.

    Divorced from reality? Reality is not optional. If these workers have skills that merit greater pay (including higher productivity), they should exercise their options and avail themselves of a better standard of living. Otherwise they will need to continue the job they have for the time being. Coercing employers (especially thinly-veiled political targets) to give them more for the same work is a zero-sum (and quite possibly negative-sum) game.

    Medians are not people and wages are not equal to income, especially when one takes into account the effects of taxes, transfers, non-wage forms of compensation, and investment income. Arguments about trends in median wages are useless, especially when tenuously linked to things like aggregate productivity. Are we really to believe that gains in productivity throughout the economy, and across occupational classes, have been equal? I certainly don’t. Higher income growth among information and technology-sector workers, for example, reflects 1) their relatively specialized skills, making them scarcer commodities, and 2) their increased productivity. Furthermore, they have done so without the need for wage floor legislation (or unions, for that matter). Can you say the same for the average Walmart cashier? Furthermore, they have done so without the need for wage floor legislation (or unions, for that matter).

  25. MJ

    Lets just play the Econ Theoretical Vacuum Game: Ivory Tower Edition. It’s all a mathematical balancing act. There is no place for qualitative or subjective inputs because we can know everything we need about humanity with algebraic calculations.

    There is nothing abstract or theoretical about it. The effects are documented and real.

    Yeah! Forget those people who loose their purchasing power and their jobs. Forget quality of life. Competition is brutal! Who care if your life is ruined? Deal with it!

    *lose

    I’ll remind you that purchasing power includes both income and price components. If prices fall faster than incomes (or if incomes are unchanged while prices fall), purchasing power increases.

    If you have evidence that Walmart causes unemployment, declines in purchasing power, worsens quality of life or “ruins” peoples lives, please provide it.

    p.s. We’re not in this together. Get rich or die trying!

    Nice collectivist rhetorical flourish. It really buttresses your argument.

  26. bennett

    Let me make a couple things clear (or more clear). 1. I don’t support this bill. 2. While I do not like Walmart, it isn’t because of their success and I don’t think Walmart should be punished because of their success. If a punishment, law, tax or regulation is going to be implemented (I’m not saying it should), it should apply to all retailers at all sales.

    Debating the ultimate “reality” of economic theory is another argument for another time. My main point (one that I make often round here), is that reducing these arguments to hyper rational mathematical equations is not only cold and lacking compassion, it ignores other “realities” that are subjective in nature. The negative social, cultural, and yes, economic impacts of big box retail, particularly Walmart, is also well documented.

    My rhetorical flourish is at the very least on par with the “boot strap, get a job, a Walmart job is better than no job (same argument made for sweatshops), people are free to stop collecting welfare at any time,” rhetoric tossed about here every day. The reason I use such rhetoric is because I want to get under my opponents skin and fight fire with fire. I’m quite aware of it’s affect on my argument, but I chose to “go there” anyway.

    p.s. I’m an admitted terrible speller and proof reader. This is a blog not a scholarly work. Sue me ;)

  27. Sandy Teal

    For those interested in the tactics of planning fights, this one was typical.

    DC and Wal-Mart have been talking for years about these developments. When DC asked how much Wal-Mart would pay employees, Wal-Mart said the same as all the Wal-Marts in the DC suburbs, which average $12.50 per hour, a higher average than the national average. So the DC Council seized on that to argue that Wal-Mart had promised a STARTING wage of $12.50 per hour, and then legislated that number.

  28. Dan

    The negative social, cultural, and yes, economic impacts of big box retail, particularly Walmart, is also well documented.

    Just as well-documented is the wage stagnation and productivity increases, while the benefits go to the upper quintile. We all know this.

    In theory I don’t like the bill either, but how else do you fight the growing inequality?

    DS

  29. Frank

    the “boot strap, get a job, a Walmart job is better than no job (same argument made for sweatshops), people are free to stop collecting welfare at any time,” rhetoric tossed about here every day.

    Everyday? A bit of hyperbole, no? A search of this site for the term “welfare” does not support your point. There’s a lot about corporate welfare; there’s several posts from a troll telling the Antiplanner that people on welfare are more honest and/or productive than he is; there’s some other stuff that happened many, many years ago.

    Interestingly, there is a hit from you:

    “Defend the rich job creators and attack the lazy welfare junkies.

    or

    Defend the poor and attack our bourgeois overlords.”

    In fact, there’s really not much bashing of welfare recipients on this site. The only thing based on reality in your list of distorted arguments was MJ’s one comment on welfare: “people are free to stop collecting welfare at any time.” Hardly bashing. The rest seems to be projection; perhaps you’ve confused this blog with another site?

    What if government stopped providing TANF, SNAP, Medicaid, etc to anyone? Turn off the flow of free government cheese and have charity, which cannot be lobbied by the retail industry, provide welfare at a fraction of the cost of massive government bureaucracy. If employers cannot attract subsidized workers at the same wage rates and benefits currently paid, would they not then have to raise wages?

    “how else do you fight the growing inequality?”

    Stop taxing income and labor. Change monetary policy so that 5-10% of income earners’ dollars aren’t eaten annually by inflation. These two fixes provide upwards of a 30% raise to workers.

  30. bennett

    “In theory I don’t like the bill either, but how else do you fight the growing inequality?”

    I hear you, but you can’t fight inequality with inequality. I don’t have the answer. It would be easy to side with the rugged individualist on this one if people could realize that compassion and selflessness are ultimately in their self interest. But the desire for cheap goods, most of which (outside of the grocery section) have little to no use-value, rules in our society. As long as the bottom line is working out on these economic metrics, we’ll find a way to justify the means.

  31. bennett

    Frank,

    Your word search skills never cease to amaze me ;) . Pardon my paraphrases, but you know exactly what I’m saying. “Everyday” may have been a slight exaggeration, but the rhetorical quips used by my opponents (including Mr. O’Toole in his posts) are plentiful.

    “What if government stopped providing TANF, SNAP, Medicaid, etc to anyone? Turn off the flow of free government cheese and have charity, which cannot be lobbied by the retail industry, provide welfare at a fraction of the cost of massive government bureaucracy.”

    Your making a pretty big assumption that someone else will pick up the reigns. Some might argue that these government programs were created to simply make government bigger and infringe on liberty because that’s what government is, but I would argue that these programs were created because no one else was taking up the charge. But yeah, it’s a bureaucratic nightmare.

    “Stop taxing income and labor. Change monetary policy so that 5-10% of income earners’ dollars aren’t eaten annually by inflation. These two fixes provide upwards of a 30% raise to workers.”

    Another interesting idea offered up by Frank. While I may not agree with you that often it’s nice to see someone tossing out solutions and not just identifying/analyzing the problems.

  32. Frank

    “Your making a pretty big assumption that someone else will pick up the reigns. …I would argue that these programs were created because no one else was taking up the charge.”

    Charitable giving has increased over the last 40 years, despite crowding by government programs.

    Are Americans Generous? Shattering the myth of American stinginess in Philanthropy Magazine shows Americans volunteer more time than their European counterparts. Other studies show the rich give a relatively high portion of their income, although it’s not as high as the 10% tithe some religious adherents give. There’s also the anecdotal hurricane and tsunami relief efforts that raised billions. Then there’s my personal anecdote; the time I needed charity to pay an electric bill, the government-granted utility monopoly couldn’t help me, but St. Vincent de Paul could and did.

    Certainly there are liberal counterarguments, and being a formal liberal, I understand them.

    The real issue for me is: Is money obtained through coercive means and redistributed inefficiently really “charity”? As to whether or not charity was sufficient in the past, I will leave that conversation and lengthy research for another day. I do have some studies bookmarked that show crowding since government became involved.

    I appreciate your sarcasm and rhetorical flourishes :)

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