Washington Post, July 9, 2013
The world’s largest retailer delivered an ultimatum to District lawmakers Tuesday, telling them less than 24 hours before a decisive vote that at least three planned Wal-Marts will not open in the city if a super-minimum-wage proposal becomes law.
[BREAKING NEWS: D.C. City Council approved the “living wage” act 8-5. Read the latest here.]
A team of Wal-Mart officials and lobbyists, including a high-level executive from the mega-
retailer’s Arkansas headquarters, walked the halls of the John A. Wilson Building on Tuesday afternoon, delivering the news to D.C. Council members.
The company’s hardball tactics come out of a well-worn playbook that involves successfully using Wal-Mart’s leverage in the form of jobs and low-priced goods to fend off legislation and regulation that could cut into its profits and set precedent in other potential markets. In the Wilson Building, elected officials have found their reliable liberal, pro-union political sentiments in conflict with their desire to bring amenities to underserved neighborhoods.
Mayor Vincent C. Gray (D) called Wal-Mart’s move “immensely discouraging,” indicating that he may consider vetoing the bill while pondering whether to seek reelection.
The 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.
Alex Barron, a regional general manager for Wal-Mart U.S., wrote in a Washington Post op-ed piece that the proposed wage requirement “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.”
As a result, Barron said, the company “will not pursue” stores at three locations where construction has yet to begin — two in Ward 7 and one in Ward 5. He added that the legislation, if passed, will also jeopardize the three stores underway, pending a review of the “financial and legal implications.” While precise terms of its agreements with developers are not known, the company’s leases could be difficult to break without major financial penalties.
The company had, until Tuesday, made statements opposing the bill but had not directly threatened to withdraw from its plans. A community affairs executive told a city business group last month that the three unbuilt stores could be in doubt, according to the Current newspapers, and a company spokesman later warned of “negative consequences” should the bill become law.
Wal-Mart’s decision echoes the retailer’s first incursion into an American urban center seven years ago, when the Chicago City Council passed a similar “living-wage” measure. The company indicated then that the bill would cause it to scale back or entirely scrap its plans to open several stores, Mayor Richard M. Daley vetoed the bill, and the council failed to override it. In March, New York raised its minimum wage only after a compromise offered tax subsidies to firms such as Wal-Mart that hire seasonal workers.
Ken Jacobs, chairman of the University of California at Berkeley’s Center for Labor Research and Education, who has investigated Wal-Mart’s wage policies, said the firm has opposed living-wage laws and other measures that target its business practices, particularly in urban markets.
“When asked about labor law, they generally say, we follow the laws of the jurisdiction in which we’re operating,” he said. “But it’s also clear when they say that, that they put a lot of weight on shaping the laws in the jurisdictions where they are operating.”
One prominent local proponent of the D.C. Council bill said the fight is properly placed in a national context. “We have learned from Chicago; we have learned from New York City,” said Joslyn N. Williams, president of the Metropolitan Washington Council, AFL-CIO. “Our fight here is not just a local fight. ”
The bill, known as the Large Retailer Accountability Act, passed the council on an initial 8 to 5 vote last month. The council would need nine votes to override a potential veto from Gray, who lobbied Wal-Mart to open a store at the Skyland Town Center site, near his Hillcrest home.
Wal-Mart’s decision did not appear likely to change any votes, but lawmakers said they were dismayed by the timing. Vincent B. Orange (D-At Large), a backer of the bill, said the announcement revealed its “true character.”
“For them to now stick guns to council members’ heads is unfortunate and regrettable,” he said.
But colleague Yvette M. Alexander (D-Ward 7), who represents an area slated for two stores and opposes the bill, said she was “angry and upset” about the message, delivered by Keith Morris, Wal-Mart’s director of public affairs and government relations. “That means back to the drawing board for Ward 7 unless there’s a vote in opposition,” she said. “This is going to just about ruin two major development plans in Ward 7.”
It was a sentiment echoed by her constituents. Karen Williams, president of the Hillcrest Community Civic Association, said she was “very disappointed” to hear Wal-Mart could pull out of the Skyland site.
“We have been working on making this project a reality for over 23 years,” she said. “We finally felt that we were so close to having it built. Even though there are people who are not exactly Wal-Mart fans, we all want the project to move forward.”
In a statement, Gray hinted more strongly than ever that he is prepared to veto the legislation. “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.”
D.C. Council Chairman Phil Mendelson (D), another lead sponsor of the bill, said Wal-Mart’s stance is “an all-or-nothing approach, which is not a helpful way for us to do development.”
But Jacobs said that has long been Wal-Mart’s way in taking on these types of proposals: “There’s good reason to believe they could actually compete quite well under these rules, but it is not a proposition they have wanted to test.”
Tim Craig, Luz Lazo and Jonathan O’Connell contributed to this report.