D.C. Mayor Gray was right to veto super-minimum wage bill

September 12, 2013

 

Wal-Mart has broken ground on three stores in the District of Columbia (Washington Post)
Wal-Mart has broken ground on three stores in the District of Columbia (Washington Post)

D.C. Mayor Vincent Gray did the right thing.

Shortly before noon on Thursday, Gray vetoed the “Large Retailer Accountability Act of 2013” that would have required so-called big box retailers like Wal-Mart to pay a super-minimum wage of $12.50 per hour in wages and benefits, or more than 50 percent above the current $8.25 hourly minimum wage.

The D.C. Council had approved the bill on an 8 to 5 vote in July and sent it to the mayor’s desk two weeks ago for his approval or veto. Council Chairman Phil Mendelson has said that he’ll try to muster enough votes — he needs 9 — to override the mayor’s veto.

The bill only affects a certain set of employers. First, they must have at least $1 billion of annual sales and operate stores with at least 75,000 square feet.  Second, employers whose workers are covered by collective bargaining agreements are exempt.  What these conditions mean is that Wal-Mart is affected, but another, large D.C. employer, Safeway Stores, which has more than $40 billion in annual sales, is exempt because its workers are unionized.  

The bill affects a range of the District’s businesses, and many of these businesses, including Target, Home Depot, AutoZone, Walgreens and Macy’s — all of which operate within the District’s 68.3 square miles — oppose the bill. Although Wal-Mart would have to pay the new wage immediately, existing employers have a four-year grace period.

Wal-Mart has already started construction at three sites in D.C.: an 80,000 square foot store in Ward 6 and two stores in Ward 4 with a combined 223,000 square feet. Wal-Mart threatened to withdraw plans to build three new stores in the District if the law went into effect. (Plans for one of those three new stores are on hold. The other two stores are planned for Ward 7, home of the Democratic mayor. )

In justifying his veto, Gray said that the bill wasn’t a “true living-wage bill” because it would have raised wages for only a small fraction of workers and that it was, in fact, a “job killer” because it would have driven more than 4,000 jobs out of the District in just the first few years.

At $8.25 an hour, the District’s minimum wage is $1.00 higher than the prevailing minimum wage in both Maryland and Virginia.

In many ways, the LRAA was seen as a way to attack Wal-Mart. Wal-Mart Stores, the country’s largest private employer, has drawn criticism in part because of the contrast between the wealth of the Walton family and the wages of its employees.

For example, four Wal-Mart women are collectively worth more than $60 billion. With a net worth of $28.2 billion, Christy Walton, is the second richest woman in the world, while Alice Walton comes in at number three with $26.3 billion for 2013, according to Forbes magazine’s list of the world’s richest women.

On the other hand, the typical person working at a Wal-Mart store is likely to be a cashier making about $20,000 a year. (In 2010, the median wage for the nation’s 4.3 million retail salespeople was $20,670, according to the Department of Labor.)

Anger at the riches of Wal-Mart’s owners is no way to set policy.

It would be great if the District could set national policy on the minimum wage, and it’s not impossible for local jurisdictions to raise the minimum wage. California, for example, is about to raise its minimum wage to $10 an hour. With more than 38 million residents within its 156,000 square miles combined with the draw of Silicon Valley and Hollywood, California, to a great extent, can afford to go its own way.

However, with just 632,000 residents, no indigenous industry, and no representation in Congress, it’s impossible for the District to set national policy. Moreover, given its mere 68.3 square miles, threats to avoid investing in the District are credible because they don’t mean abandoning a market. The District’s metropolitan area encompasses nearly 6 million residents and a company can easily reach those consumers by crossing the Potomac River. Thus, there’s a real strong possibility that the job losses might exceed the 4,000 predicted by the mayor’s office.

A far better way to give District workers a living wage would be for Congress to pass legislation at the federal level.  (The District of Columbia doesn’t have a vote in Congress, so it must rely on representatives from one of the states to push forward legislation. Democrat Eleanor Holmes Norton is D.C.’s non-voting delegate to Congress) 

The Fair Minimum Wage Act of 2013, which would increase the federal minimum wage to $10.10 by 2015 and index it for inflation, is a good way for District of Columbia workers to earn higher wages. Unlike the Large Retailer Accountability Act, this federal change would benefit all D.C. employees and wouldn’t create a climate that would discourage companies from investing in the District of Columbia.

Joann Weiner teaches economics at George Washington University. She has written for Bloomberg, Politics Daily, and Tax Analysts and worked as an economist at the U.S. Treasury Department. Follow her on Twitter @DCEcon.
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Mary C. Curtis · September 12, 2013