Retailers in the metropolitan area , while relatively optimistic about sales for the remainder of the year, agree that a scheduled pay increase for 300,000 federal white-collar workers will have little or no effect on business.
In fact, a survey of several leading Washington-area merchants yesterday showed that they really haven't factored the pay increase into their store plans. What's more, they don't intend to make any adjustments based on President Reagan's recommendation of a 4.8 percent pay hike for white-collar employes.
Moreover, several merchants pointed out that federal employment in the Washington region is no longer the dominant sector of the work force. It has been replaced by the rapidly growing servies industry.
On the other hand, if the same group of federal employes had succeeded in winning White House approval of a 15.1 percent pay increase, the effect would be quite significant where retail sales are concerned.
"I think it would," agreed Robert J. Mulligan, vice chairman of Woodward & Lothrop Inc., the region's biggest department store chain. "That's a pretty hefty increase, and I think it has a psychological effect," Mulligan said of the 15.1 percent that had been proposed earlier.
But an increase of 4.8 percent only would "help people keep up with inflation," said Mulligan. "I don't think it's going to have a boost to sales in any way."
Sheldon W. Fantle, president and chief executive officer of Peoples Drug Stores Inc., said he hasn't assessed the matter "quantitatively," but he added, "I have to believe an increase possibly 10 percent less than anticipated, psychologically will force consumers in this area who are federal employes to cut back."
Fantle said he anticipates some decrease in retail sales here in the so-called luxury-business category. "Fortunately, we are in a necessity business, for the most part," he said of the drug store chain. "We have been somewhat recession-proof."
A lot will "depend on how consumers perceive their earning power versus the rate of inflation," said J. Pat Galloway, general manager for Sears, Roebuck & Co. stores in the Washington-Baltimore region.
"Obviously, if they receive the maximum, it would work to our advantage in the short term," said Galloway.
Although the percentage of federal employes in the regional work force has declined, a substantial pay increase "would all be discretionary, and that does affect retail sales quite a bit," observed William Striegl, district manager for J.C. Penney Co. Inc.
But, as most retailers agreed, "it's hard to identify" any effect a 4.8 percent pay increase would have on sales volume, said Leonard Kolodny, manager of the Greater Washington Board of Trade's retail bureau.
Moving on to a big concern of area businesses, Kolodny said, "What I sense generally in talking with the retailers is that there is a great deal of relief that the overall impact of the threatened reduction" in the federal work force "will not be as significant as we were led to believe. In this sense, the business community is delighted."
For the most part, retailers consider the scheduled tax cut for consumers more significant than a pay increase that will benefit only a small percentage of the total consumer base.
Indeed, Mulligan of Woodies emphasized, "I would hope that the tax cut will have a wider benefit."
Ironically, the Reagan administration's success in pushing through a tax cut was based in part on the argument that it would be a strong incentive for investment.
Meanwhile, retailers, while not predicting robust results for the year, expect to do relatively well in the remaining months of 1981.
"We think there are opportunities for increased sales," said Galloway. "We think there are still strong factors in the local economy."
With the start of the Christmas sales push not too far away, most merchants "will try to get that late business earlier with promotional efforts," said Striegl.
Meanwhile, department store sales have been "pretty good, generally", said Striegl.
On the other hand, while business was good in the spring, "It's gotten a little soft in the last couple of weeks," said Mulligan.