THE BLOG
07/25/2013 10:46 pm ET Updated Sep 24, 2013

The Large Retailer Accountability Act, a Bill D.C. Doesn't Need

The laureate economist Milton Friedman used to say that the minimum-wage rate is the most  anti-black law (he actually used a different term) on the books.  He was talking about the daunting effects such law has on the poor working class.  On July 10, 2013, the District of Columbia City Council approved a measure that will discriminately increase the minimum-wage rate only for employees of large retailers.  The vote on this law was 8-5: 8 Councilmembers favored the law and 5 opposed it.  For this approved bill to become law in the District of Columbia, first it has to be signed by D.C. Mayor Vincent Gray, and then it must go through a 30-day Congressional review period.     

The Large Retailer Accountability Act,  or the "living wage" bill, would require large retailers with corporate sales of $1 billion or more and operating spaces 75,000 square feet or larger, to pay its work force a minimum-wage of $12.50 an hour.  The current federal minimum wage is $7.25, and the District's minimum wage is $8.25, $1 above the national minimum-wage. 

Much has been debated on the outcome of this bill and many believe that the main target for this bill is  Wal-Mart.  Over two years ago, after city officials had been courting the large retailer for over a decade, Wal-Mart announced it would open six stores throughout the city. The news was welcomed by most, but it also opened up the usual community discussion when the large retailer enters a new market.  Fear that small businesses would be driven to shut down, and that Wal-Mart would engage in unfair labor practices soon dominated the discussion.  Aided by labor unions and special interest groups, B20-0062 quickly found co-sponsors in the city legislation.  Many used the city's lack of affordable housing, and rising rent costs to justify the higher minimum-wage rate mandate. 

But shortly before the all but certain passage of the bill, Wal-Mart officials were putting out press statements threatening the city with departure from their original plan to operate six stores in the city, should the bill become law.   This has brought some friction between the executive and the legislative branch of the city.  After threats that Wal-Mart would alter plans to build all six stores, including completely abandoning plans to build three stores, many started to put their hopes on a mayoral veto of the passed bill.  The mayor himself had already questioned the need for such a bill and its consequences.  D.C. Mayor Vincent Gray lives in Ward 7, a Ward east of the river, where Wal-Mart had intended to build two stores, including an anchor store at the long-neglected Skyland Shopping Center.  Many residents from Ward 7 expected some economic development would be derived from the opening of the stores in the Ward.  The current Councilmember from Ward 7, Yvette Alexander, voted against the minimum-wage bill.  Her justification for voting against the bill is that a low paying job is better than no job, which she believes will be the outcome if Wal-Mart decides to not open the two stores in her Ward. 

Most economists have long held that imposing a minimum-wage rate is bad for the economy and that it ends up hurting those whose intention it is to protect.  The rationale is that in addition to imposing the economic burden for employers, employers would normally cut jobs they believe are not worth paying the minimum wage for.  For example, a grocery store may cut the bagger because it no longer feels that job to be worth paying the minimum wage.  These are the jobs normally held by low skill workers, students, seniors, and some immigrants.

The future of the Large Retailer Accountability Act is uncertain; many hope D.C. Mayor Vincent Gray vetoes the bill, because it will hurt economic development, and not provide much-needed jobs by keeping big retailers out of the city.  Recently, D.C. Councilmember Tommy Wells, who also voted against the bill, has signaled he wants to introduce his own version of a minimum-wage bill, which will call for higher minimum wage for all workers in the city, not just those employ by big retailers.   But the Chairman of the D.C. Council, Phil Mendelson, who supports the bill, is looking to change one of five D.C. Councilmembers that voted against the bill.  With that additional vote, nine Councilmembers would support the Bill, enough to override a mayoral veto.