Political Animal


July 14, 2013 8:51 PM The case against Walmart, and for DC’s big box living wage law

By Kathleen Geier

Our old friend Walmart has been back in the news this week. Gawker has been continuing its exemplary series in which Walmart workers, powerfully and movingly, tell the true stories of their own lives. And this week, the Washington, DC City Council passed a law that requires Walmart and other big box retailers (basically, any retailer with company-wide sales of over $1 billion a year and stores that average 75,000 or more square feet) to pay a living wage of $12.50 per hour. The bill hasn’t become law yet — it still has to be signed by the mayor, and DC’s Mayor Vincent Gray could end up doing what Mayor Richard M. Daley did in Chicago a number of years ago to a similar bill: veto it. Walmart has threatened to cancel its plans to build stores in the DC area if the bill is enacted.

As soon as word of the DC Council’s vote broke, predictable spasms outrage followed. I’ve seen expressions of anger not only from the expected quarters such as Fox News, but also from some of my neoliberal sparring partners on listservs. After listening to their arguments, I’ve come to believe that the objections some Democrats have to this bill have little to do with well-grounded economic arguments based on empirical realities. These folks seem, instead, to be motivated principally by a tribal desire to distance themselves from members of the dirty hippie labor left. When it comes down to it, their arguments are weak tea indeed. The more you examine their arguments, the more you realize there’s no there there. I will list their principal objections, and show why they don’t hold up.

1. It’s downright un-American to use the law to target a single business.

There’s something particularly creepy about liberals who, out of a sense of abstract principle, fall all over themselves to defend the honor of a corporate predator like Walmart. Because unless you cling to fairly fundamentalist ideas about the thrilling magic of markets and the ghastly, unforgivable sin of government interference in them — which basically no actual liberal really does — this argument makes no sense.

Let’s back up a bit. First of all, the idea that the DC law would apply only to Walmart is false. As I noted above, it applies to all new big box stores in the DC area, and as the WonkBlog post I linked to reports, that means it could also apply to other retailers like Costco, Target, or Home Depot. It would apply immediately to big box retailers (like Walmart) which aren’t already operating in DC. For retailers which already have stores in the district (like Costco, Target, and Home Depot), the law won’t take effect for another four years.

Secondly, that said, yes, it’s clear that laws like these have been invoked mainly against Walmart. And what, I ask, is so very wrong about that? Walmart is not a person, it’s a corporate behemoth. More than that, it is the single biggest employer in the world. As such, it has had a huge, and in practice disproportionately negative, impact on workers worldwide. It is a powerful monopsony that drags down wages throughout the retail sector; its size makes it a market maker rather than a market taker. By this, I mean that, as opposed to offering the market-clearing wage set by a competitive labor market, it wields its considerable market power to determine that wage in the first place. In the same way that the auto companies and Walter Reuther’s Treaty of Detroit set labor standards for the rest of the American economy in the mid-20th century, Walmart is the leader in setting labor standards today. And that is a truly terrible and tragic thing.

Also, Walmart engages in many notorious anti-worker labor practices besides its rock-bottom wages. Its long list of crimes against labor includes wage theft, violating child labor laws, violating occupational health and safety laws, locking employees in stores against their will, and sex discrimination (which is the subject of a huge ongoing class action suit) — all practiced on a massive scale. In addition, it is the most hardcore anti-union employer in the country (the international human rights group, Human Rights Watch, has issued at least one special report about its anti-union tactics). And don’t even get me started on the labor conditions in Walmart and its affiliates abroad, and the brutal impact Walmart has on the labor practices of its suppliers!

For all these reasons, Walmart has been targeted by labor organizations. The idea is: if even a bottom-feeding company like Walmart can be brought to heel, it will have a hugely salutary impact on other employers — in the same way that, for example, a unionized workforce in a leading company in a particular industry tends to increase pay industry-wide.

2. But we’re in a recession! Walmart will create jobs, and living wage laws are job-killers!

Here we have another bogus argument, in which the pro-Walmart liberals who were posing as the self-styled defenders of markets in the example above morph, with whiplash-inducing speed, into the heroic defenders of workers, the poor, and the wretched of the earth.

Yes, America’s economy is in terrible shape. But the idea that Walmart is a job creator? Or that a living wage is a job killer? Sorry, no and no. Contrary to myth, when Walmart opens a new store, it doesn’t miraculously produce new jobs — instead, it destroys the old ones. The best available study of the subject that I could find is one headed by economist David Neumark, who is best known for his research suggesting that the minimum wage causes job loss. Neumark’s Walmart study found that Walmart causes a net reduction in county-level employment, with each Walmart employee replacing approximately 1.4 workers.

As to the idea that a living wage would create unemployment — again, there is not a lot of strong evidence for this. Living wages enacted in cities like Santa Fe and San Francisco, for example, did not have a disemployment effect. Not to mention the fact that, as Felix Salmon argues in this piece, a substantial hike in the minimum wage — even to $15 an hour — would act as a stimulus that would create jobs. To the extent that it would be inflationary, that would be a good thing for the vast majority of Americans, since it would help the debtor class — i.e., most of us. The rentier class would scream bloody murder, you say? Let ‘em.

3. Walmart couldn’t possibly afford to pay a $12.50 minimum wage and stay in business.

This is another canard. One recent study shows that if Walmart raised its minimum wage to $12, even if it passed the entire cost onto consumers, Walmart prices would go up by only 1.1 percent. Such a wage increase would cost the average Walmart consumer approximately $12.49 per year.

Moreover, employers like Trader Joe’s and Costco are thriving retail establishments that manage to pay their hourly workforce significantly more than Walmart does. Costco pays its hourly workers $20.89 an hour, while Walmart pays comparable workers only $12.67. Starting pay for Trader Joe’s is between $10 and $12 per hour, as opposed to the minimum wage ($7.25 in most states) which Walmart pays.

I’ve heard the argument that if Walmart were to start paying Costco-level wages, it would have to change its business model. My response has been: and the problem with that would be … ?

One more point: let’s say there’s an attractive business opportunity to make a profit by opening a retail store in a particular area. If the laws of the free market hold (though to be clear, it’s far from certain that, in the real world, they actually do), then even if Walmart is kept out, some other firm will take advantage of that opportunity. It seems unlikely that all those other retailers would be leaving money on the table — that is, if the free market works the way it’s supposed to.

4. Don’t consumers have a right to a Walmart in their neighborhood if they want one?

And now we come to the last refuge of scoundrels: the idea that the huddled masses are yearning for more consumer choices, and that this would necessitate having a Walmart in their neighborhood. This seems to be Matthew Yglesias’ argument.

But consumer “choice” shouldn’t trump all other concerns, especially values like social justice for workers. If a company is like Walmart — that is, if it pays low wages, treats its employees badly, causes job loss, and costs taxpayers money by paying its employees so poorly that they must rely on public benefits — its social costs would greatly outweigh its potential consumer benefits.

Not to mention the fact that Walmart is far from a consumer’s paradise. The store is infamous for its low-quality goods and rotten produce. Retailers like Trader Joe’s and Costco not only have superior labor records, but they offer far better quality merchandise than Walmart, at comparable prices.

Walmart’s liberal defenders puzzle me. As I’ve demonstrated, none of their arguments — that Walmart would create jobs, that it would be good for consumers, that big box laws unfairly target Walmart, that neither Walmart nor any other retailer could afford a $12.50 an hour wage — are rooted in empirical reality. The only thing that’s sort of true is that Walmart tends to be unfairly singled out for labor practices that plague almost the entire retail sector. Target, for example, also pays lousy wages and has a poor labor record, but you don’t hear nearly so much about them. And nearly all retailers engage in terrible work scheduling practices — cutting back hours and making last-minute changes to workers’ schedules — which create stressful fluctuations in earnings and the sort of unpredictability that wreaks havoc on workers’ health and family life.

But even compared to other retailers, Walmart is a particularly bad corporate actor. Most crucially, when it comes to instituting anti-worker policies. Walmart has been a leader and an innovator. This is the political, strategic reason why labor progressives have been targeting them. The idea is to bar their entry into new markets unless they agree to behave decently. Walmart has no God-given right to force itself on communities who don’t want it there. If Walmart chooses to pitch a hissy fit rather than obey the rules a given community has laid down, that is Walmart’s problem, not the community’s.

Labor progressives believe that if Walmart wants or needs new urban markets like the one in DC badly enough, it will eventually knuckle under. It will realize it must accept significantly more stringent labor standards as the price of doing business. Once it does so, we could see dramatic improvements not only for Walmart workers, but for workers in the retail sector as a whole.

Liberals and others who care about the well-being of workers should be strongly supportive of this strategy. Letting Walmart continue to ride roughshod over workers and the American economy will only increase workers’ suffering and contribute to soaring levels of economic inequality. If the pro-Walmart liberals have better ideas about how to improve conditions for Walmart workers, I’d love to hear them. Thus far, though, they’ve been awfully quiet about sharing such ideas, assuming they have them. In fact, you could be forgiven for believing that they weren’t really seriously committed to improving conditions for low-wage workers in the first place.

UPDATE: One criticism of this post has been that I don’t actually cite any of the pro-Walmart Democrats I refer to, other than Matthew Yglesias. This post was inspired by a debate I got into on a liberal listserv, and since my opponents’ arguments are not public, I’m unable to link to them. But there are many, many prominent “liberal” (or at least liberalish) Democrats who have pro-Walmart views. Here are a few who have been exceptionally supportive of Walmart: former longtime Chicago mayor Richard M. Daley, current Chicago mayor Rahm Emanuel, First Lady Michelle Obama (who clearly wouldn’t be making these kinds of appearances without explicit White House approval), and Hillary Clinton (who served on Walmart’s board of directors, for heaven’s sake!). These are hardly marginal figures.

Honestly, folks, I’m not arguing with imaginary voices in my head. When it comes to fighting for justice for low-wage workers, neoliberal Democrats continue to be a huge obstacle to progress. Anyone who is paying even minimal attention to this issue would know this.

Kathleen Geier is a writer and public policy researcher who lives in Chicago. She blogs at Inequality Matters. Find her on Twitter: @Kathy_Gee


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