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Walmart face-off with D.C. fuels wage debate

Big-box retailers targeted in bill to raise minimum

Walmart threatened to cancel plans for three stores in Washington if the wage bill passes.

Matt Rourke /Associated Press

Walmart threatened to cancel plans for three stores in Washington if the wage bill passes.

WASHINGTON — A bitter standoff between Walmart and Washington, D.C., officials over the city’s effort to impose a higher minimum wage on big-box retailers is fueling a wider debate about how far cities should go in trying to raise pay for low-wage workers — and whether larger companies should be required to pay more.

Walmart Stores Inc., the nation’s largest private employer, is fuming about a ‘‘living wage’’ bill approved by the D.C. Council that has an unusual twist: It would apply only to certain large retailers, forcing them to pay at least $12.50 an hour, nearly 50 percent higher than city’s minimum wage of $8.25.

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The measure is being cheered by unions and worker advocates, who have long complained about Walmart’s wages and working conditions. Opponents call it an unfair tactic that will discourage companies from doing business in the city.

Walmart has threatened to cancel plans for three of the six stores it hopes to build in some of the city’s poorest neighborhoods. The measure is now before Mayor Vincent Gray.

Some economists say targeting large retailers or industries that can afford to increase wages may be an effective way to raise pay to even higher levels than a broad-based minimum wage. The district’s bill applies to stores of 75,000 square feet or larger and annual corporate revenue of at least $1 billion.

‘‘A large retailer can more easily absorb a pay hike than a corner store,’’ said Arindrajit Dube, an economics professor at the University of Massachusetts Amherst and a prominent supporter of raising the minimum wage. Large stores are ‘‘less likely to shut down or cut back on employment’’ in response to an increase, he said.

But Dube cautioned that a targeted hike might make it harder for Walmart and other big-box stores to pass on the wage hike as a price increase, since smaller retailers could still keep prices low.

The capital’s minimum wage already is higher than the federal rate of $7.25 an hour. Other cities and states that have sought to raise the minimum wage have applied the hike to all businesses. San Francisco’s rate of $10.55 an hour is the highest in the nation.

Still, no other city has singled out certain businesses. The Chicago City Council tried to pass a similar measure seven years ago, but it was vetoed by then-mayor Richard M. Daley.

President Obama has proposed raising the federal minimum to $9 an hour and boosting it annually to keep pace with inflation.

Many Walmart workers already make $12.50 an hour — the rate set by the district’s bill — or more, but the average sales associate earns $8.81, according to IBISWorld, an independent research group.

Walmart spokesman Steven Restivo questioned why the D.C. measure excludes unionized stores such as Safeway and Giant, suggesting the bill is targeting nonunion stores. He said most of the company’s 1.4 million employees work full time, and about 75 percent of management started as hourly associates.

David Neumark, an economics professor at the University of California Irvine, has argued that raising the minimum wage is bad for workers because it discourages employers from hiring and leads to fewer jobs. He said Walmart’s low prices are more important to helping low-income workers.

‘‘We can talk about wages, but if you can lower prices, that’s as good as raising wages,’’ Neumark said. ‘‘And of course helps a lot more people.’’

Forcing Walmart to raise wages could create gradual pressure on smaller businesses to boost wages over time, said Michael Reich, an economics professor at the University of California Berkeley.

‘‘A lot of people would be trying to get jobs at Walmart,’’ he said. ‘‘That labor market pressure is going to raise wages at smaller stores, just because Walmart is such a big employer.’’

But business groups call the idea outrageous and unfair.

‘‘By any analysis, this is a really flawed proposal that’s also very discriminatory,’’ said David French, senior vice president of the National Retail Federation.

‘‘The assumption is that retailers make a lot of money, therefore they can pay higher wages and therefore you can impose higher costs by fiat. That doesn’t necessarily reflect reality.’’

Typically, retailers are low-margin businesses, French said.

The district’s measure could also affect other retailers like Best Buy and Macy’s.

Business groups are also concerned a precedent-setting law in Washington could trigger similar measure elsewhere.

‘‘The political forces that have brought the D.C. Council to the brink of economic suicide are the same political forces at work in other cities,’’ said French.

More than 140 cities and counties have laws that require businesses receiving government contracts or subsidies to pay a rate higher than the federal or state minimum wage.

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