Online | November 9, 2014 at 5:04 pm

Wal-Mart and Workers’ Rights: A Case Study

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The newly opened Wal-Mart on H Street in Washington, D.C. Photo credit Plannersweb.com

The newly opened Wal-Mart on H Street in Washington, D.C. Photo credit Plannersweb.com

In 1938, President Franklin D. Roosevelt signed the Fair Labor Standards Act into law, creating the first national minimum wage. This bill forever changed the relationship between legislation and workers’ rights, challenging lawmakers to work toward protecting the financial and physical rights of the worker, in this case by ensuring they received a living wage. The debate over the relationship between legislation and workers’ rights continues even into the modern age, most prominently in President Obama’s push—as yet unsuccessful—to raise the federal minimum wage at first to $10.10, then later $9, per hour.

However, no recent high-profile bill has sought to embrace this challenge as fully as the District of Columbia’s Large Retailer Accountability Act of 2013, passed by the Council of the District of Columbia in July of 2013. The saga of the bill’s passage and eventual failure—it was vetoed by District Mayor Vincent Gray in September of the same year— provides an interesting look into the struggle between big business and progressive local politics.

Introduced by Phil Mendelson, the current chairman of the Council of the District of Columbia, in January 2013, the Large Retailer Accountability Act (LRAA) would have required non-union retailers with a gross corporate income in excess of $1 billion and with stores larger than 75,000 square feet to pay employees a minimum of $12.50 an hour. The bill also would have, if signed into law, included provisions requiring those employers to index their wages to inflation, measured by the Bureau of Labor Statistics’ Consumer Price Index, a way of ensuring that workers’ income moves with their cost of living.

The legislation came as a result of newfound interest among corporate retailers, particularly Wal-Mart, in development in the District. Wal-Mart, known for paying its employees lower wages and providing skimpy benefits compared to other retailers, experienced strikes on Black Friday 2012 as an employee response to these conditions. The retailer also paid $352 million to settle various lawsuits in 2008 after employees sued Wal-Mart for wages not paid for overtime work. The retailer originally planned to construct and operate six new stores in the District.

Proponents of the bill felt that its targeted approach toward big box stores would work to hold accountable large retailers that paid relatively low wages to their employees. Low wages and skimpy benefits, according to the bill’s language, increases “costs to the District” when these employees are forced to use public healthcare. Additionally, the bill’s greatly elevated minimum wage was aimed at counteracting the historic decline in relative value of the federal minimum wage.

According to a document drafted by Craig K. Elwell, specialist in macroeconomic policy for the Congressional Research Service, the minimum wage’s real value reached an all-time high of $10.69 per hour (indexed in 2014 dollars) in 1968. Since then, this rate has fallen steadily to its present value of just $7.25. This drop, according to Lawrence Mishel of the liberal-leaning Economic Policy Institute, has led to increased wage inequality and a widening gap between the wealthy and the lower class.

In addition to targeting low wages as such, the bill’s supporters also wished to halt big box development in specifically urban settings like Washington, D.C.. Large retailers have increasingly pursued urban development due to over-saturation of suburban markets across the country. When large retailers like Wal-Mart enter an urban setting, small businesses that define a neighborhood or a central business district are slowly driven out, removing some of the local cachet of the neighborhood or district.

The LRAA is by no means the first bill introduced by a local or state government to target Wal-Mart’s low wage levels. In 2006, Maryland passed a bill requiring businesses with 10,000 or more employees in the state to channel at least eight percent of their payroll to healthcare costs for employees. Wal-Mart was the only employer in the state that both met the 10,000-employee requirement and fell below the eight percent threshold. However, no local or state government has attempted to institute changes as quickly as the District did with the LRAA, increasing the minimum wage for Wal-Mart and stores like it by two or three dollars in only two or three years.

Opponents of the bill, including District Councilwoman and Mayor-Elect Muriel Bowser, felt that passing the bill would be detrimental to District citizens. In an interview with Governing Magazine in September 2013, Bowser stated that “there is this confused notion that, because [the District] is a growing city and [it has] economic development happening, that all parts of Washington are really sought after areas to develop. We just know that’s not the case.” Basically, opponents argued that the Wal-Mart stores slated for construction were in less wealthy neighborhoods that find it difficult to attract business development. Thus, any development, even if it meant a less-than-ideal wage situation, would have a positive effect on the community.

Perhaps Bowser is correct. Of the six locations Wal-Mart is currently opening, none could have been described as part of a truly affluent neighborhood. One store is located in the Mount Vernon Triangle neighborhood, an area with a high rate of development and an accompanying high rent. However, only ten years ago, the neighborhood was known best for “parking lots and prostitution,” according to Washington Post authors Will Smith and Mark Wellborn. Furthermore, another store will be located in Washington’s Southeast area—one of the most dangerous parts of the District, with the risk for residents of murder at 589 percent above the national average.

Good or bad, following the proposal of the LRAA, Wal-Mart struck back by threatening to stop building three of the six stores that were already under construction and to not even consider the other three, which were still in the development phase. After the Council’s approval of the LRAA, Wal-Mart followed through on this ultimatum, delaying development of its D.C. stores until Mayor Gray’s veto of the bill. Since the veto, Wal-Mart has opened two stores inside of the District and is developing and constructing three more; one other store is in the works, but Wal-Mart has not yet found a developer for the location.

What does this mean for the future? Perhaps little. After all, as of now the LRAA no longer carries any legislative weight. Wal-Mart has pressed on with construction and operation of its planned locations inside of the District. Gray received some backlash for his decision from union leaders, although he received major support for his veto from many, including former District Mayor Anthony A. Williams.

However, the LRAA may reflect a growing concern over the relationship between big business and workers’ rights. At the time of the passage of Roosevelt’s Fair Labor Standards Act, membership in the United Auto Workers Union hovered around 20,000, as the union had only been recognized by Chrysler the year before. Workers’ rights were a new concept, and few Americans questioned the rights of big business.

Although it is only one of a string of bills at the local and state level, the LRAA suggests that this could be beginning to change. Americans’ growing concern regarding the big business-workers’ rights relationship among also manifests itself in President Obama’s call for an increased minimum wage, the protests concerning rights for Wal-Mart employees, and the swelling ranks of the “working poor,” a group of Americans who have jobs but still live below the federal poverty line. Essentially, though Wal-Mart won in the short term with the failure of the bill, the LRAA can be seen as highlighting America’s growing belief that the big business-workers’ rights dynamic needs to be addressed.

 

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