July 17, 2013 at 9:22 am EST | by Mark Lee
D.C. can’t enact wage law and be competitive

Even a widely anticipated veto this week by D.C. Mayor Vincent Gray of an extraordinary hike in the minimum wage for a small number of large retailers in the District approved last week by the D.C. Council will not restore a recently improved level of trust and confidence in the city. The required “clean-up” may take years.

If allowed to take effect, the bill would add a whopping 52 percent wage surcharge for large retailers grossing more than $1 billion in company-wide sales and affecting any store location larger than 75,000 square feet, to $12.50 per hour minus the cost of benefits. The local hourly minimum of $8.25 for most workers employed in the District is already a dollar higher than the national rate.

It is the nearly universal expectation that the legislation, targeting Walmart and approved last week in a split vote insufficient to override a mayoral veto, will be quashed. It would be the only law of its type in the country and would impose the highest minimum wage nationwide.

Although observers were astonished that bill sponsors couldn’t quantify how many businesses would be affected during Council debate, it is thought to be limited to approximately eight or less. The negative implications, however, extend much further.

Of note, otherwise qualifying retailers with labor union agreements are exempted, whether salaries are below the mandated minimum due the mistaken presumption they aren’t  – notably at unionized grocery chains Giant and Safeway. Labor unions and allied special interest groups have orchestrated the push for passage, part of an unsuccessful effort to coerce unionization at Walmart and similar “big box” retailers in other cities, as well as force localized wage rate increases.

Ironically, it was revealed this week by the D.C. Department of Human Resources that the District doesn’t pay the proposed wage to some city employees, including full-time maintenance workers, custodians and office clerks.

A city government failing to graduate more than 60 percent of public school students or ensure that those who do acquire proficiencies necessary to qualify for more than low-skill employment should not be eliminating new entry-level jobs in the face of sky-high joblessness among the young adult population and other residents.

The bill’s backers ignore a simple fact: the city cannot solely raise its minimum wage without suffering serious competitive disadvantage. Absent a federal increase, the resulting disincentive for new retail investment, job creation and economic development is significant and real.

The notion that city-sought businesses and consumer-desired commerce will engage and invest regardless of regulatory policies is foolish. Deluded by the notorious requirement that businesses operating in the District must absorb substantial regulatory hurdles and tax burdens, some seem to think that no obstacle is too great to bear.

The transparent desire to eventually extend the mandate to more, if not all, by first imposing it on a few also sent shockwaves through the local business community – especially small business owners.

Prior to the Council vote, Walmart announced a decision to cancel at least three of six stores, all planned for areas most in need of the retail shopping and healthful food options the projects would provide. This immediately stalled a major housing and retail “town center” development in Southeast Washington.

Worse, two days after the vote, the Deputy Mayor for Planning and Economic Development notified Council members last Friday that three national retailers had informed the city they would not move forward on entering the D.C. market if the bill became law. The official told the Washington Business Journal “people have no idea how damaging this is.”

These developments illustrated the damage to the city’s reputation and ability to attract business investment benefiting residents and the local economy. Despite intensive efforts to convince retailers that the District government had developed a new attitude, that claim now rang hollow.

Despite the scorching summer temperatures, an all-too-familiar chill began to blow across the city.

Mark Lee is a long-time entrepreneur and community business advocate. Follow on Twitter: @MarkLeeDC. Reach him at OurBusinessMatters@gmail.com.

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  • Watcher

    Do all editorials about local economic issues have to be from a libertarian perspective?

  • Kurt

    I appreciate Mark’s reflection on this important issue as he is an articulate representative of the business viewpoint on the living wage bill. But particularly this week, I think we should consider the other viewpoint that was central to the thinking of Bayard Rustin and Dr. Martin Luther King, Jr. Both men held that that a living wage was an indispensable part of any freedom movement. We hear much from the Right-Wing about the “redefinition of marriage.” We need to hear instead about those who would redefine “job.” A job is the means of which a person contributes his labor in exchange for at a minimum the necessities of life. A boss has not created a job if he pays less than a living wage. In our community we have (sadly) people thrown out of their homes at a young age and forced to fend for themselves. But should not these and all people have the basic dignity of a minimal living wage even if just engaged in manual labor, contributing to their highly profitable employers the brawn of their back and the sweat of their brown for 40 hours a week/52 weeks a year? If we believe in what Bayard Rustin stood for, we should enact the living wage bill.

  • Kurt

    “Nothing but a lack of social vision prevents us from paying an adequate wage to every American”. —Martin Luther King, Jr.

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