Carpe Diem

More on the DC city council’s hostility to Wal-Mart and DC consumers as an ‘economic death wish’

Image Credit: Shutterstock

Image Credit: Shutterstock

Update: In what I described last week on CD as an “economic death wish,” the Washington DC city council recently voted in favor of a “living wage” ordinance that would impose a super-minimum-wage of $12.50 per hour on Wal-Mart, which is planning to open six new stores in the District (three are already under construction). A final vote takes place today, and Wal-Mart announced yesterday that it will not start construction to open stores at three of the planned inner-city locations if the ordinance passes and is not vetoed by Mayor Vincent Gray. The retailer is also considering its options on the three stores that are already under construction, saying that it will review the “financial and legal implications” before deciding whether to possibly stop construction on those stores if the “super-minimum-wage ordinance targeted at Wal-Mart passes.

At the Antiplanner blog (“dedicated to ending government land-use regulation, comprehensive planning, and transportation boondoggles”), a post titled “Job-Killing Living Wages” makes some great points about the DC Wal-Mart situation:

The left excuses this discrimination [against Wal-Mart] by calling it a “living wage” ordinance. But why is it that only employees of Wal-Mart, and not employees of smaller retail shops, supermarkets, restaurants, or other businesses?

Ironically, over the last decade three successive Washington DC mayors worked hard to attract Wal-Mart to build stores in inner-city neighborhoods. Wal-Mart was reluctant to build in those areas due to crime, but finally agreed to open six stores in the district. “We’ve been praying for food in this neighborhood for about 40 years,” said the resident of one neighborhood where Wal-Mart was planning to build.

Residents of this and other neighborhoods would not only benefit from Wal-Mart’s low prices but also from the hundreds of jobs that each store would require. Certainly $12.50 an hour is more than $8.25, but $12.50 times zero jobs is a lot less than $8.25 times 600 jobs. Not surprisingly, Wal-Mart is now threatening to abandon at least three if not all six of the stores it was planning to build in the city.’

These policies set the standards all wrong. The only valid way of judging Wal-Marts and other major retailers is from the point of view of consumers, not employees and certainly not their competitors. People who don’t like Wal-Mart should just not shop there, and people who think Wal-Mart doesn’t pay enough should just not work there. Otherwise, they should get out of the way and let others make their own decisions.

MP: French economist Frederic Bastiat wrote almost two hundred years ago in the early 1800s that “It is necessary to view economics from the viewpoint of the consumer. All economic phenomena must be judged by the advantages and disadvantages they bring to the consumer.” If we apply that profound, timeless economic insight to the DC situation today and consider the significant economic benefits that six Wal-Mart stores will bring to inner-city DC residents (everyday low prices for groceries, clothing, household and other consumer goods, $4 drug prescriptions, etc.), in addition to creating 1,800 new retail jobs and 600 construction jobs for workers, it would really be a politically-motivated “economic death wish” for the DC city council and mayor to drive Wal-Mart away from the District. We’ll find out later today whether DC politicians care more about politics or more about the economic well-being of the residents they have been elected to represent.

Update: D.C. Council moved forward with its “economic death wish” and approved the job-killing, economic development-suffocating, “living wage” bill yesterday.

33 thoughts on “More on the DC city council’s hostility to Wal-Mart and DC consumers as an ‘economic death wish’

  1. If you are a moron and a lefty politician (and, yes, I repeat myself), you are utterly vested in the notion that YOU control economic behavior, not the other way around. Which means all you have to do is envision outcomes that suit you, pass a law and it will be. Because you are a moron, it might not occur to you that there will be other consequences to the law you passed. But, then, of course, since YOU are in charge, you will simply pass another law, won’t you?

  2. According to the Census Bureau, nearly a quarter (23.2%) of Washington DC residents live in poverty. That’s second only to California (23.5%). Is it really a good idea to drive away a business that 1) employs low-skilled people and 2) provides poor people with affordable goods and services?

    • Is it really a good idea to drive away a business that 1) employs low-skilled people and 2) provides poor people with affordable goods and services?

      Well no, Jon, it isn’t. :)

  3. Here’s the other thing with Wal-Mart:

    I know someone is going to throw this argument out: “Wal-Mart can afford this minimum wage! They just don’t want to pay it!” That may not be true. They may not be able to afford it.

    Wal-Mart has a profit margin of approximately 3%. In other words, for every dollar spent at Wal-Mart, they keep $0.03. A 51.5% rise in payroll expenses could very well mean the difference between a store being profitable and non-profitable. And it seems to me Wal-Mart is making that determination now.

    • Jon

      The numbers may be different now, but at one time I used Walmart’s earnings, number of employees, and a wage of $10/hr to calculate that Walmart earned $4000/yr per employee. That means at $12/hr Walmart would make $0.

      Based on that crude estimate, a 51% raise would not be possible. Maybe you have better info at your capable fingertips.

        • Technically, both are correct. “Wal-Mart” is the name of the incorporation. WalMart is the name of the brand.

          In my humble opinion, since this article is talking about both the brand and the company, I think either-or works here.

          • Actually Wal-Mart Stores Inc. is the corp. name and Dr. Perry was correct in using that name because he is talking about the corporation not the brand. The brand does not make the decision to locate stores, the corporation does.

            The only hocus-pocus was in stating that Dr. Perry was incorrect without researching the truth.

        • Three wrongs make a right must be some sort of new economic hocus-pocus.

          Is it even possible to find something more trivial to discuss?

  4. The economic arguments against imposing such a law are extraordinarily strong. However, they pale in comparison to the moral–and by extension the legal–arguments against it. Such a law would unquestionably be discriminatory against Wal Mart. No court would allow it to stand.

    Now, if the idea were posed as a point of negotiation, it’s as valid as any other idea “on the table”. If either party doesn’t like the terms, either can walk. But you can’t change the terms of the deal after the fact.

  5. The “Large Retailer Accountability of 2013″ includes this language in Section 5 (a):

    “By December 1 of each year, The Mayor shall publish and make available to large retailers a bulletin announcing the adjusted wage and benefits rate for the upcoming year, which shall take effect January 1.”

    This will remove the word private from private enterprise.

    • Cit: “This will remove the word private from private enterprise.

      It may also remove the words Walmart, Home Depot, and maybe others from anywhere within DC city limits.

      • And: Nordstrom, TJ Maxx, Banana Republic, Macy’s, Target, Sak’s Fifth Avenue, Neiman Marcus, Marshall’s, Dollar Store, and others.

  6. Actually, there’s a word for this. Something about private ownership but public control. It starts with “f”, I think. Someone here will no doubt remind me.

  7. “French economist Frederic Bastiat wrote almost two hundred years ago in the early 1800s that “It is necessary to view economics from the viewpoint of the consumer.”

    What consumer? The affluent consumer, who works hard and saves 20% or more of his income, in a U.S. and global savings glut, or the impoverished consumer, who works hard and saves nothing?

    • Both. And, in both cases, such a move by DC is harmful.

      The saver is harmed by the loss of potential income if he could invest in Wal-Mart. The hard worker is harmed because he is denied the opportunity to spend less money on many goods and services and have the potential to save.

          • I see you’re still working with half of a supply-demand model. See paradox of thrift (a Keynesian concept).

          • Yes, I know. I am well-aware of Keynes’ Paradox of Thrift (and I find it to be a very, very, very poorly reasoned argument).

            So, which raises income more:

            A) 600 jobs x $8.25/hr
            B) 300 jobs x $12.50/hr?

            The answer is A (600*$8.25 = $4,950 payroll dollars per hour vs $3,750 payroll dollars per hour. Of course, all this assumes that Wal-Mart opens the stores and does not abandon the move all together, in which case there would be zero payroll dollars).

            No matter how you look at this, this move is bad for the consumers and bad for DC.

          • an i see you are still working with a partial comprehension model liberally salted with some fantasy land theory peak.

            and, of course, jon is being quite generous to you in his assumptions.

            the reality looks more like 600 jobs at $8.25 or NONE at $12.50.

            and that none also comes with higher prices and less selection for local consumers, which makes real income losses even worse.

            that fact that you would even attempt to trot out the paradox of thrift as a valid theory pretty much says it all.

            at least you are consistent.

            it seems that no matter what the question is, you answer is always “force people to do things they do not wish to or prevent them from doing the things they wish” as though that somehow results in optimal economic or social behavior.

            “When income rises, both saving and consumption rise.”

            not when the rise in income is a zero sum event not associated with productivity and the additional money comes right out of someone else’s pocket.

            just where do you think these extra wages come from?

            i find it hilarious that you accuse others of using half a model while so continually doing so yourself.

            money does not magically appear just because you mandate an increase wages. to do so absent productivity growth is zero sum. it may increase consumption (depending upon marginal propensity to consume) but if it does, it does so at the expense of those with a high propensity to invest which tends to be what drives the productivity needed for higher wages or at the expense of consumers who must now pay higher prices to cover these higher wages.

          • Jon

            Yes, I know. I am well-aware of Keynes’ Paradox of Thrift (and I find it to be a very, very, very poorly reasoned argument).

            Not only is it poorly reasoned, it is false.

            See here….

            “Hayek demonstrated that the Foster and Catchings’ underconsumption doomsday does not arise. The “missing” purchasing power comes from the increase in the supply of goods that workers are able to produce. [due to increased capital, from savings, in proportion to labor] As they supply more they are able to demand more. Rather than a collapse into depression, the entire system reaches a new equilibrium at a higher level of savings by means of adjustments everywhere else: in labor and in capital; in prices and in quantities; in production and in consumption. ”

            …and here.

          • When income rises, both saving and consumption rise.

            And income rises when production rises.

            Production can rise when capital (from savings) is increased in proportion to labor so that more is produced with the same amount of labor, thus lowering real prices or increasing real income (the same thing) so that more is demanded.

            Consumer demand doesn’t drive the economy no matter how often Keynesians say it does..

            Production before consumption. Always.

          • See paradox of thrift (a Keynesian concept).

            Yes, I’ve seen it, and it’s false. You’ve been shown this numerous times. Keynesians have a poor understanding of the concept of the passage of time, as you keep demonstrating.

        • “How do you know there isn’t a rise in real income, for both savers and consumers?”

          how do you know that there is?

          you are the one advocating a change in policy. the burden of proof that such a change is a good idea lies with you.

        • Same old tired arguments in favor of minimum wage. How many times do these arguments have to be shown wrong?

          There is no way that a price control works better than an open and free market in determining the best price for a product or service. This includes the labor market.

          There is not one price control that has succeeded in doing this over a free market outcome but yet you continue to argue that minimum wage does? What is it about the market for labour that makes it operate differently than any other market out there? There is no difference and hence price controls do not work.

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