The Washington D.C. City Council last week passed a controversial ordinance 8-5 that requires big box stores (read: Wal-Mart) to pay a minimum wage of $12.50. That’s 50 percent higher than the D.C. minimum wage for every other business ($8.25), which is $1 higher than the federal minimum wage.
The ordinance, if approved by Mayor Vincent Gray, will likely mean the end of Wal-Mart’s three-year long effort to locate six stores in the nation’s capital. The retail giant says it will cancel plans for three stores and halt construction of three others.
The lead supporter of the legislation, councilman-at-large Vincent Orange, practices the well-worn social engineering rhetoric to make his argument. “The question here is a living wage; it’s not whether Wal-Mart comes or stays.”
But what Orange is really doing is substituting his value judgment for the free market. $12.50 an hour is what he thinks is the minimum Wal-Mart employees should make, which has no connection to the actual value of the work.
As economist Thomas Sowell said in his book Basic Economics, “There is no collective decision by ‘society’ as to how much each individual’s work is worth. In a market economy, those who get the direct benefit of an individual’s work decide how much they are prepared to pay for what they receive.”
Orange also arrogantly dismisses the importance of vibrant businesses in communities. “We’re at a point where we don’t need retailers,” Orange said. “Retailers need us.”
Councilman Orange has a degree in business administration, a master’s degree in taxation and is a CPA, but somewhere along the line he must have missed Economics 101.
We need both retailers and customers, of course. The free market is based on the simple concept of the willing exchange of goods and services. It works with remarkable efficiency, at least until the government interferes to the degree to which the D.C. City Council is suggesting.
Several of the Wal-Mart stores were going to be in poorer neighborhoods, creating job opportunities and providing residents with easier access to low-priced goods, including fresh foods. Now the residents of those communities will have to continue to travel farther for employment and pay higher costs for products.
Additionally, Wal-Mart stores tend to attract other businesses because of the increased traffic. Chicago had a similar fight a few years ago before finally allowing Wal-Mart in. 37th Ward Alderman Emma Mitts says the Wal-Mart in her neighborhood has been a boon.
“Menards, Food4Less, Aldi, CVS, Burlington Coat Factory, Chase and Bank of America are just a few of the companies that have opened new businesses within a half-mile of the new Wal-Mart, all since Wal-Mart opened four years ago,” Mitts wrote in an op-ed piece.
Wal-Mart tried to become engrained in the D.C. community even before it opened any stores. According to the Washington Post, the company promised to set aside shelf space for local producers, create a job training program and dedicate a portion of its revenues to non-profits. Wal-Mart also donated nearly $4 million to D.C. charities last year.
That doesn’t seem to matter to the economic illiterates on the D.C. Council, who can congratulate themselves on protecting the illusion of a “living wage.” However, that will be little comfort to the D.C. residents who will earn no wage at all.