NOTE: This article was co-authored by Jay Willis.
Washington residents have closely followed the very public conflict playing out between the District’s City Council and retail giant Walmart over the past few months. In July, Walmart scrapped several of its planned stores in the District, publicly blaming the Council’s recently enacted Large Retailer Accountability Act (LRAA) that would require Walmart and other big-box retailers in D.C. to pay a minimum wage of $12.50. Today, Mayor Vincent Gray vetoed the Act but the fight isn't over; the Council could vote as early as Tuesday to override the Mayor's veto.
We do not purport to offer a comprehensive solution to the problem that Washington and Walmart face. But the players here need to move past their high-stakes staring contest and start talking compromise. Both sides should recognize that their problem is a shared one, that a solution exists somewhere between each side’s entrenched position, and that reaching this compromise is in both parties’ best interests.
The passage of the LRAA is a significant moment for Walmart. Like many cities across the country, Washington is booming again. Among major cities, Washington saw the largest increase in wages from 2009 to 2012. Seeking to capitalize on this lucrative trend, Walmart and other big-box retailers have aggressively sought to move into cities. For Walmart, its entry into D.C. is not only a business opportunity but also an inflection point; the resolution of this dispute will have significant implications for Walmart’s forays into other cities across the country.
Two interests are at stake for Walmart: First, it needs to avoid setting a precedent in which cities make Walmart’s entry contingent on burdensome exactions. However, Walmart must also demonstrate to cities wary of the retailer’s oft-maligned employment policies that it can be a “team player” by paying living wages to employees who face high urban costs of living.
Walmart also has concerns about the financial prospects of its long-planned stores in Washington. For example, the retailer has threatened to nix its location in Southeast D.C.’s Skyland Plaza if the LRAA goes into effect. Because of Skyland Plaza’s location in an underserved neighborhood, Walmart has, up to this point, accepted a risk that a store there might not meet the company’s profit expectations. The burden added by the LRAA could make Skyland an unappealing gamble for Walmart.
Washington, too, has important interests at stake. The situation at Skyland Plaza nicely illustrates one of them: securing anchor tenants to revitalize neighborhoods that the city’s recent economic boom has largely ignored. Walmart’s stores would bring thousands of jobs and millions of dollars in tax revenue. Perhaps more importantly, the stores would signal to other businesses that one of the world’s most successful retailers believes in the long-term viability of communities like Skyland Plaza.
At the same time, Washington’s economic boom gives newfound leverage to local politicians to ensure that residents’ needs are not marginalized by business development. While residents expect leaders to use such power, the city must also show prospective entrants that it plays fair, a message unfortunately undermined by the Council’s decision to pass the LRAA after deals were in place for Walmart to come to the city.
Despite the complexity of both Walmart and Washington’s contentions, there are viable ways forward that address both sides’ interests. For example, in a two-pronged approach, Walmart could be allowed to move ahead with its planned stores without being subject to the LRAA. The second prong of this approach would require Walmart to increase wages for employees in its Washington stores when those locations reach certain profitability thresholds.
Why is this good for Walmart?
Limiting the LRAA to prospective application allows the retailer to avoid a situation in which the controversy in Washington emboldens other cities to target Walmart with burdensome restrictions. In agreeing to wage increases when profit thresholds are reached, Walmart can rely on the proven strength of its business model and show its willingness to tailor the management of urban stores to the communities in which they are located.
Why is this good for Washington?
Profit-threshold wage increases demonstrate to constituents that their elected officials will fight to ensure that incoming businesses provide meaningful opportunities to residents. By allowing Walmart to proceed with stores planned under already-negotiated terms, the proposal sends the critical message to businesses that the city can be trusted. Finally, this compromise makes it more likely that underserved neighborhoods will enjoy access to strong anchors for future commercial development.
With Washington’s other government mired in gridlock, state and local officials bear a heightened responsibility to enact the policies that strengthen our communities. Rather than simply overriding the veto, the Council should use the upcoming vote as an opportunity to move towards compromise.
Our proposal isn’t perfect, but it’s a start. It’s time for both sides to act pragmatically and find a resolution that allows Washington and Walmart to grow together.