Right-Wing Media Use Walmart "Bait-And-Switch" To Falsely Attack Minimum Wage
Research ››› ››› ALEX MORASH
After building three stores in rapidly developing Washington, D.C., neighborhoods, Walmart announced it would not build two additional stores planned for low-income communities. Right-wing media are falsely claiming that the District's recent increase in its minimum wage killed these stores when in fact, Walmart originally agreed to build them only to get support for the three stores it wanted to open in better-off areas, and the company has since decided to close over 150 stores in the U.S. this year due to poor sales.
Walmart Abandons Expansion Plans In Low-Income D.C. Neighborhoods
LA Times: Walmart Left Low-Income Neighborhoods "High And Dry." On January 22, the Los Angeles Times reported that Walmart had "quelled civic opposition" to its plans to develop stores in the nation's capital "by promising to build two stores in the city's poorest neighborhoods" along with three stores in more "middle-class" areas. According to the Times, after securing space for development, opening the three stores it initially wanted, and killing a living wage ordinance in 2013 that would have forced companies including Walmart to pay employees $12.50 per hour, the retail giant abandoned its expansion plans and left two low-income neighborhoods "high and dry":
Back in 2012, the huge retailer quelled civic opposition to allowing it into Washington, D.C., by promising to build two stores in the city's poorest neighborhoods to go with three stores it would build in more middle-class neighborhoods.
With the latter three stores already opened, Wal-Mart abruptly announced last week that it was scrapping plans for the other two. The neighborhoods to be left high and dry are in the city's Ward 7, which is 95% African American, with a median household income of $35,000.
Washington officials and residents are justifiably enraged. "We have absolutely been shafted," former D.C. Mayor Vincent Gray, who negotiated the 2012 deal, told local broadcasters. "They think they can do this to us and we will roll over. I bet you Wal-Mart doesn't do that everywhere."
Still, Wal-Mart played its partnership initiative for all it was worth. The company got more from its pledge than merely permission to open stores in the city at a time when its corporate strategy involved expanding out of the suburbs into big cities. The company was also able to kill a 2013 "living wage" measure that would have required D.C. retailers to pay employees at least $12.50 an hour in wages and benefits, or 50% more than the then-minimum wage. Mayor Gray vetoed the measure in response to a threat from Wal-Mart to pare back its building plans. [Los Angeles Times, 1/22/16]
Wash. Post: The "Bait-and-switch" By Walmart Was "Among The Sleaziest Ever Played." On January 19, Washington Post columnist Courtland Milloy called Walmart's decision to abandon its expansion plans in Washington, D.C., a "bait-and-switch" that ranks "among the sleaziest ever played":
It's not unusual for working-class and low-income people to be targeted for con jobs -- high-interest payday loans, scam repair services, products marketed with false claims. But the bait-and-switch that Walmart just pulled off in the District has to rank among the sleaziest ever played.
To get approval to build three stores in wealthier parts of the city, Walmart promised to build two in underserved neighborhoods. So they built the three they wanted. Then, last week, Walmart told city officials that it had made "fresh assumptions" about the profitability of stores slated for black working-class neighborhoods and decided not to build them. [The Washington Post, 1/19/16]
Right-Wing Media Claim Walmart Is A Victim Of High Minimum Wages
WSJ Op-Ed: Walmart's Margins Are Too Small To Pay Workers $11.50 An Hour. CKE Restaurants CEO and frequent Wall Street Journal op-ed contributor Andy Puzder claimed on February 4 that Walmart's decision not to build stores in low-income areas of the District, along with the closing of over 150 stores nationwide, was a direct result of minimum wage increases in D.C. and across the country. The op-ed claimed that retail locations are "only marginally" profitable and that raising the minimum wage threatened stores by increasing labor costs:
The evidence continues to roll in: Broad increases in the minimum wage destroy jobs and hurt the working-class Americans that they are supposed to help. The latest evidence is an announcement that Wal-Mart, America's largest employer, will close more than 150 U.S. stores, a move that will affect 10,000 employees.
Every retailer has locations that are profitable, but only marginally. Increased labor costs can push these stores over the line and into the loss column. When that happens, companies that want to stay competitive will close them. That's one of the reasons that substantially increasing the minimum wage poses real risks for working-class Americans.
It's harder to count the jobs that were never created in the first place because of the minimum wage. But here's an anecdote: Wal-Mart also canceled plans to build two stores in Washington, D.C., where the minimum wage is $10.50 and rising to $11.50 in July. A November ballot initiative could bring it to $15. [The Wall Street Journal, 2/4/16]
Wash. Post Op-Ed: $11.50 Minimum Wage Is "Irresponsible," Driving Walmart And Other Retailers Out Of D.C. On January 27, right-wing researchers Mark Perry and Michael Saltsman wrote an op-ed in The Washington Post on Walmart's decision to drop two of the five stores the retailer had planned to build in the nation's capital. The writers blamed Walmart's actions almost entirely on the city's decision to enforce an $11.50 per hour minimum wage effective July 1, 2016. The authors claimed that it would be "irresponsible" to increase municipal wages to $11.50 per hour and "downright foolish" to consider raising wages to $15 per hour in the future, concluding that "the District should ensure that it leads the region in opportunities created, not opportunities destroyed." But they failed to mention that the retailer originally proposed building just three stores, agreeing to the additional two only after city officials insisted:
Based on this evidence, it's irresponsible for the city to move ahead with another minimum wage jump to $11.50 in July, and it'd be downright foolish for voters to support the $15 minimum wage that labor groups want to put on the November ballot. (The initiative would also raise the base wage for tipped employees by more than 400 percent.) The stories collected from west coast cities that have pursued wage mandates approaching this level -- including Seattle, San Francisco, and Oakland -- show that significant price hikes, employee layoffs and business closures should be anticipated and expected. [The Washington Post, 1/27/16]
Breitbart Blames "The Left's Stupid Economic Policies" For Costing D.C. Jobs. On January 18, Breitbart attacked The Washington Post for focusing on Walmart's decision not to build stores in low-income areas, claiming that The Post should have instead focused on the "stupid" progressive economic policy of raising the minimum wage to $11.50 an hour, a wage the right-wing blog claimed was "just too high" (emphasis added):
The Washington Post headline screams, "District leaders furious Walmart breaking promise to build stores in poor neighborhoods." So you would think that the primary reason behind the so-called broken promise would be near the top of the story, correct? Well, not if you're reading the Washington Post when the reason for the broken promise is inconvenient to one of the Left's favorite narratives -- the minimum wage.
On top of three current D.C. Walmart stores already doing worse than expected, Walmart is backing out of the other two because the cost of doing business in DC is just too high. The DC minimum wage is already an inflated $11.50 an hour, and that could jump to $15 in November. Naturally the left-wing Washington Post buries that inconvenient news under more than a dozen paragraphs:
Thanks to the Left's stupid economic policies, hundreds of jobs that would have paid $7.25 an hour and up, are now gone. Hundreds of people in DC's inner-cities that would have had work will now make nothing. Other than left-wing demagogues like the Washington Post and Democrat politicians, who are these policies helping? [Breitbart, 1/18/16]
Townhall.com Blames Minimum Wage Increase For Walmart Backing Out On Promised Expansion. On January 17, Townhall.com claimed Walmart's decision to not build two stores in the District's low-income communities was based on the city's increased minimum wage, blaming the wage for leaving District residents without "a low-cost grocery store smack in the middle of a food desert." The article concluded by arguing that Walmart should be able to pay workers $8.80 an hour, lower than the city's minimum wage of $10.50 an hour in 2015:
DC officials are furious as Walmart has reneged on a promise to build stores in lower-income areas of the city. Walmart announced last week that they will be shuttering 269 stores throughout the world. (The already-existing three DC stores will remain open.) The company cited the unexpectedly high building and labor costs as to why they would not move forward with the additional locations, but was more open in a meeting as to how DC's labor laws, including its higher minimum wage, are making it harder to operate a business.
Honestly, this is a shame. The two locations would have created hundreds of jobs in an area that desperately needs them, and having a job that pays $8.80 an hour (which is what I was paid when I was employed as a cashier at Walmart in 2011 and 2012) is certainly better than having no job and getting paid $0.00 an hour. Additionally, the presence of a supercenter (which carries grocery items) would have put a low-cost grocery store smack in the middle of a food desert. Now, thanks in-part to DC's regulations, none of this is going to happen.
It's been shown again and again that minimum wage increases hurt the very people they're intended to help. This is proof. [Townhall, 1/17/16]
IBD: Raising The Minimum Wage Makes D.C. "A Cautionary Example." On January 16, Investor's Business Daily claimed Walmart's actions make D.C. a "cautionary example of what can happen when bastions of liberalism throw caution to the wind in raising the minimum wage":
Now, as D.C. employers brace for yet-another minimum-wage hike to $11.50 set for this coming July, Wal-Mart (WMT) has called off two of the city's most-prized retail developments.
On Friday, Wal-Mart said it would close 154 stores in the U.S., mostly small-format locations. But even as the nation's biggest retailer said it would keep opening supercenters, including 50 to 60 in the coming year, it told District officials that it won't go forward with plans for two huge stores that were expected to create hundreds of new jobs in one of the city's poorer sections.
The Washington Post reported that company officials cited the city's coming minimum-wake (sic)hike to $11.50 an hour as one of the reasons for its change of heart. Wal-Mart has signaled to investors that its already-narrow profit margins could shrink by one-third as it voluntarily hikes its own base wage to $10 an hour. [Investor's Business Daily, 1/16/16]
Minimum Wages Are Not The Reason Walmart Is Closing 154 Stores Nationwide
Walmart To Close 269 Stores This Year, Including 154 In the U.S. In January, it was widely reported that Walmart planned to close 269 stores worldwide in the upcoming year, 154 of them in the United States. According to The Washington Post, the contraction is the result of Walmart refocusing expansion efforts toward online shopping while it maintains established, profitable supercenters. According to Walmart's own press release, some of the domestic outlets slated to close this year happen to be in cities that recently increased their municipal minimum wage, but many are also in areas where the federal minimum wage of $7.25 per hour applies. [The Washington Post, 1/15/16; Walmart, 1/15/16]
Time: Walmart Closing All Express Stores. On January 15, Time reported that Walmart was closing all 102 of its small Walmart Express stores as part of plans to close 154 stores across the country. Time stated that "what worked for XXL stores wouldn't necessarily work for mini-mart-type retail locations." Time reported that because Walmart was unable to provide the same low prices without the high volume its superstores offer, the retailer could not make express stores work. [Time, 1/15/16]
Walmart Reportedly "Dogged" By Years Of Mismanagement, Long Lines, Poor Customer Service
Fortune: Walmart "Dogged By Criticism" Of Long Lines, Empty Shelves, Growth Outpacing Hiring. On November 20, 2015, Fortune reported that Walmart's hiring has not kept up with growth of the chain. Fortune cited analysis from Reuters that "store space per employee had increased to about 547 square feet from 407 square feet in 2005." Fortune reported that this inability or unwillingness to match the pace of hiring to growth may be the cause of low customer service ratings, as poor service "was hurting sales growth":
Walmart has been dogged by criticism of the standard of its stores in recent years, including long checkout lines and insufficient stocking of its shelves. A Reuters analysis of the giant discount retailer's growth and its employee numbers may help explain why.
Over the past decade, Walmart opened nearly 1,500 new stores in the United States, a 45% increase in space and equivalent to more than 4,000 American football fields, while its sales have grown by 50%. But based on rough headcount figures provided by the company, the expansion was in stark contrast to the growth in its U.S. workforce, which was only about 8% in that time. It means the store space per employee increased around 34%.
The disparity may help to explain why Walmart acknowledged earlier this year that its customer service needed to be improved significantly as it was hurting sales growth, and why it is now investing a lot more in its workforce and technology to improve the standard of the stores and how shoppers are treated there. [Fortune, 11/20/15]
Consumerist: Walmart Is "Understaffed And Mismanaged" Thanks To High Turnover Rate. On March 31, 2014, the consumer watchdog blog Consumerist reported that Walmart was working on resolving issues of understocked shelves. Consumerist reported that workers say stores had been "understaffed and mismanaged." The consumer blog did say the retailer was working to beef up hours and hiring, but it also noted that one Walmart worker said her store "has a way of overwhelming new part-time hires with too much work, leading to a high level of turnover":
For the past few years, a growing number of Walmart customers have complained about threadbare shelves, while Walmart workers say it's a result of being understaffed and mismanaged. Now the nation's largest retailer is admitting that it's losing billions of dollars by trying to be cheap.
According to a recent BusinessWeek story, Walmart execs announced at a company meeting earlier this month that improving the level of merchandise that is in-stock and available for customers to buy is a top priority.
At the company meeting, executives said they will add more hours in an effort to improve "in-store execution." If it fails to make a change for the positive, the company figures to lose $3 billion a year.
Whether or not that works will likely depend on who they hire and how they treat the new hires. One Walmart worker told Consumerist that her store has a way of overwhelming new part-time hires with too much work, leading to a high level of turnover, meaning time is wasted training people over and over again. [Consumerist, 3/31/14]
Increased Minimum Wages Do Not Kill Jobs
Cornell University Study Debunks The Myth That Minimum Wage Hurts Jobs. In the December 2015 edition of the Cornell Hospitality Report, researchers at Cornell University found that over the past 20 years, raising the regular and tipped minimum wage for workers in the restaurant and hospitality industries has "not had large or reliable effects" on the number of people working in those industries. The research stands as yet another piece of evidence debunking claims that wage increases harm businesses and weaken the job market:
Although minimum wage increases almost certainly necessitate changes in restaurant prices or operations, those changes do not appear to dramatically affect overall demand or industry size. Furthermore, there is strong evidence that increases in the minimum wage reduce turnover, and good reason to believe that it may increase employee productivity as well. While prospective large increases in minimum wage mandates may have more noticeable effects, the evidence suggests that the restaurant industry should accept reasonable, modest increases in the minimum wage.
There is strong evidence that increases in the minimum wage reduce turnover, as mentioned previously. While no study has tested our belief that increasing the minimum wage will increase employee happiness and productivity as well, our reasoning is theoretically sound and consistent with more general research on compensation effects. Moreover, the research reviewed and reported here suggests that the industry has little to lose by acting on this belief. Thus, we contend that the restaurant industry should support rather than oppose reasonable increases in the minimum wage. [Cornell Hospitality Report, December 2015]
CEPR: Increasing The Minimum Wage Has "No Discernable Effect" On Employment. In an exhaustive February 2013 report, the Center for Economic and Policy Research (CEPR) concluded that local, state, and federal minimum wage increases had a negligible effect on job creation:
Economists have conducted hundreds of studies of the employment impact of the minimum wage. Summarizing those studies is a daunting task, but two recent meta-studies analyzing the research conducted since the early 1990s concludes that the minimum wage has little or no discernible effect on the employment prospects of low-wage workers. [Center for Economic and Policy Research, February 2013]
IRLE: Increased Minimum Wages Had Zero Effect On Employment. An April 2012 report by the University of California, Berkeley's Institute for Research on Labor and Employment (IRLE) looked at the link between raising minimum wages and job creation. The IRLE found no change in job growth tied to raising minimum wages:
Summarizing to this point, we find that our border-discontinuity estimates find strong positive responses of earnings to a minimum wage increase. This rise in earnings is met with a change in the employment stock that is indistinguishable from zero. [University of California, Berkeley, Institute for Research on Labor and Employment, April 2012]