DC Super-Minimum Wage: Bad Idea, Bad Policy

Washington D.C. City Council’s bill that would require large retailers (namely Wal-Mart) to pay a super-minimum wage is not only bad public policy, but also most likely illegal.

The Large Retailer Accountability Act (LRAA) Bill 20-62, which passed the D.C. City Council 8-5 on July 10 but has not yet been approved by Mayor Vincent Gray, establishes that some large retail stores must pay their employees a special minimum wage of $12.50 per hour. LRAA would only apply to non-union retail stores where the parent company takes in more than $1 billion in annual revenue and establishments are at least 75,000 square-feet in size.

According to proponents of the LRAA, a “living wage” is necessary due to the dire economic environment for low-wage D.C. residents and high cost of living in the District. But the Washington Post Editorial Board, in a recent op-ed, questioned the veracity of these claims:

“Council members who backed the measure, first sponsored by Chairman Phil Mendelson (D), claimed only to be looking out for D.C. workers struggling to keep pace with the cost of living in the District. Apparently they aren’t worried about people who work in fast-food restaurants, the unionized grocery stores carefully exempted or countless other businesses or, for that matter, about some of their own government employees who make less than $12.50 an hour.”

Worse than disingenuous claims from elected officials, the prospective legislation will cause negative economic consequences for the city. If Mayor Vincent Gray does not veto the Bill 20-62, Wal-Mart announced it would not build three Washington D.C. stores where construction has yet to begin. As well, Alex Barron, a regional general manager for Wal-Mart U.S., said the Big Box store giant might consider stopping construction of three stores already underway depending on the “financial and legal implications.” Each of the Wal-Mart stores was estimated to hire, at minimum, 300 part and full-time employees.

Further, the discriminatory and arbitrary nature of the prospective law is probably illegal, as former DC Councilman John Ray argued in his testimony.

First, Ray points out the obvious: the bill treats large retailers different from other businesses and he believes that the different treatment would violate the Equal Protection Clause.

Second, the former Councilman challenges whether the LRAA would pass the rational basis test, which is a principle of analysis courts apply to determine if giving a particular class of people preferential treatment is a legitimate government purpose.

He comes to this conclusion because one passage in Bill 20-62 “Findings and Declaration of Policy” states that its objective is “to safeguard the public health, safety, welfare and prosperity of all Washingtonians.”

Yet, Ray rightly states the LRAA does the opposite and only gives preferential treatment to a few “Washingtonians,” specifically large retail workers without a legitimate reason for doing so.  John Ray provides the evidence, noting:

“if you work for an employer that meets the 75,000 square feet rule and the $1 billion rule, you are guaranteed a living wage and all the benefits of Bill 20-62, but if you happen to be working for an employer that only has 74,000 square feet and has gross revenues of $1 billion, you do not qualify for a living wage or the other benefits of Bill 20-62. Such a distinction between is not only discriminatory, but it is capricious.”

How can a bill be considered “rational” when it insists that all D.C. workers should receive a “living wage,” but then limits the benefit to just employees who work at stores that profits exceed $1 billion and meet the 75,000 square feet standard?

Hopefully D.C. residents won’t have to find out, and Mayor Gray will stand up for all Washingtonians and veto this bill. If not, it is abundantly clear the LRAA is arbitrary and discriminatory legislation that would have a tough time withstanding legal scrutiny.

(Editor’s note: To learn more about the pernicious effects of minimum wage laws, check out the WPC original video, “The Life of Julius: How Unions Hurt Workers“)