Losers in the unions vs. Wal-Mart game: D.C.'s poor

July 11, 2013: 12:34 PM ET

The retailer is dropping planned stores in Washington, DC, in face of a new wage law.

By Nina Easton, columnist

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FORTUNE -- Tug on the stem of any anti-corporate protest these days, and you're likely to find the same root -- unions more attuned to their own self-interest than the futures of low-income workers.

Just take a look at what happened to Wal-Mart Stores (WMT), which had the audacity to make plans to bring six stores and 1,800 jobs to Washington, D.C. -- catering to parts of the city where unemployment rates are among the highest in the nation. After the city council voted to single out the giant retailer with a requirement to pay workers 50% above minimum wage, Wal-Mart iced at least part--and possibly all--of those plans.

Wal-Mart, a nonunion shop, has been in crosshairs of labor leaders for years. So it was no surprise when its initial interest in building stores in D.C. neighborhoods long-ago written off by retailers drew street protests under the guise of "Occupy D.C." -- including a protest-visit to the home of a real estate developer involved in the deal.

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But the No. 1 company on the Fortune 500 list, no stranger to setting up shop in union-strangleholds, plowed on. Wal-Mart regional general manager Alex Barron noted in the Washington Post this week that store officials engaged "in an open dialogue with residents, stakeholders, critics, and elected officials" and became sufficiently confident of local support that plans were made to increase the investment from four to six stores and 1,200 to 1,800 jobs.

The company's charitable foundation doled out $3.8 million last year to poverty-fighting organizations like D.C. Central Kitchen and Capitol Area Food Bank.

Local officials, including the mayor, quickly recognized the importance not only of jobs, but of providing low-cost groceries, clothes, and other consumer products to residents who must take public transportation for miles to find retail outlets.

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Then, at the 11th hour, with two stores slated to open this fall, organized labor struck. The D.C. council took up union-backed legislation, called the Large Retailer Accountability Act, that would force giant box stores -- i.e. Wal-Mart -- to pay workers $12.50 an hour instead of the $8.25 minimum wage. (The measure applies to retailers over 75,000 square feet and with a parent company gross revenues of more than $1 billion. Existing stores are exempt.)

This week Wal-Mart publicly threatened to pull out, even on the three stores already under construction. But last night the council voted 5-3 to pass the law--despite support from  Mayor Vincent Gray, who derided the measure for producing "lost jobs and retail opportunities." Gray told a local TV reporter he has not decided whether to sign or veto the law.

Nevertheless, today Wal-Mart spokesman Steven Restivo issued a statement saying the store will not pursue three stores in the planning stages and "will start to review the financial and legal implications on the three stores already under construction." He added: "This was a difficult decision for us—and unfortunate news for most D.C. residents—but the council has forced our hand," he said.

The proponents of this "living wage" measure describe Wal-Mart's pullout as a victory for income equality and low-income workers. Really? Let's look at some facts. Washington, D.C.'s 68 square miles feature one of the widest income chasms in the country. The overall unemployment rate is about 8.5%, but Ward 7 -- which will lose two major Wal-Mart facilities -- has an unemployment rate that hovers at seven to eight times that of the mostly white, upper middle class Ward 3 in Northwest Washington.

No wonder Ward 7 council member Yvette M. Alexander described Wal-Mart's threatened pullout as "her worst nightmare" and called the legislation "a development killer ... a jobs killer." Her constituents are coping with a 15% unemployment rate.

Ward 8 is even worse, with a 23% unemployment rate. A 2012 Department of Employment Services report stressed that "wards with the highest poverty need access to resources that break the poverty cycle such as transportation to outlying areas where much of the economic growth is occurring and will grow."

Without Wal-Mart and related retailers it supports around, the residents can continue their long treks to Maryland and Virginia for jobs and affordable shopping.

Some victory for the poor.

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