Economy

Walmart Threatens City Council For Considering Minimum Wage Increase

CREDIT: AP Photo/Gareth Patterson

Walmart CEO Doug McMillon

A California city is experiencing a tactic Walmart has become known for: threats over a minimum wage hike.

The city of Desert Hot Springs, California is considering a minimum wage increase to boost residents’ incomes and therefore help attract more retailers. But the proposal has drawn the protests of the country’s largest retailer, Walmart.

The ordinance that the city council will vote on Tuesday would require any large retailers — those with gross sales of $500 or more — who open in the city to pay at least $10.20 an hour starting in January, a minimum that would increase by a dollar each of the next two years and then be indexed to inflation after that. The city’s current minimum wage is currently set at the California state level of $9 an hour, which will increase to $10 in January. Residents of Desert Hot Springs make about $32,000 at the median, far lower than neighboring cities.

Walmart owns land in the city and has been in talks to build a store for years. But after hearing of this proposal, the company said it would “evaluate our next step” if it were to pass, saying the ordinance is “specifically aimed at blocking Walmart from coming to Desert Hot Springs.” That would put the roughly 300 promised new jobs on the line. The company went so far as to take out a full-page newspaper ad attacking the ordinance over the weekend.

It’s not the first time Walmart has threatened to pull out of plans to open a store in opposition to a minimum wage increase. In 2006, it successfully lobbied against a Chicago bill that would have required the city’s largest retailers to pay a $10 minimum wage after threatening that its passage would keep it from opening stores within city limits. The same story played out in Washington, DC in 2013, when the mayor vetoed a bill that would have required large retailers to pay at least $12.50 an hour in combined wages and benefits after the company said it would walk away from planned store openings it if went into effect. The city eventually passed a blanket minimum wage increase to $11.50.

The scare tactics are based on the fear that Walmart’s refusal to open stores will cost jobs. But that’s not likely the case. After Chicago’s bill was defeated and Walmart’s doors opened, economists found that the company’s arrival often led other businesses to close, and the result was that Walmart destroyed nearly as many jobs as it created.

And while the company is opposing a wage hike in Desert Hot Springs that would require it to pay at least $10.20 an hour, its own minimum wage will go up to $10 an hour at the start of the new year.

UPDATE DEC 2, 2015 8:32 AM

At the city council meeting on Tuesday, the motion to raise the minimum wage was tabled from the agenda amid concerns that it would keep companies like Walmart out, with only one council member voting to keep it. It can be added to a meeting agenda at a later date, but nothing was set at Tuesday's meeting.

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