So let’s say you’re on the City Council of an economically stratified city. A large chunk of your residents are either employed by the federal government or are dependent on the federal government indirectly for their employment. Despite recent budget “cuts,” these folks have tremendous job security. On the other hand, a significant portion of the populace lives in economically depressed parts of the city with obscenely high unemployment rates. Thousands of these residents are looking for secure employment. A major box retailer is proposing to come in and open several new franchises in your city, a pair of which will be in the economically depressed areas of the city. Do you encourage this big box retailer and help them set up shop so that they could begin the process of employing hundreds, if not thousands of local citizens?
Well if you’re on the City Council Washington, DC, you do the precise opposite and craft legislation clearly aimed at said retailer that all but drives them out of town.
The world’s largest retailer delivered an ultimatum to District lawmakers Tuesday, telling them less than 24 hours before a decisive vote that at least three planned Wal-Marts will not open in the city if a super-minimum-wage proposal becomes law.
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The D.C. Council bill would require retailers with corporate sales of $1 billion or more and operating in spaces 75,000 square feet or larger to pay their employees no less than $12.50 an hour. The city’s minimum wage is $8.25.
While the bill would apply to some other retailers — such as Home Depot, Costco and Macy’s — a grandfather period and an exception for those with unionized workforces made it clear that the bill targets Wal-Mart, which has said it would open six stores, employing up to 1,800 people.
Alex Barron, a regional general manager for Wal-Mart U.S., wrote in a Washington Post op-ed piece that the proposed wage requirement “would clearly inject unforeseen costs into the equation that will create an uneven playing field and challenge the fiscal health of our planned D.C. stores.”
As a result, Barron said, the company “will not pursue” stores at three locations where construction has yet to begin — two in Ward 7 and one in Ward 5. He added that the legislation, if passed, will also jeopardize the three stores underway, pending a review of the “financial and legal implications.” While precise terms of its agreements with developers are not known, the company’s leases could be difficult to break without major financial penalties.
Good job, City Council. Instead of being paid $8.25 per hour, the would-be employees will continue to make their current wage: $0.00 per hour.
These are the wages (pun intended) of left-wing paternalism. Do-gooders insist on manufacturing legislation they think will ameliorate the conditions for the poor, but instead only make things worse by backwards economic and social engineering. What the DC Council fails to appreciate is that in a free market, a company will not simply wage raises for jobs at a point well beyond what they are worth if they have good options.
What’s particularly is that this type of legislation seems less to be about raising the living conditions of the working poor and more about punishing big bad Walmart, as blog posts like this indicate.
Walmart is using hardball tactics in their effort to force D.C. government to scrap their super-minimum-wage law. They said that if the bill were to become law, they may not build 3 of their proposed stores going in in D.C. That would cost the area low quality jobs and access to, well, low quality crap.
The author, no doubt one of the city’s countless young, white hipsters, safely ensconced in a neighborhood like Dupont or in a gentrified locale in the northwest, just finds Walmart so gauche. Better that 1,800 of his fellow residents – residents who probably live on the other side of the Anacostia and who he won’t have to interact with too much – remain unemployed rather than nasty Walmart open its doors.
Of course things are just as bad over the Bay and in the Maryland state capital of Annapolis. Governor O’Malley, a man who actually thinks he has a chance to be the next president of the United States, has just overseen a series of massive tax hikes, including a “rain tax” – yes, a rain tax. Included in these tax hikes is a relatively modest four cent per gallon increase in the gasoline tax, which will be followed up by a pair of eight cent increases in 2015, 2016, effectively doubling the overall tax applied to a gallon of gasoline in the state.
These moves have been applauded in certain quarters. One resident even took to a neighborhood list-serve to praise the increased gas tax, noting how much the extra revenue will be necessary. No doubt the new revenue will help fund vital infrastructure development such as the Silver Spring Transit Center. But how much extra revenue will be raised?
Well a decent proportion of Maryland residents live pretty close to other jurisdictions such as Pennsylvania, Virginia, Delaware, or DC. Many residents work outside of the state, or pretty close to it. In other words, we don’t have to pay a lick of the gas tax. I sure as hell won’t be filling up in the state if I can avoid it.
Let’s do a little math. As a conservative estimate I use about 25 gallons of gas per month driving to work. Multiply that by 12, and we arrive at 300 gallons per year. At 20 cents per gallon, the state loses on $60 per year in new gas revenues, and a total of about $150 per year. Now that’s just what the state loses on my gas tax revenue. The retailers in the state lose out on at least $1,000 or so per year in revenue depending on the price of gas. So Maryland’s decision to “only” raise the gas tax about 20 cents per gallon will lead to a reduction in the state’s coffers and local retailer’s coffers of over a thousand dollars per year. And that’s a conservative estimate, and it also doesn’t include my wife’s fuel usage. My wife is not as petty as me, so the state might lose out on only about half that amount.
Now if I’m the only person engaging in this little tax protest, that’s meaningless. But what if others decide to do the same? I have no idea precisely ho many Maryland residents live on the border, but it’s a decent chunk. If even ten percent fill-up where they work or just even drive a few miles on the weekend, then that little tax increase won’t lead to the kind of anticipated revenue increase needed to fund those oh so vital programs.
You see, people have choices, and as long as people have choices, they will make choices that cost them less money in the long-run. And people in charge of northeastern and western governments wonder why millions are fleeing to places like Texas – places that don’t impose ridiculous tax and regulatory burdens on businesses and residents.
If nothing else these actions demonstrate the value of federalism. It should also serve as a caution against increased centralization.