History of the LRAA:
In July 2013, D.C. Council Chairman Phil Mendelson proposed the Large Retailer Accountability Act (LRAA) for the consideration of the D.C. City Council. The act aimed to mandate that retailers with corporate sales above $1 billion and storefronts of 75,000 feet or larger pay workers a minimum of $12.50 an hour as compared to D.C.’s minimum wage at the time of $8.25.
The act initially passed through city council before Walmart general manager Alex Barron published an stating that if the act were ratified Walmart would stop development of six proposed new stores in the D.C metro area. Barron States:
“As a result, Walmart will not pursue stores at Skyland, Capitol Gateway or New York Avenue if the LRAA is passed. What’s more, passage would also jeopardize the three stores already under construction, as we would thoroughly review the financial and legal implications of the bill on those projects” (3).
The city council passed the bill on to the consideration of Mayor Vincent Gray with a vote of 8-5 on August 30, 2013 (1). Mayor Gray then vetoed the bill on September 12, 2013 stating, “After careful consideration, I have concluded that the bill, while well-intentioned, is flawed and will fail to achieve its intended goals” (2).
For the proponents of the act, the LRAA is a direct response to the retailers (like Walmart) paying low wages and providing poor benefits to their employees. Compounded by a high cost of living in D.C. these retailers employ the majority of their workforce at or below poverty levels.
Conversely, large retailers are making the argument that the LRAA unnecessarily discriminates against corporations who otherwise would be large employers in areas with low employment rates. Furthermore, these retailers make the case that imposing higher minimum wages will hurt D.C.’s economic development. (5)
How the LRAA attempted to address problems associated with low wages:
The proposed policy aims to address the issues associated with low wages by:
1. Requiring retailers whose parent companies’ sales are larger than $1 billion or have storefronts larger than 75,000 sq. ft. to pay employees $12.50/hr.
2. Requiring retailers to post the changes in pay structure in an observable place within the workplace.
3. Requiring retailers to retain payroll record for four years.
Walmart corporate was the main retailer that lobbied against the LRAA. Walmart general manager Alex Barron stated:
“From day one, we have said that this legislation is arbitrary and discriminatory and that it discourages investment in Washington” (3).
“Like any business, we have a responsibility to our customers, employees and shareholders to reevaluate our options when it looks as if local rules may significantly change” (3).
As stated by Mayor Gray in his veto letter, “While often referred to as a Walmart bill, the bill applies to a far broader range of retailers… including Target, Home Depot, Wegmans, Lowe’s, Walgreens, Harris Teeter, AutoZone and Macy’s” (2).
The employees of retailers that are affected by the LRAA had the most to gain from the legislation. However, this group was not represented because at the time of the proposed legislation these employees were theoretical – as the actual storefronts were yet to be built.
Other Large Employers in D.C:
Businesses that operate below the legislative cutoffs of $1 billion or 75,000 square feet have been documented as potentially affected by the LRAA. The argument is, if the city council chose to regulate wages in large retailers like Walmart, they would systematically begin to target other businesses and storefronts next.
Primary Impacts of the LRAA:
Job Loss or Creation:
Walmart has claimed that the direct job loss impacts of implementing the LRAA would have been 1200 to 1800 jobs. However, these jobs are only at risk because Walmart threatened to stop development of their proposed projects.
For an employee at one of the large retailers affected by the LRAA a full time employee’s wages would increase from $17,000 to $26,000.
The environmental impacts of the construction of large retail spaces depend largely on factors like building design, location and mitigation strategies implemented by the buildings contractors. It is important to note that these large retail spaces are generally large consumers of energy, and displace local flora and fauna in the construction process.
As Walmart develops its storefront locations employment rates will increase in the area due to the employment of contractors, construction workers, architects and developers. However, the initial influx of employees is not likely to be from the local area. Permanent increases in employment are not likely to be seen until the storefronts open for retail business.
Additionally if LRAA was passed it is possible that increased wages would result in an increase in spending from employees who would have more discretionary income, creating the potential for further job creation by increasing liquidity of money in the area. Walmart Corporate makes the argument that even at current wages this secondary impact is still present.
Opponents of the legislation claim that the LRAA unfairly discriminates on the issue of wages against large retailers. They are correct. The failure of the LRAA is largely due to the fact that it regulated such an isolated group in a policy area that is normally reserved for citywide ordinance. If the proponents of the act had proposed an increase in D.C.’s minimum wage instead, they may not have received threat of Walmart backing out on their deal. Mayor Gray is also on record stating he would be supportive of increases in minimum wage on a citywide scale.
The push for implementation of the LRAA fell victim to some major pitfalls:
First, under the existing wording of the LRAA Walmart felt they had no choice other than to threaten to withdraw their existing projects, essentially killing the LRAA.
Second, by deciding to pursue the LRAA over a city wide increase in minimum wage, the city council alienated the mayor as a potential ally.
Third, by moving to enact the legislation while proposed large retail projects were under development the city council was setting themselves up for political push back from Walmart—an organization with deep pockets and a successful track record of stopping initiatives that threaten their profit motives.
Ultimately, the LRAA may have been well intentioned in its goal of improving the living standards for D.C.’s working class, but it did so by pressuring the wrong leverage points.