While I think making ‘hay’ out of Walmart’s decision to close some stores might be pushing the boundaries, after all, closing 269 stores out of over 11,500 is really insignificant, I think this article tells a reasonable story about the pattern of those closures. I try to avoid claiming that policy-makers don’t understand the consequences of their actions; I believe they understand fully the intended and unintended outcomes of their policies. I think that in the optics of politics, populism often wins in the face of smart policy. Thus, laws such as the minimum wage are vote winners, even if they kill low-skill job creation (which they MUST do by some very simple laws of economics – don’t be fooled by economists who would claim otherwise or bamboozle us with ‘fancy’ general equilibrium models, even they acknowledge to appropriate audiences the deleterious effects of populist policies).
Regardless, this article makes a couple of connects that have some merit. Click the title for the original.
by Adam B. Summers, January 21, 2016, the Orange County Register
The financial world, and quite a few employees, were taken aback recently when Wal-Mart announced that it will be closing 269 of its 11,600 stores, including 154 in the U.S., although it still plans to open 300 stores worldwide in the coming year.
Oakland officials “expressed shock” at Wal-Mart’s decision, according to the San Francisco Chronicle, and Washington, D.C., leaders were “furious,” according to a Washington Post headline.
They only have themselves to blame.
While Wal-Mart President and CEO Doug McMillon was quick to dispel the notion that Wal-Mart’s voluntary “investment in wages” had anything to do with the store closures, some have noted a pattern among the more poorly performing stores getting the axe: they tend to be located in cities with high government-imposed minimum wages and other costly anti-business policies.
A San Francisco Chronicle report noted that Wal-Mart stores were closing in San Jose and Oakland, which each adopted minimum wages higher than the state rate – currently $10.30 and hour and $12.55 an hour, respectively – while the two stores in San Leandro, a city that did not increase the minimum wage, will remain open.
“I think it really is a little discouraging,” Oakland Councilman Larry Reid told the Chronicle. “The minimum wage in the city of Oakland played a factor, was one of the factors, they considered in closing the stores.”
Among the seven stores closing in Southern California are two in the city of Los Angeles (Chinatown and the Crenshaw District), L.A. County (Altadena) and Long Beach (on East Fifth Street). Both the city and county of L.A. adopted ordinances last summer that will hike the minimum wage to $15 an hour by 2020. Long Beach just approved a measure Wednesday that will raise the minimum wage to $13 an hour by 2019, and possibly to $15 by 2021.
City officials were also upset in the District of Columbia, where Wal-Mart is keeping its three existing stores but announced that it could no longer move ahead with plans for two additional stores in poor areas east of the Anacostia River, where the jobs they would bring were eagerly anticipated (as was the sales tax revenue they would generate for the district). The retailer had only been allowed to operate in the city by virtue of a “handshake deal” in 2013 whereby it agreed to open stores in poorer neighborhoods.
“It’s an outrage,” former mayor Vincent C. Gray told the Washington Post. “A deal’s a deal,” snapped Councilman Jack Evans.
Such a deal is ridiculous on its face, however, since business owners in a free society are not blackmailed or otherwise coerced to operate or not operate in certain areas. They open their stores where they deem fit and profitable, and consumers make the ultimate decision about the wisdom of their location decisions.
As Councilman Evans related to the Post, Wal-Mart’s decision was influenced by the city’s $11.50 hourly minimum wage – which could rise to $15 an hour if voters approve a ballot measure in November – and proposals to require a minimum number of hours for hourly workers and force employers to pay into a fund for employees’ family and medical leave.
It is unfortunate that those in poor neighborhoods who are most in need of the jobs, and wide selection of goods and produce at cheap prices that Wal-Mart offers will be deprived of these things due to the greedy and shortsighted policies of their governments, which make it too costly to operate at all. Wal-Mart is a business, not a charity. It is an employer, not a make-work jobs program.
For too long, big government elected officials and advocates have treated businesses as cash cows for their pet programs, many of which are used to buy votes at election time. It is time that they learned that they cannot keep biting the hand that feeds them without deleterious consequences.