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Wal-Mart, D.C. face off over 'living wage'

The bitter standoff between Wal-Mart and Washington, D.C., officials over the city's effort to impose a higher minimum wage on big-box retailers is fueling a wider debate about how far cities should go in trying to raise pay for low-wage workers -- and whether larger companies should be required to pay more.

Wal-Mart Stores Inc., the nation's largest private employer, is fuming about a "living wage" bill approved by the D.C. City Council that has an unusual twist -- it would apply only to certain large retailers, forcing them to pay employees at least $12.50 an hour. That's nearly 50 percent higher than the city's minimum wage of $8.25 an hour.

The measure is being cheered by unions and worker advocates who have long complained about Wal-Mart's wages and working conditions. Opponents call it an unfair tactic that will discourage companies from doing business in the city.

Wal-Mart has threatened, if the bill becomes law, to cancel plans for three of the six stores it hopes to build in some of the city's poorest neighborhoods that are sorely in need of economic development. The measure is now before D.C. Mayor Vincent Gray.

Some economists say targeting large retailers or other industries that can afford to increase wages may be an effective way to raise pay to even higher levels than a broad-based minimum wage. The D.C. bill applies to stores of 75,000 square feet or larger and with annual corporate revenues of at least $1 billion.

"A large retailer can more easily absorb a pay hike than a corner store," said Arindrajit Dube, an economics professor at the University of Massachusetts Amherst and a prominent supporter of raising the minimum wage. Large stores are "less likely to shut down or cut back on employment" in response to such an increase, he said.

But Dube cautioned that a targeted hike might make it harder for Wal-Mart and other big-box stores to pass on the wage hike as a price increase since smaller retailers could still keep prices low.

Many Wal-Mart workers already make $12.50 an hour -- the rate set by the D.C. bill -- or more, but the average sales associate earns $8.81 per hour, according to IBISWorld, an independent market research group.

The minimum wage in the nation's capital already is higher than the federal rate of $7.25 an hour. Other cities and states that have sought to raise the minimum wage above what is required have applied the hike to all businesses. San Jose, Calif., recently raised its minimum from $8 to $10 an hour and San Francisco's rate of $10.55 an hour is the highest in the nation.

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