My Five-Step Ethical Process: Wal-Mart, Wages, and Washington, D.C.

Let’s apply my five-step method to Wal-Mart’s decision whether to open stores in Washington, D.C.

Yesterday (July 10, 2013), the District of Columbia (D.C.) city council voted to require retailers with corporate sales of $1 billion or more to pay the retailers’ employees who work in large stores (75,000 square feet or larger) in D.C. a minimum of $12.50 per hour. The minimum wage for employees in general in D.C. is $8.25 per hour.

According to an article in the Washington Post (online edition) on Monday (July 8), D.C. mayors have been trying for years to persuade Wal-Mart to open stores in D.C. but Wal-Mart was reluctant to. The mayors wanted Wal-Mart because Wal-Mart would provide between 1,200 and 1,800 jobs to D.C. residents who need jobs and also provide fresh food and other necessary household items to D.C. residents for affordable prices. Wal-Mart was concerned about the difficulty of turning a profit in largely-poor D.C. (D.C. is the home of the U.S. Government and has many gleaming, world-famous buildings, monuments, and homes, but they are clustered mainly in the northwest part of the city; much of the rest of D.C. is poor) and the crime in D.C. In 2011, Wal-Mart announced it would build and open six stores in D.C. As of today (July 11, 2013), three are under construction and scheduled to open in Fall 2013. Construction has not yet started on the other three. Now that three of the stores are almost ready to open, the D.C. government is saying Wal-Mart must pay a minimum of $12.50 per hour to employees in those stores rather than a minimum of $8.25 per hour. According to the Post, a Wal-Mart executive is accusing the D.C. government of using “bait-and-switch” tactics: luring Wal-Mart into D.C. with the assumption that Wal-Mart could pay in D.C. the low wages Wal-Mart pays elsewhere, then, at the “eleventh-hour” (to use the words of a Wal-Mart executive), changing the rules and requiring a wage of at least $12.50 per hour (a “living wage”) rather than $8.25 per hour (the minimum wage that most D.C. businesses are required to pay employees). Some people claim that a Wal-Mart executive told some D.C. clergymen that Wal-Mart would pay $13 dollars an hour to employees in D.C.

Wal-Mart has several options. Wal-Mart can proceed to open stores in D.C. and pay employees in those stores at least $12.50 per hour. Wal-Mart can decide not to open stores in D.C. Wal-Mart can continue to negotiate with the D.C. government and try to reach a compromise on the minimum wage. Perhaps there are additional options.

Fox Business reported this morning (July 11) that after the D.C. city council voted yesterday to raise the minimum wage so that Wal-Mart will be required to pay Wal-Mart’s D.C. employees a minimum of $12.50 per hour, Wal-Mart announced it would not build the three stores it was planning to build and will consider its options regarding the three stores that are under construction and scheduled to open soon (Wal-Mart “will start to review the financial and legal implications on the three stores already under construction,” says a Wal-Mart spokesman quoted by Fox Business). Let’s analyze Wal-Mart’s actions.

Question 1. Is it illegal? What do I mean by “it”? I mean Wal-Mart’s decision, which of course could change in the future (today, I’m just talking about the initial decision Wal-Mart made after the D.C. city council vote yesterday), not to construct the three stores it was planning to construct, and to “review the financial and legal implications on the three stores already under construction.” My guess is that it is not illegal. My guess (I don’t know all the facts, and I don’t know the laws of D.C.; I am just guessing) is that Wal-Mart has the right not to open the three stores that haven’t even been constructed yet, and Wal-Mart certainly has the right to “review the financial and legal implications on the three stores already under construction.”

Question 2. Is it a tort, breach of contract, or other activity that might cause someone to sue you (in this case, Wal-Mart) in court and win? My answer to Question 2 is the same as my answer to Question 1. Indeed, I think Wal-Mart is doing exactly what I think business people do: Wal-Mart is going through this five-step thought process. Rather than announcing that Wal-Mart will, or will not, open the three stores that are already under construction and scheduled to open, Wal-Mart is announcing that it will analyze the legal and financial ramifications before it makes a decision about it.

Question 3. Will it offend people, and if so, will it offend enough people so that the amount of money you (Wal-Mart) lose by doing it is greater than the amount of money you gain by doing it? Thus far (as of 1:00 pm Eastern Time on July 11, 2013), I doubt that anyone is offended by Wal-Mart’s initial response to the D.C. city council vote yesterday other than the people—and there are a number of such people—who are offended by almost everything Wal-Mart does. Many people are offended that a company that is largely (but not entirely; Wal-Mart’s stock is publicly traded on the New York Stock Exchange) owned by a family (Walton) that has four people who are each worth more than $20 billion (they are four of the ten richest people in the United States, according to Forbes magazine) might refuse to open a store in our Nation’s Capitol if Wal-Mart has to pay its employees in that store $12.50 per hour rather than $8.25 per hour, $9.00 per hour, or whatever Wal-Mart would pay these employees if the minimum that applies to most D.C. workers ($8.25 per hour) applied to Wal-Mart’s workers. Of course, one of Wal-Mart’s arguments against the $12.50 minimum wage is that Wal-Mart and other very large retailers are being singled out. Why should other stores in D.C. that sell the types of goods that Wal-Mart sells be allowed to pay employees only $8.25 per hour while Wal-Mart and other very large retailers are required to pay $12.50 per hour? Another of Wal-Mart’s arguments is that if Wal-Mart caves in to D.C’s demands—opens the stores and pays the employees at least $12.50 per hour), then many other cities and towns will do the same thing: set a higher minimum wage for large retailers such as Wal-Mart than for smaller retailers.

Wal-Mart needs to decide whether the number of people, not just in D.C. but around the world, who would be offended if Wal-Mart chooses not to open in D.C. and who, as a result of being so offended, would stop buying at Wal-Mart is enough so that Wal-Mart ends up losing money rather than gaining money by choosing not to open in D.C.

Many business ethics scholars want to see a deeper analysis than my five-step analysis. They want to judge Wal-Mart’s ethics by asking, for example, What would Kant (Immanuel Kant, the 18th-century German philosopher) say? When I was in college and heard my philosophy professor say Immanuel Kant, I asked “Why can’t he?” Some would ask, What would Rawls (not Lou Rawls, the singer, but John Rawls, the philosopher) say? Some would ask, What would Jesus say? Some would debate whether we are talking about teleological ethics or deontological ethics. Their points are well taken, and I will not criticize anyone for arguing that my five-step analysis, which can be described as a utilitarian analysis, is not deep enough. I will only say that, in my opinion, my five-step method is the method most ethical businesspeople use, although they don’t necessarily think of it as a “five-step method” and they almost certainly have never heard of me or read anything I have written (such as this blog).

I will also say this. Kant, Rawls, and other ethics teachers did not, and do not, provide many jobs. Whether Jesus provided and/or continues to provide jobs is a subject I will politely avoid in this blog because the University of New Haven is a nonsectarian institution. My guess (I can only speculate about this) is that if 1,200 people had asked Kant to give them a job, he would have said, “I can’t.” Wal-Mart in D.C. is saying, “We can,” but Wal-Mart is undecided about whether Wal-Mart is willing to pay them $12.50 per hour.

Wal-Mart provides jobs. They may be low-paying jobs, but they are available to many people. This reminds me of a conversation I had a few years ago. As you may know, the University of New Haven is the best university in the New Haven area. But it is not the only university in the New Haven area. There is Southern Connecticut State, Quinnipiac, Albertus Magnus College, and a very old university that, I am told, still manages to attract some good students and employees: Yale. One day I was talking politics with a Yale employee. He was highly critical of Wal-Mart. He thought it was immoral for the Walton family to be so rich yet pay low wages to Wal-Mart employees. I asked him this: If the average Wal-Mart employee in the New Haven area were to decide to leave Wal-Mart and apply for a job at Yale University, would Yale have a job for him? He replied, “Probably not. We’re not hiring much now. It’s a bad economy.” I asked, “Doesn’t Yale have an endowment of $20 billion?” He walked away in a huff, mumbling something about why Yale’s endowment is not and should not be indicative of how many jobs Yale should make available to people in the New Haven area who are looking for jobs. Who is doing the right thing? Wal-Mart? The D.C. city council? The people whose position is somewhere in between Wal-Mart’s and the D.C. city council’s? The people who shop at Wal-Mart? The people who do not shop at Wal-Mart? Decide for yourself.

If Wal-Mart ultimately decides that the answer to Question 3 is no, Wal-Mart will then ask itself (that is, Wal-Mart’s top executives will ask themselves and each other) Question 4 and perhaps Question 5 of my five-step analysis. Since we don’t know yet what the answer to Question 3 is, and since Wal-Mart still has to analyze the legal and financial ramifications of opening or not opening stores in D.C., it is too early to speculate about how to answer Questions 4 and 5.



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