A report commissioned by two Los Angeles city councilmen warns that Wal-Mart Stores Inc.'s Supercenters could harm the local economy and recommends that the company be required to raise its pay and benefits if it wants to operate in the city.
The report, made public Friday, moves Los Angeles one step closer toward banning or placing severe restrictions on the mega-stores, which combine a full supermarket with a typical Wal-Mart discount outlet. Wal-Mart plans to open 40 of the stores in California within the next two years. At least five California cities have approved Supercenters; Oakland and several others have instituted zoning rules that ban them.
The expansion of nonunion Wal-Mart into the grocery business threatens the state's highly unionized supermarket industry and figures prominently in the strike and lockout of grocery workers in Southern and Central California. The supermarket companies say they must cut labor costs to compete.
Bentonville, Ark.-based Wal-Mart will oppose any effort by the city to prevent it from opening a Supercenter in Los Angeles, said Pete Kanelos, the company's California-based community relations specialist.
"We will not allow ourselves to be singled out and have separate rules apply to us that do not apply to our competitors," he said.
Councilmen Eric Garcetti and Ed Reyes commissioned the analysis. The report, prepared by consulting firm Rodino Associates, says Supercenters can push down retail wages, strain public services and hurt smaller businesses. It was based in part on testimony from two public hearings packed with union members and Wal-Mart employees.
The report says Wal-Mart's wages are about $8 an hour lower than union grocery wages. Eventually, the report says, that could set a trend toward lowering overall retail wages in Los Angeles.
The report also finds that Wal-Mart's health benefits could push more employees into emergency rooms and public medical assistance and that its aggressive marketing could force smaller competitors out of business.
Garcetti spokesman Josh Kamensky said that although the report concludes that all so-called big-box stores would affect the local economy, the City Council probably would focus on those that sell a high share of groceries.
"That's where the impacts are compounded, because wages are much higher" in union groceries, he said.
The 72-page report says the sales tax benefits of big-box stores to cities may be illusory, because the stores may take business from other retailers in the same community. However, it notes that existing Wal-Mart stores in the region have delivered jobs and merchandise to communities such as Baldwin Hills and Panorama City that had been abandoned by other major retailers.
Based on the report's recommendations and guidance from the council's Economic Development and Employment Committee, the city attorney's office will draw up a proposed ordinance, which could be ready for action early next year. Assistant City Atty. Cecilia Estolano said Oakland's ordinance, which withstood a court challenge from Wal-Mart last month, might embolden Los Angeles.
"It's changing our view of how far we can go," she said.
Kanelos said the city's agenda was political, not economic. "Organized labor and our competitors are making every effort to limit competition and protect their market share," he said.
Wal-Mart commissioned its own analysis of potential Supercenter effects by the Los Angeles County Economic Development Corp. The report has not been released.