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Wal-Mart to DC: Force us to raise wages? We'll leave

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Wal-Mart Stores is butting heads with Washington, D.C., over a city council vote that would require large box retailers to pay employees $12.50 an hour at minimum.

That's more than the local minimum wage of $8.25 an hour, but no matter. A day after Wal-Mart pushed back, threatening to drop plans to build three stores in the nation's capital and reconsider its commitment to three more, D.C. lawmakers approved the bill. If signed by the mayor, the bill would require retailers with more than $1 billion in U.S. annual sales and stores 75,000 square feet or larger to pay a higher minimum wage than that of the city.

From the debate has emerged a question other U.S. cities may have: Will Wal-Mart be able to break into cities, traditionally union strongholds?

(Read More: Wal-Mart's Staffing Levels Criticized Over Not-So-Fresh Groceries)

With rural and suburban America reaching saturation, Wal-Mart's push into heavily Democratic cities has been met so far with resistance from community leaders and politicians demanding that the retailer pay its employees more.

"In terms of the major urban centers, their low wages and poor labor practices have been a large barrier," said Ken Jacobs, chair of the University of California Berkeley Center for Labor Research and Education.

Wal-Mart spokesman Steve Restivo said by email that the decision to pull out and suspend projects in the District will be a "difficult decision."

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There's also the concern that Wal-Mart wouldn't abandon D.C.—but would shrink its new store blueprints to below the 75,000-square-foot threshold. (It would be tough to shrink profits: In the first quarter ending April 30, net sales were $113.4 billion company-wide, and income was $3.78 billion.

"The fear I have is they might scale back," said Joslyn Williams, president of the Metropolitan Washington Council of the AFL-CIO.

Despite an improving economy, Reverend Graylan Hagler, leader of a social justice-focused think tank of clergy members, said residents in poor neighborhoods were being left on the sidelines.

"There's a corporate responsibility here, not only of providing jobs but of providing meaningful and dignified jobs," Hagler said.

Wal-Mart says its average hourly wage for full-time, non-managerial employees in the U.S. is $12.78, and $12.39 in Virginia. "Our wages and benefits meet or exceed those offered by most of our competitors," Restivo said.

But Jacobs, the Berkeley labor professor, says those wages don't represent workers overall.

"That $12.78 really masks the fact that you have a significant number of part-time workers, who are paid less," he said.

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(Restivo said that "most" of Wal-Mart's workforce is full-time, but he declined to provide a percentage.)

In a 2011 paper, Jacobs said Wal-Mart could absorb the cost of a wage increase. He said even passing it along to customers would only have an incremental effect on prices.

This isn't the first time local lawmakers have targeted Wal-Mart over wages. A similar big-box wage measure in Chicago failed in 2006 after Wal-Mart objected and then-mayor Richard Daley vetoed the legislation. Supporters fear a similar outcome in Washington, D.C., as Mayor Vincent Gray has "serious concerns" about the city council's bill, his spokesman Pedro Ribeiro said.

Even if Wal-Mart wins this round, Jacobs said the company will have to address its low wages if it wants to break into American cities. "At some point, Wal-Mart is going to have to deal with this issue," he said. "Ultimately, I think if cities go forward with these initiatives, Wal-Mart is going to be forced to bend."

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