$13 Minimum Wage for Chicago Big Box Retailers?

The Chicago City Council is considering passing legislation that would require “big box” retailers like Wal-Mart, Target and Staples to pay all employees at least $13 an hour.

Opponents of Wal-Mart Stores Inc.’s expansion into inner cities are scoring early success with a new tactic, enlisting support for a proposed local ordinance requiring giant retailers to significantly raise the minimum wage and help pay for health benefits. Advocates of the so-called living wage or big-box ordinance, which advanced to a vote by the Chicago City Council next week after being passed by its finance committee Wednesday, say its approval would set the stage for similar actions in other U.S. cities. “These proposals are really about whether it’s reasonable to ask some of the largest and most successful companies in the country to balance growth and profits with paying a living wage,” said Paul Sonn, deputy director of the poverty program at the New York-based Brennan Center for Justice, who helped draft the ordinance.

Retailers, however, argue such ordinances would cause them to locate new stores elsewhere and force layoffs at existing outlets in the affected areas. The Chicago initiative, mirroring one under consideration by the Washington, D.C., city council, comes with Wal-Mart preparing to open its first local store on the West Side in September after winning a heated zoning battle.

The ordinance would require operators of large stores in the city to pay their workers at least $10 an hour in wages plus another $3 in fringe benefits. That’s significantly above Illinois’ minimum wage of $6.50 and roughly double the federal minimum wage of $5.15. If enacted, it would be one of the nation’s first industry wage laws, following one adopted last November for large hotels in Emeryville, Calif., on San Francisco Bay. Supporters say it would raise pay for tens of thousands of local residents working for employers such as Wal-Mart, Target Corp. and Staples Inc.

“I believe it is an important step that we’ve taken to speak on behalf of the working people, not only of our area but generally of the United States,” said Chicago Alderwoman Freddrenna Lyle, a co-sponsor of the proposed ordinance, following the 15-6 vote by the finance committee. “We’re basically saying that labor has a right to be paid a wage which allows them to not just live but to sustain themselves and improve themselves,” she said.

That’s a laudable notion but a rather asinine thing to attempt via legislation. According to the piece, “The ordinance’s backers dispute that argument and maintain that big-box retailers still will open stores in inner cities regardless because rural and suburban areas are saturated.” But, of course, they won’t. Wal-Mart and Target, at least, operate on incredibly tiny margins and big volumes. They’d simply be better off bypassing any city that had such a law in place.

Assuming they weren’t stricken by the courts.

Labor and employment law expert Jim Hendricks said the ordinance would be unlikely to withstand legal scrutiny as a “blue law,” or one that singles out specific types of businesses. “You can’t say you’re just going to do it for some employers,” said Hendricks, based in Chicago for the firm Fisher and Phillips. “I’m sure it’s going to get challenged if they’re foolish enough to pass it.”

One would think.

via emailer Paul J

FILED UNDER: General,
James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. Anderson says:

    Theyâ??d simply be better off bypassing any city that had such a law in place.

    According to the story, isn’t that the idea?

    Opponents of Wal-Mart Stores Inc.â??s expansion into inner cities are scoring early success …

  2. Steve Verdon says:

    That was my thought too, it is nothing but rent seeking and a way to keep out competition from big box retailers. Unfortunately it would also hit places like Costco. I don’t know what Costco’s wages are like, but I have heard the employees get benefits and the pay is pretty good, but starting wages may be sub $13/hour. Hence this legislation would hurt a “decent” big box retailers.

    And exactly how many workers at Mom-&-Pop places get benefits? My guess is besides family members: none.

  3. Why only $13/hour?

    Why not make the minimum wage $1 million/hour. Then we can all be as rich as Bill Gates and retire at 30.

  4. James Joyner says:

    Anderson:

    Apparently, that’s one motivation. Although the Council members pushing this are claiming it’s about providing wages and that the jobs won’t be lost.

    Either way, it’s absurd. One the one hand, if there is no Wal-Mart, there are fewer jobs for low skilled workers. Or, conversely, the gap will be filled by other businesses without Wal-Mart’s ability to drive down prices and thus pass on higher costs to the consumer and yet without being subject to the “special” minimum wage. On the other, without the law, Wal-Mart and other big box companies would be free to offer to employ people and, if they didn’t offer enough money, they’d have no takers.

    Either way, low skill workers aren’t going to get $13 an hour unless they can generate in excess of that for their employer.

  5. ken says:

    A better idea would be for the city of Chicago to assist labor organizers to secure labor contracts with the retailers. That way each side can work out the level of compensation/benefits through negotiation instead of by fiat.

  6. Anderson says:

    Wal-Mart’s wages don’t bother me, but it’s a little absurd for the taxpayer to be picking up the tab for their employees’ health care.

    Look at the negotiating power Wal-Mart has: they could come up with some relatively kick-ass health insurance for their lowliest employees, if they wanted to.

    (Of course, we’re also picking up the tab for the low salaries via the EITC, but I suspect a majority of OTBers would favor abolishing the EITC, so that’s not much of an argument.)

  7. In my town we had a hullabaloo a few years ago about the number of groceries stores on the west side of town vs the east side of town. I will give you one guess which side of town has more poor people. The distribution of stores was taken as prima facia evidence that the grocery store chains were racist. The city council in the people’s republic even discussed zoning laws that would limit building permits for new stores in the west unless they were matched by stores in the east side.

    The furor died down when someone explained that there was no restriction on opening a grocery store, state oversight was minimal and that if they have found an economic opportunity via an unserviced need, go for it. Some on the left saw the opportunity to do themselves some economic good by doing good.

    Needless to say that the economic realities eventually set in and found that higher costs associated with working in a poorer neighbor hood (such as crime) didn’t make this such a wonderful opportunity.

    As James points out, the impact of this is likely to be for the urban poor to be poorer as they are denied access to jobs and to lower cost consumer goods.

    To all the liberals. If you think there is an opportunity to provide ‘living wage’ jobs and serve the urban masses by paying 2x the minimum wage to employees, go for it. If you succeed, you will be hailed. Of course, you might get seduced away from being a liberal.

    At the time I started my business, the Left had taught me that business and capitalism were based on exploitation: exploitation of consumers, workers, society, and the environment. I believed that “profit” was a necessary evil at best, and certainly not a desirable goal for society as a whole. However, becoming an entrepreneur completely changed my life. Everything I believed about business was proven to be wrong.

    The most important thing I learned about business in my first year was that business wasn’t based on exploitation or coercion at all. Instead I realized that business is based on voluntary cooperation. No one is forced to trade with a business; customers have competitive alternatives in the market place; employees have competitive alternatives for their labor; investors have different alternatives and places to invest their capital. Investors, labor, management, suppliers â?? they all need to cooperate to create value for their customers. If they do, then any realized profit can be divided amongst the creators of the value through competitive market dynamics.

    In other words, business is not a zero-sum game with a winner and loser. It is a win, win, win, win game â?? and I really like that. However, I discovered despite my idealism that our customers thought our prices were too high, our employees thought they were underpaid, the vendors would not give us large discounts, the community was forever clamoring for donations, and the government was slapping us with endless fees, licenses, fines, and taxes.

  8. jwb says:

    Costco is one of the only “big boxes” that pays decent wages. The other is Home Depot. Notably, there are only two big box retailers who have had any success muscling in on San Francisco retail turf: Costo and Home Depot. Hrmm.

    There were lots of people who opposed the entry of Home Depot into San Francisco, but those people were 1) morons, and 2) in the employ of the local hardware store monopoly. Most of the time you hear about “local retailers” complaining, it means they are going to get squeezed out of the market, they will have to lay off their brother and their one other employee, and the other million people who live in the city are going to get more jobs and cheaper goods.

    Still, I don’t see why Chicago should be prohibited from setting local minimum wages.

  9. Mark says:

    Why only bix-box retailers though?

    If it’s good enough for Walmart, why isn;t $13/hour mandated for restaurant workers (non servers b/c of the tip issue). Or janitors? Or better yet: city employees.

  10. Rick Moran says:

    Wal Mart has already said that any new wage requirements will not stop it from opening its store in the Austin neighborhood.

    The problem, as some commenters have pointed to, is the future of such stores in the city. I wrote about it here.

  11. just me says:

    Wal-Martâ??s wages donâ??t bother me, but itâ??s a little absurd for the taxpayer to be picking up the tab for their employeesâ?? health care.

    Wal-Mart pays better than the school district I work for, and my job requires at least two years of college.

    It also has better benefits. The family plan for the district I work for is $560 per pay period.

    I could probably get all up in arms over these arguments, but the reality is that Wal-Mart isn’t the bottom of the barrel, and often the bottom is city and municipal governments.

  12. James Joyner says:

    Anderson: I read something a couple months or so ago in a print magazine (probably the Atlantic or New Yorker) that Wal-Mart is likely to wind up the chief, and perhaps decisive, proponent of a single payer system. What we’re finding out courtesy of the big auto companies is that having employers provide retirement and health benefits is likely not sustainable, especially as we live longer and health costs continue to skyrocket.

  13. Steve Verdon says:

    What weâ??re finding out courtesy of the big auto companies is that having employers provide retirement and health benefits is likely not sustainable, especially as we live longer and health costs continue to skyrocket.

    And why should it be sustainable if the government provides it?

  14. jwb says:

    Steve Verdon: because the govt has insane bargaining power, if it cares to use it. Single payer will be a big boost to business in the USA. It will relieve businesses operating here of a competitive disadvantage that they suffer compared to operators in nations with a mandatory system. It will also solve a number of inefficiencies in the domestic labor market.

  15. Denis says:

    James, where’s the link to the original article? Either I’m going blind or there really is no link. I’m not discounting either possiblity 🙂

  16. James Joyner says:

    Denis: Nope, somehow I managed to not include it. It’s there now–via AP.

  17. jwb,

    That insane bargaining power is both strength and weakness. When most people start salivating about the possibilites of single payer, they forget about the things that won’t happen as a result of squelching the market, as bad as it is already. They’re taking the single biggest problem in the market — monopoly behavior — and basing the entire market on that.

    Why do you think that Germany, once the “medicine chest” of Europe, is losing its pharmaceutical industry? How many new classes of drugs come from all of Europe vs. the U.S.? Very few. It’s the bargaining power that will cause pharmaceutical companies, and others, to cut substantially on their investments.

    There would be some initial savings — OK, a lot of initial savings — but the market for healthcare would suffer over the long run. It’s more than just improving the allocation of the present resources that we need to focus on.

    Anderson,

    I doubt many would want to get rid of the EITC. I wouldn’t. It’s a far more efficient mechanism for helping the poor than the minimum wage, without the distortions that come with the minimum wage.

  18. “the govt has insane bargaining power” which is why medicare, medicaid and prescription drug programs are so cheap with the government running them. Just look at how much the US GDP is put into those programs compared to comprehensive national health programs.