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Zorn wonders if the giant retailers may be most worried that Chicago’s “big box ordinance” will work as planners intend - no current or prospective jobs lost and better lives for those who work at the stores. The proposed ordinance would kick the minimum wage up to $10 an hour with $3 in benefits by 2010. Zorn offers these reasons:
A similar though broader “living wage” ordinance took effect in Santa Fe, N.M., New Mexico, in 2004, and a follow-up study by the University of New Mexico found that private sector employment growth proceeded to outpace the overall growth in New Mexico, gross retail receipts grew faster than inflation and employment levels rose.San Francisco raised the local hourly minimum wage to $8.82 (the federal minimum is stuck at $5.15) at about the same time, and economists at the University of California at Berkeley who studied the impact concluded that, “on the whole, the San Francisco economy has adjusted relatively easily to the citywide wage policy. The policy has generated the benefits that were desired by the voters and with surprisingly small costs.”
The Wisconsin Department of Workforce Development recently reported that a 55 cent hike in that state’s hourly minimum last year resulted in an additional $175 million in payroll taxes and a $3 million rise uptick in state taxes.
Estimates from the pro-ordinance Brennan Center for Justice at the New York University School of Law are that there’s $1.3 billion in untapped consumer demand on the city’s South and West Sides. I don’t see the big-box boys walking away from that over a couple of bucks an hour that many of their employees already earn.
UPDATE: Were rally attendees tricked?
Meanwhile, residents at the Harold Ickes Homes on the city’s South Side said organizers opposing the ordinance tricked them last week into attending a rally of about 1,200 people, heavily covered by the media, by saying that jobs at Wal-Mart awaited them there.The organizers, all employees of The Woodlawn Organization, knocked on doors last Thursday, instructing Ickes tenants to bring their resumes to a bus idling nearby, the residents said. The organization is contracted by the Chicago Housing Authority to help Ickes residents find employment.
“They said we were going to get some jobs, and when we got there, it was just a bunch of bull crap,” said Cheryl Brown, 24. “All they did was talk about how they were going to bring Wal-Mart to Chicago. People were mad.”
Finney, the organization’s director and pastor of the South Side church where the rally was held, denied that the gathering was stacked.
[Hat tip: IlDemNet]
posted by Rich Miller
Tuesday, Jul 25, 06 @ 2:41 pm
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I read this column this morning and at first I was very impressed with the data and began to wonder if the retail folks are blowing smoke for nothing, but then I read the article again and realized that Zorn is talking about a living wage for everyone, unlike the Chicago living wage proposal that is only for big box retailers.
That’s like comparing apples to oranges.
If I’m wrong, I apologize, please correct me.
Comment by Anon. Tuesday, Jul 25, 06 @ 2:56 pm
The Big Box boys will balk, cuss, whine, and cry; but at the last minute they’ll cave… First one, and then the whole pack will follow..
It happens all the time with zoning and land use restrictions. Why would this be any different?
Comment by Downstate Surveyor Tuesday, Jul 25, 06 @ 3:01 pm
Do you remember when we couldn’t buy meat after 6PM or on Sundays in Chicago and Cook County?
The Butchers Union wouldn’t allow it.
I think retailers are afraid of a return to those times with ords like this.
The big box stores a ripe for mechinization and machines/computers/scanners will take over much of the labor. I think retailers are afraid they’ll get stuck with a mandated labor force when the city gets involved like this.
The solution is what Harry Bridges negotiated for the west coast longshorman over mechanization. He said the docks may only need one longshoreman in the future to offload those containers but he’ll be the best paid longshormen ever.
Anyhow, I think it’s conceding the right to the city to negotiate labor that sticks in the retailers craw because they know retail workers as we know them becoming obsolete.
Comment by Bill Baar Tuesday, Jul 25, 06 @ 3:03 pm
i fail to see how these examples are not analogous. employers already target wages now, paying more to the experienced, or the rare, or the knowledgable. creating a separate wage floor for big box retailers is unlikely to have any other effect. and i do believe that proponents argue that this is a first step to increasing the minimum wage across the board.
wal-mart, especially, is bluffing. they’ve already told wall street analysts that their continued growth requires coming into the urban markets. if they fail to do so, the investment banks will change their recommendations. this vote is a no-brainer. it may make the big box retailers mad, but they will still expand into the urban center. they just won’t be transferring their medical costs to the taxpayer any longer. wal-mart can afford to pay *all* their employees’ medical costs…
Comment by bored now Tuesday, Jul 25, 06 @ 3:08 pm
Every time we raise the minimum wage, expand requirements for health insurance, or toughen workplace safety laws, big business cries “Wolf” in Springfield. Why should Chicago be any different?
Despite dire predictions that raising the minimum wage would make Illinois a non-competitive state, I haven’t read a single story about a McDonald’s closing or relocating to Indiana.
Comment by Yellow Dog Democrat Tuesday, Jul 25, 06 @ 3:13 pm
However, McDonalds has incredible turnover, allowing them to offer minimum wage and lower wages overall to a significant percentage of their workforce. While they may not move, their employees do. Just a thought.
Comment by econguru Tuesday, Jul 25, 06 @ 3:28 pm
There is a motivational problem with the raising of minimum wage. The people that have been there the longest get screwed over. I started my part-time job making $5.15 an hour. I got a quarter raise every year (been there 7 years), except this one. My wage even got cut (thanks gov). Everyone now makes $6.50. I would be making $6.85, instead I make 6.50. That is a result of the minimum wage hike and tight management (I found it hard to blame people who have to balance books to stay in the black… this is a government failure). It costs management more money to pay for the same amount of people and I make less money. All that I have to say about this is, it is a great program for high-school students, illegals, and the inexperienced. Everybody that has been around long enough to deserve more money gets screwed over. What results is lower productivity. The older people become lazy and don’t teach the younger people. So the younger people then know nothing about how the system works. Oy… So whether you like the Big Box ordinance or not, it has its flaws. The first flaw, it is an idea of politicians….
Comment by Lovie's Leather Tuesday, Jul 25, 06 @ 3:34 pm
i completely agree that increasing the minimum wage for big boxers will encourage them to train their workforce thoroughly and use them more efficiently. i’ve always thought that labor was the most inefficient part of the wal-mart b-model.
regardless, this ordinance would stop the wal-marts from transferring their health care costs to the taxpayer and make visible to their customers the real costs of these kinds of stores. that’s a good thing, and likely to reduce one of the biggest variables in government spending.
Comment by bored now Tuesday, Jul 25, 06 @ 3:37 pm
This, I believe, is the key sentence from Zorn’s column: “[I]f the law goes wrong, the council can repeal it and the living-wage movement will suffer a mortal blow.”
If the terrible negative effects on business actually come to pass, the council would fall all over itself to return to a no-minimum status. These aren’t industrial businesses searching for a factory location playing a zero sum game. As long as there are consumers on the west and south sides, there will be motivation for big box stores to move in — either despite the living wage ordinance or after it is repealed.
So there really isn’t any long-term downside to giving subsistence wages a chance in Chicago.
Comment by So-Called "Austin Mayor" Tuesday, Jul 25, 06 @ 3:39 pm
Zorn’s column does a good job puncturing the myth that the minimum wage is an automatic job-killer.
That said, it does remain to be shown just what is the right minimum wage for Chicago. If there weren’t _some_ relationship between wages and prices / taxes / unemployment, then let’s pass the ordinance now to make Wal-Mart and every other big-boxer pay $30 in wages and benefits. It’s not that easy.
So the central question remains: is $13 the right target? I have no idea; I’m no labor economist. But I do know it’s not just a question of what should be a moral wage. I wish Zorn had gone more into exploring just how big a hike these case examples were, relative to what wage levels preexisted in those states.
Comment by ZC Tuesday, Jul 25, 06 @ 3:39 pm
I think, as a post I forwarded to Rich, says that what retailers do will depend on whether or not they can be profitable. If they can, they will stay. If that can’t make money, they’ll leave.
And the question isn’t whether or not a city adjusts relatively easily, nor whether tax revenues went up, nor whether employment outpaced other parts of a region. All can be influenced by other factors.
It’s whether or not you have created or lost more jobs than you otherwise would have with or without a given policy.
Comment by Greg Tuesday, Jul 25, 06 @ 3:42 pm
It would, of course be heresy to suggest that the City, through its increase in sales taxes, store by store, use it to pay for health care costs for the employees. After all, no Walmart, no sales taxes, no extra employment contributing to the economy.
The remainder of the extra sales taxes would go to the City to waste as it sees fit.
Comment by Truthful James Tuesday, Jul 25, 06 @ 3:44 pm
What defines a living wage? People will always want what they can’t have/afford. So as they reach this “living wage” as you all call for, they’ll still be left unsatisfied…and guess what, they’ll want more money!
Comment by Danimal Tuesday, Jul 25, 06 @ 3:52 pm
James, that post makes no sense.
…Take a portion of the sales tax to pay for Wal-Mart employees’ health care? That essentially already happens (though not specifically from sales taxes, but rather all taxes) as society picks up health costs of the uninsured and underpaid.
…This ordinance proposes to force the business to bear that cost directly, rather than passing the buck to you, the taxpayer. Yes, you will end up paying for it somehow (an extra penny or two either in price or in tax), but this is an issue of responsibility.
I’m still not sold on the need for an ordinance, but I do agree with the premise which boils down to mandating employers be responsible for their employees basic well-being (which is the way it was for decades in America).
Every minimum wage increase has ended up in a net result of improved job markets and an overall better economy. Conservatives have no proof to the contrary.
Comment by NW burbs Tuesday, Jul 25, 06 @ 3:59 pm
One thing to consider also, look at the actual report for the New Mexico figures (http://www.unm.edu/~bber/pubs/SFLWpt2.pdf). There have been some fairly significant problems with raising the wage rate, especially in the case of the cost of living - (9% increase over a 3% increase nationally). While this does not definitively indicate that the idea of a living wage is good or bad, it could have the unanticipated effect of allowing businesses to raise their prices to accomodate for the increase of cash in consumers’ wallets. Not quite the picture Mr. Zorn paints…
Comment by econguru Tuesday, Jul 25, 06 @ 4:02 pm
NWB –
We come from a different base. If there is no big box, there is no employment at it. There are no workers. Granted they may be on Medicaid and the taxpayer is paying for that, is he not.
If there is no big box, there are no property taxes or sales taxes generated. With the big box we are no generating more of each. Found money, so to speak.
Solomon like, I suggested that we had a wage based problem. Wal-mart and Target should pay workers no more than the value of their labor. The City suggested that workers be paid a fixed amount whether their work had that value or not. In addition, the City suggests that they should pay in addition health care costs.
If the Big Box says, thanks, but I will locate in an adjacent village, what is the City to do — tax them for not locating in Chicago?
So, in return for locating, the City agrees to use the necesary portion of the newly generated sales taxes — not otherwise available — on store employee healthcare.
The employees spend money in the City, income flows throughout the local economy — income which would otherwise not be there. Citizens are healthier, welfare costs go down
Who loses?
Comment by Truthful James Tuesday, Jul 25, 06 @ 4:19 pm
I’m pro-minimum wage, but against targeting specific industries or stores for minimums, even an evil empire like Wal-Mart. Either it should be everyone or no one.
Comment by Niles Township Tuesday, Jul 25, 06 @ 4:19 pm
The smaller the geography, the less successful the minimum wage hike. It’s just too easy for big box retailers to set up shop in neighboring suburbs like the WalMart did in Evergreen Park. Evanston, Skokie, Oak Park, Rosemont, etc. are the biggest beneficiaries of this ordinance. Don’t get me wrong, I think it’s criminal that we haven’t raised the national minimum wage. But that’s a totally different matter from this crazy thing.
If Chicago develops even more of a reputation of being inhospitable to business, that will cost far more than the lost tax revenue which is the inevitable result of this move. I don’t think any Target’s will leave, but they’re extremely likely to scale back their expansion plans within the city limits. I wish these Aldermen understood macroeconomics anywhere near as well as they understand their own need for a pay raise.
Comment by ChicagoCynic Tuesday, Jul 25, 06 @ 4:20 pm
it could have the unanticipated effect of allowing businesses to raise their prices to accomodate for the increase of cash in consumers’ wallets
you don’t know anything about economics, do you? it’s a very predictable reaction: that employers will raise prices, if the market allows it. there’s nothing surprising about that whatsoever.
Comment by bored now Tuesday, Jul 25, 06 @ 4:26 pm
What so progressive about making poor people shop at stores that pass through the costs of a moral wage and folks in the burbs can pay and immoral wage…probably to their own kids to help defray college costs.
The morality of his is beyond me.
Comment by Bill Baar Tuesday, Jul 25, 06 @ 4:36 pm
Zorn says? Who cares, then.
Comment by Tommy Tuesday, Jul 25, 06 @ 5:23 pm
I’m all for raising the minimum wage, because living on the minimum wage is especially hard on single income households. However, I think the “living wage” discussion seems to miss a key issue. Families are no longer generally supported by a single income — I think two earner households are the norm rather than the exception (where there are two adults), and the calculation of how the minimum wage is so far below the poverty level us usually based on one income in a four-person household. Hey, there you go. Keeping the minimum wage as it is supports the new federal policy trend of promoting marriage! te he.
Comment by NoGiftsPlease Tuesday, Jul 25, 06 @ 7:25 pm
bored now, you missed the entire point of my post, it would seem. The potential problem of a wage increase is that suppliers (i.e. businesses of virtually all kinds) will have the economic incentive to raise their prices. It is an admirable goal to seek to improve the lives of people, which proponents of this wage hike are attempting to do by securing more money for families dependent on income from Walmart. However, with more money in the hands of consumers, they will spend it to buy more things than they currently purchase. This increase in demand will cause a rightward shift along the supply curve, thereby causing prices to increase (though, depending on the elasticity of demand for the goods purchased, the price increase may be proportinally larger or smaller than the average increase). As prices increase, consumers will purchase less (overall) of the goods in question, ending up at an equilibrium position of increased consumption, but also, quite likely, higher prices. Given the vagarities of consumer demand, it is difficult to say how much of an increase will be seen, but it is very likely that prices will increase, eating away at the wage hike.
Comment by econguru Tuesday, Jul 25, 06 @ 7:57 pm
I was just in San Francisco and the bills for meals out included $1 fee for each diner for the City minimum wage. Looks like San Francisco is subsidizing the higher wages by charging people who go out for meals…
Comment by kimsch Tuesday, Jul 25, 06 @ 8:28 pm
The minimum wage is ridiculously low.
Corporate profits are up. But wages are stagnant in the Bush economy. I believe the big box stores can be profitable despite a mandated living wage/health benefit. I am quite willing to pay higher prices if it can help the working poor and other low income groups.
Anyone who thinks the big-box ordinance is out of line should try living on $9.50 an hour budget for a month or so. It’s difficult to survive, much less prosper, given the high cost of living in Chicago.
Kudos to Alderman Joe Moore for his leadership on this issue and to the Chicago City Council for standing up to Republicrat Mayor Daley.
Daley’s treading on thin ice right now - so maybe he won’t veto the ordinance. I don’t think Daley can afford to alienate organized labor ,given all his other problems.
SEIU knows where it’s members live and has informed aldermen that they will be held accountable in their wards if they fail toi supoort labor on key issues like “big box.”
Greg Heinz did a story on this a week or so ago. SEIU is prepared to spend at lest $1 million in the February aldermanic elections. I was very favorably impressed by a presntation by SEIU’s Political Director on their plans for becoming a major player in Chicago aldermanic elections.
I suggested that SEIU should also consider focusing on Cook County Commissioners in the future.
Comment by Captain America Tuesday, Jul 25, 06 @ 9:14 pm
Walmart: Low tactics. Always.
Comment by Gregor Tuesday, Jul 25, 06 @ 9:52 pm
This CBS2 clip is great.
“Supporters have a one-word response: ‘COSTCO’”
COSTCO starts its employees out at $10 per hour plus benefits. If COSTCO can, Wal-Mart can, and will.
Comment by Yellow Dog Democrat Wednesday, Jul 26, 06 @ 12:36 am
econguru –
which is precisely my point. If the political structure wants to make social policy, they have the tools to do so outside of forcing wage costs unnaturally higher. Let them use their found extra sales taxes to do so.
Captain America and others –
Nobody is suggesting that a family of four, or six, or whatever can live on a single income minimum wage. Back when I was young (no I was not alive during the Civil War) the minimum wage was considered to be the entry level wage for one person. Single, living at home or perhaps sharing an apartment with friends. Marriage and children came later, after the development of job skills and promotions or move-ons. My generation would never think of proposing and facing the bride’s father with a good handle of what my ‘prospects’ were. Had I developed, no matter how small, a pattern of postposing consumption for savings? Could I support the family I was proposing to have?
Yhat father had raised his daughter with the expectation that she would obtain a better life. It was not the government’s job to provide all workers with the wherewithall to raise a family.
Comment by Truthful James Wednesday, Jul 26, 06 @ 7:07 am
YDD, How many Costco’s do you see in Illinois, in Chicago? Those that can afford an increased wage will stay ONLY where they will make enough money back - in the wealthiest areas. How does that benefit minimum wage workers?
Comment by babs Wednesday, Jul 26, 06 @ 9:21 am