Ah Chicago! That toddling town!
After months of fevered lobbying and bitter debate, the Chicago City Council passed a groundbreaking ordinance yesterday requiring “big box†stores, like Wal-Mart and Home Depot, to pay a minimum wage of $10 an hour by 2010, along with at least $3 an hour worth of benefits.The ordinance, imposing the requirement on stores that occupy more than 90,000 square feet and are part of companies grossing more than $1 billion annually, would be the first in the country to single out large retailers for wage rules.
What in the wide, wide, world of sports could my hometown City Council be thinking of? When I wrote about this issue a couple of months ago, Wal-Mart was undecided about whether or not it would go through with its plans to open several more stores within the city limits, thus creating thousands of new jobs for Chicagoans – a city with an announced unemployment rate of 6.1% but with tens of thousands more not receiving benefits and thus, not counted.
Well, Wal-Mart has made up its mind:
In an interview at Wal-Mart’s Chicago office last week, Lewis said if the city council approved the bill, Wal-Mart would “put more time and effort in the suburbs,” in particular focusing on those close to the city in order to draw shoppers across city lines.“It would stand to reason that we would ring Chicago with Supercenters,” Lewis said.
Late Wednesday in a written statement issued after the Chicago vote, Lewis added, “Our preference is to serve the people of Chicago in their communities and we will do what we can to keep up with significant consumer demand from city residents.” The official statement didn’t address whether Wal-Mart would carry through with threats to avoid opening stores within the city limits.
And to that, I’ll add a great big “duh.”
The backers of this measure are made up of the usual suspects; big labor, social activists groups like ACORN, and others who have what amounts to a kindergarteners understanding of economics:
“At the heart of this ordinance is equality and fairness,” Chicago Federation of Labor President Dennis Gannon said in a statement. “Today’s vote sends a message that our elected officials and community members alike are not interested in the creation of low-paying jobs that fail to provide a living wage or adequate health-care benefits for working families.“The choice between no job and a low-paying job is a choice between bad and worse,” Gannon said.
Mr. Gannon, sitting in his plush office in the Prudential Building downtown, obviously hasn’t talked to very many poor, unemployed people recently. If he had, he would know that his last statement about the choice between “no job and a low-paying job” is a crock of unadulterated crap. It also reveals a stupidity that is beyond belief. Better, Mr. Gannon supposes, that we just keep the unemployed on the dole rather than give them the hope and dignity that a job – any job – can give.
In addition, most of the jobs available at these “big box” retail stores are entry level jobs offered to those with few if any job skills. In the suburbs, these include teenagers, young dropouts, and college graduates who majored in philosophy or comparative lit.
In the city – especially this city with its dysfunctional public schools and blighted neighborhoods – it includes most of the unemployed as well as those who are unemployable. The measure passed by the Council has undermined the very nature of the “entry level” job opportunity for these people. The profit margin of retail stores is low to begin with. One of the only ways to hold down costs and make the store profitable is to keep entry level wages low since these positions suffer from the most turnover.
And the reason for that turnover is not necessarily low wages and benefits. It has much more to do with the failure of the employee to demonstrate even minimal job skills by being constantly late or not showing up for work at all as well as poor job performance. A retailer like Wal Mart will have a turnover of up to 60% after 90 days for these reasons alone. This doesn’t include things like employee theft, leaving for another job, or illness. There’s also the fact that the entry level employee has to be trained at a cost in productivity and time which adds considerably to the cost of a new hire.
The difference between $7.50 and $10.00 per hour is insignificant. Employees who stay on in entry level positions (and thus become eligible for regular raises in salary as well as benefits) overwhelmingly cite how they are treated by superiors as well as their enjoyment in working with people they get along with as reasons for staying on. Salary has little to do with a new hire sticking it out long enough to start earning a decent wage.
Also not addressed is that the scale has gone up for managers as well. In short, the entire salary structure for the store has been skewed. Does the store then raise the prices of its items to offset the rise in salaries? Not if it wants to stay in business very long. There are plenty of non-big box stores not subject to the whims of a bunch of economic ignoramuses sitting on the City Council who will be able to sell exactly the same products at a lower price.
Just how ignorant are the Council members who voted for this measure?
But some of the aldermen who voted in favor asserted that big retail firms, despite threats otherwise, will continue to locate in Chicago because of the growth that it offers and its fertile market.“There is a buck to be made, a lot of bucks,” asserted Ald. Joe Moore (49th), the ordinance’s sponsor. “If they are to continue to remain profitable, they must expand.
Huh? You bet they’ll expand. They’ll expand right out of the city limits and into the near suburbs where they’re not treated like some factory manager in the old Soviet Union forced to run his plant according to what a bunch of idiots in the Politburo thought was proper.
Don’t believe me? Here’s the perplexed and bewildered President of the local retail association:
As union leaders and other proponents claimed victory, the Illinois Retail Merchants Association was poised to go to court, if necessary, to seek to have the measure declared unconstitutional.“I’m not as disappointed as the thousands of job seekers who would have had an opportunity for employment,” said David Vite, the association’s president. “There are, as it stands, thousands of jobs that are going to be lost.”
And the Chamber of Commerce weighs in:
Gerald Roper, president of the Chicagoland Chamber of Commerce, put it in more dire terms.“I think that the aldermen who voted in support of this helped put the sign up, really big, that development in Chicago is dead,” he said. “There is no sense of coming to this city because there is no predictability … And it is a sad day.”
Indeed. And the Chamber is ready to play a little hardball:
We are going to take a look at those aldermen who have decided they don’t want development in their particular wards, and we will make sure when we bring in retailers and other companies we go to the wards that have supported development,” Roper said. Two of the council members in good standing with the chamber because of their opposition to the measure are Ald. Isaac Carothers (29th) and Ald. Emma Mitts (37th), who represent impoverished wards on the West Side.
Is it just me or do the celebrations of the proponents of this measure ring hollow when Aldermen representing two of the poorest neighborhoods in the city begged their fellows not to pass this measure?
So much for “equality and fairness.”
UPDATE
I’m starting to feel picked on by the state. Every move I make is watched. Every conversation I have is taped. Every time I go to the bathroom, I feel the omnipresent and watchful eyes of the government making sure I flush and wash my hands.
Or…I’m a nut!
2:06 pm
These are the same goofballs that have banned foie gras and are considering banning high-cholesterol foods.
Chicago is turning into NOT my kind of town.
3:25 pm
Yet another game of “one dimensional chess.”
3:35 pm
The Chamber of Commerce is right. The ordinance is unconstitutional, plain and simple. And big labor could give a damn about non-union workers—that’s what this is all about.
Monsoon
3:47 pm
Rick, I’ve heard and seen from other sources that this whole minimum wage issue DOES have some common-sense economic thought behind it: Many unions base their contracts for wages and benefits to the minimum wage, thus an increase in that will ALSO mean an increase for them. Of course they’re not going to be above-board with their thinking, instead using the liberal codespeak to mask their true intent by trying to get in by the “back door”. Who in their right mind would ever think that a family of four can be supported by one person working for a minimum wage? Only those in their left mind.
4:02 pm
Chicago City Council OKs ‘living wage’
Brushing aside warnings from Wal-Mart Stores Inc., the City Council approved an ordinance Wednesday
4:02 pm
This is simply the outcropping of the “Wal-Mart is big and rich and, therefore, bad” mindset of lefties. I’m glad Roper is playing hardball with them. Chicago alderman are nothing but a nattering group of busybodies hell-bent on invading every aspect of our lives. I feel like I’m being forced to move to the suburbs. Ugh.
6:46 pm
I live in Alabama and we have two supercenters w/in 9 miles of each large suburban area and they are SWAMPED with shoppers all the time. I love Wally-World and know some folks who work there. They are cashiers who started at $8.00 an hour and even some of the high school stockers are making $6.50 to start.
My best friends son is a dist. mgn in Gulf-Port Ms. and when Kat came in they gave away most of the store. He started at Wal-Mart 15 years ago as a shopping cart getter and continued to work his way up to dist. mgn. with NO COLLEGE EDUCATION.
Heck, in Alabama the McDonald’s is starting these summer kids off at $7.00 cuz our unemployment is so low in Alabama.
These folks in Chicago need to get a life and do something with it and don’t get me started on unions.
My 15 year old makes $150 a week at a Christian Day Camp.
7:05 pm
Radio.blog is watching
New World Man sir, or whatever they’re calling you now, I love these weekly playlists of yours. But how do I, a mere blog reader, experience this music for myself instead of just reading about it? Why, you can listen to all 12 songs, in order, from ea…
7:27 pm
Here in the People’s Republic of New York City; there is also hostility to any big box stores and the effect is telling. Nassau County (right outside of NYC) and Queens County (part of NYC) are about the same size geographically and demographically.
Nassau has 45,000 more retail jobs than Queens, due to their acceptance of the big box stores. The NYC City Council is just as leftist and crazy as the Chicago CC and hates the big box stores.
So the citizens of Queens and NYC have to travel outside of NYC to do any kind of work in the retail sector.
Does our RINO Mayor Bloomberg care? Heck no, he’s ticked because a power outage in Staten Island forced him to cancel a trip to Ireland. No idea why he’s going to Ireland, but he should stay there.
7:31 pm
Rick,
Well argued. Can’t believe I hadn’t thought of the politburo analogy. It’s spot on.
7:26 am
Big Boxes, Packing it Up?
The Chicago City Council voted in favor of the ordinance that would require &ldq
8:59 am
I posit that we cannot understand the actions of the aldermen because most of the readers/commentors on this site are conservative or libertarian leaning. The philosophy behind the Chicago City Council is the same nanny-state philosophy of big goverment and union hiring businesses that people need someone to take care of them.
Too often when people try to “violate” economic laws (i.e.: try to disrupt the nature of supply and demand), the results are very messy. The airline industry is a prime example of this. For quite some time, it was run under conditions that were somewhat socialistic. The FAA regulated fares. The workers (pilots, flight attendants, mechanics, etc.) were represented by unions who claimed their “fair share” including pension plans that would take care of the workers for life. However, when deregulation happened, the industry fell apart. Customers shopped for fares, following the principles of supply and demand. The airlines couldn’t control their labor costs to balance out the changes in revenue. As a result, the nanny-state government has to pick up big pension costs that the nanny-state bankrupt airlines promised. A similar example can be seen in the automotive industry as well. I suppose a lot of people ignored the moral of the fable of the ant and the grasshopper.
Having survived the purgatory of retail management, I learned a lot about the economics of the industry that apparantly Alderman Moore does not understand. A public company such as Wal-Mart owes a responsibility to its shareholders to build worth. While expansion is an idicator analysts use to measure the value of a retailer, it is accompanied by net profits and same store sales. If the stores in Chicago have to charge more to make up for higher wages, sales growth will be flat. The other alternative is to use lighter staffing in those stores to reduce labor cost. Moving into such markets will be the last course of action for Wal-Mart. I would expect them to expand into other ventures than to move into locations that don’t help shareholder value.
In the real world, as other commentors have stated, Wal-Mart and other big box retailers do not even start people out at minimum wage. The better managers in these stores are always looking for the sharpest of their workers and promote them. Having sharp people working for When people prove themselves worthy, they get paid more. Someone who is willing to take on the responsibilities of head cashier earn more than someone content just to work the register.
Of course, I’m curious about who defines a living wage. Who decides what is absolutely necessary for survival?
The bottom line is that I don’t believe these people hate big business. They are so wrapped up in their paternal philosophy of big goverment/big business taking care of workers for life that they cannot comprehend why a business believes in self-reliance of the workers.
9:54 am
[...] I love Chicago, but this legislative assault on big-box stores by the union run city is, well, simplissime is the nicest word that comes to mind. It is hard to believe it has a whole school of economic thinking named after the department at one of it’s universities that is epitomized (but was nto founded by and did not end with) by this economist couple. [...]
1:27 pm
Heh, and out here in Kane County, Randall Road raises Wal-Marts, Meijers, Lowes, Home Depots, etc. like corn plants! I can go 5 minutes North or South and buy almost anything I need. Sorry Chicago, you don’t want ‘em, we’ll take ‘em!
2:03 pm
I couldn’t agree more with you RightWing! But you have to remember that Chicago is a land unto itself—where the Mayor and the Aldermen believe that Miegs Field was bad (so they bulldozed the runways in the middle of the night) and that guns cause crime…
6pence
PS- and I’m a life-long Illini.
3:22 pm
Steve,
I actually I understand the reasoning behind alderman’s decision. I also understand the irony that this is occurring in “Chicago”.
If the market forces were allowed to take place in the airline industry, there would probably be only 4 to 6 airlines in the United States.
Drewsmom,
One problem is that the cost of living is much higher in Chicago than say in Alabama or even Fairfield, Illinois. While the reasoning behind forcing “big box” is understandable considering that $10.00 an hour doesn’t pay the bills quite as well as in St. Louis, it is also true that businesses will go to places where labor is cheaper. I mean look at the various auto companies setting up plants in the South.
3:32 pm
Higher and higher union dues go to pay for more and more political action committee BS that make the unions even more powerful. This is no different. The unions won this round. The losers?...thousands of job seekers who really want to work or NEED to work. So what is all the celebrating about? Who wins in this situation? The city councilmen really need to ask their consituents and stop acting as if they cannot be held to account for their votes. They don’t have the foggiest idea what we voters REALLY want.
Carol
5:26 pm
Svenghouli,
If no one will take the jobs at the wages that Wal-Mart offers, that is Wal-Mart’s problem. They have a choice at that point: raise wages or see suffering sales. If other companies have higher paying jobs that require the same level competence, Wal-Mart will have to compete. This happens.
Looking at how this law is structured is also very troublesome. It only applies to big retailers. If you prevent the big retailers from moving in by making the climate unfavorable, people have to go to smaller stores that are not chained to the idiotic law. These smaller stores could easily have poorer benefits than the big box retailer, and they will not be able to match the efficiencies of scale that the big boxes utilize. The latter just increases the costs to consumers. These are the same consumers are the people affected by the council’s law, and they lack buying power. So the council is hurting the very people they pretend to protect.
8:38 pm
Steve,
Don’t worry I understand economics. My father did some graduate work at University of Chicago through Illinois Institute of Technology. I just found the irony in the fact this is occurring in the birthplace of the Chicago School of Economics.
Anyway, we all know the one of the greatest costs that a company incurs due to distribution. If the wage increase drastically hurts Wal-Mart’s profit margin for the region, there won’t be anymore expansion. Other big chains will see this as a failure and avoid Chicago like the plague.
10:09 pm
Hey Guys,
Apparently the Republican party is trying to raise minimum wage to $7.25. They decided attaching the raise with a permanent cut to estate taxes. Minimum wage increase will phased over three years. This opposed the plan that was proposed by the Democrats a month ago. They wanted to phase the increase in two years. This might mean that drive thru windows at fast food joints will operated from all the way from India.
But seriously, the minimum wage buying power is the weakest in 50 years. There should be an increase in minimum wages, but isn’t an increase of over two dollars a bit extreme?
http://home.peoplepc.com/psp/newsstory.asp?cat=news&referrer=welcome&id=20060728/44c98bc0_3ca6_1552620060728-11820610
7:42 am
Svenghouli,
You’re confusing me a little with your posts. First you say that you understand economics, and then you say there should be an increase in the minimum wage.
Why should the government dictate the minimum wage? If there is not a labor supply for a job, an employer will have to raise wages to attract workers. If there is a surplus of labor, why should the employer still have to deal with an artifical floor? A minimum wage increase will have one of two effects. It could cause inflation because of the artifically higher labor costs, or it will decrease the number of jobs available to low skill and no skill workers (As you pointed out about the drive-through operated remotely from India). If the latter happens, people with no income will have MUCH lower buying power than people who are making the current minimum wage. If the former happens, there is no net change in buying power for the minimum wage people.
What is happening in Congress is that the Republicans have made a poison pill for BOTH sides. The Republicans have to choke down an increase in the minimum wage while the Democrats have to accept a decrease in the death tax penalty. I wonder if that is the future of “bipartisanship” to craft legislation that has elements that both sides of the aisle like and despise at the same time.
7:25 pm
Saturday Night Links
Nashville Skyline. Maggie’s Farm’s Dylanologist is making the big move from Yankee-land, across the Mason-Dixon line to Nashville to pursue his career. We wish him the best, and ask that the Volunteer State treat him well. Even though he is a Yank, h…
6:56 pm
[...] Rick Moran for his vituperative attacks on Windy City proletariat, with capitalist so-called “economics.” [...]
11:43 pm
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