The Chicago city council has passed an ordinace requiring retailers with $1 billion in annual sales and at least 90,000 square feet to pay a minimum wage of $10 an hour and $3 an hour in benefits:
After months of fevered lobbying and bitter debate, the Chicago City Council passed a ground-breaking 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.
...In arguing that Wal-Mart and other companies can easily afford to meet the new standards, proponents of the measure pointed to Costco, which says it already pays at least $10 an hour plus benefits to starting workers around the country.
It's not about being able to afford to pay the wages. The question is: "will they pay the wages?" Wal Mart could easily "afford" to hire me as their CEO. I have retail management experience, but that ended 13 years ago when I left for graduate school and I have absolutely zero experience in upper management. Simply put, Wal Mart officials could afford me, but why would they want me?
While the proponents are so certain that Big Box retailers can afford to pay the workers, they should also realize that the retailers are not inanimate objects. Retailers are people who are in business to do one thing: to generate maximum profits. Artificially lifting the wages of workers in a competitive labor market, which Chicago surely is, necessarily translates into some jobs that would go to low-productivity workers being phased out over time. At the very least, the law will make them explore options other than hiring low-productivity workers. If maximum profits come by hiring low producitivity workers at, essentially, $13 an hour (plus whatever the cost of living adjustment will be in the future), then the jobs won't be lost. If maximum profits come by eliminating some of those jobs, then they will be eliminated - somehow, some way.
Some of the other things that might happen if the ordinance does indeed pass mayoral and legal muster:
- More 89,000 square foot retail stores in Chicago
- More "check yourself out" counters (which the PowerFamily regularly uses when we shop at the local Big Boxes, if available)
- More non-management work done by management staff
As I noted in this previous post, a Maryland law similar to the Chicago ordinance in that it targeted big box retailers was recently struck down in court. And as I also wrote, this law simply punishes success - arbitrarily, I might add.
Update: The folks at Fark are getting on the discussion.
Addendum: From the Sun Times:
A two-year lobbying campaign waged behind the scenes culminated in more than three hours of debate that aired all of the old arguments -- and some new ones.
They may be old arguments, but they are still valid - no matter how tired reporters and their papers' customers are of hearing them:
- In a competitive labor market, increases in the minimum wage increase unemployment, especially among the lowest-skilled workers (mostly teens). Although the proportionate decrease in employment is much smaller than the proportionate increase in the minimum wage (studies I've seen and opinions I've read suggest that a 1% increase in the minimum wage decreases employment among low skilled workers about 0.1%), the effect is there.
- Increases in the minimum wage drive some low-skilled workers to continue in their current job rather than obtain education/job training... a decision that affects them cumulatively as they age.
- Big Box retailers will look for ways to substitute capital for low-skilled labor.
- Big Box retailers will possibly look for ways to reduce the square footage of their stores to stay under 90,000 square feet threshhold. This can include closing existing stores and not building new stores. If this becomes part of the game, future alderman may well look at amending the law to bring down the threshhold, affecting smaller retailers in the process.
- Big Box retailers will possibly raise some of their prices, passing increased labor costs onto their customers, both "rich" and "poor."