Faced with threats of boycotts by both Target and Wal-Mart, Chicago has backed away from a plan that would have mandated a "living wage" for employees of big box stores. On Wednesday, the city council voted to sustain Mayor Richard M. Daley's Sept. 11 veto of legislation that would force companies that have more than $1 billion in annual revenue and which operate stores larger than 90,000 square feet in Chicago to pay employees at least $13 an hour in wages and benefits by 2010.
ACORN, a nation-wide advocacy organization for low- and moderate-income families and the backer of the measure, did not return calls for comment, but the organization's website posted this statement by the group's Chicago community leader Toni Foulkes:
"The Mayor did the wrong thing by our communities when he bent to pressure from big money interests from out of town," Foulkes said. "We want the Aldermen on the City Council to stand up for their neighborhoods and override this veto, so we can have jobs with fairness and dignity in our communities."
Retail operators, on the other hand, were thrilled. Wal-Mart, which previously threatened to pull the plug on 20 outlet centers it planned to build in Chicago, said the veto would allow further business investment in the community.
"The Mayor's action encourages desperately-needed business investment and development in the city, with job opportunities and savings for those who need it most," said Michael Lewis, senior vice president of store operations and president of Midwest division with Wal-Mart, in an official statement.
Wal-Mart is scheduled to open its first store in Chicago, on the city's West Side, this September. Target and Lowe's, who followed Wal-Mart's lead in threatening to take Chicago projects off the drawing board, did not return calls for comment. Target is supposed to serve as the anchor for a $90 million shopping center on Marshfield Avenue and the $113 million retail project at Wilson Yard. Lowe's was planning two new stores in Chicago. Both retailers already have some presence in the city.
But while the veto is a setback for the union-backed effort to force non-union big-box retailers to provide higher compensation, the movement is not dead. As big box retailers continue to target urban markets for growth, the fight may be replayed again and again, according to Annette Bernhardt, deputy director of the poverty program at the Brennan Center for Justice at New York University School of Law. Wal-Mart has faced stiff opposition from both the New York City Council and community groups such as Wal-Mart Watch in its on-again/off-again search for a New York foothold. And elected officials in Washington D.C. and Orlando, Fla., are also discussing living wage laws.
Chicago, which passed the ordinance in July, was not the first city to consider living wage legislation. In fact, 140 municipalities in the U.S. have already adopted such laws, according to the University of Massachusetts-Amherst's Political Economy Research Institute. The difference is that Chicago is the first city to date to have passed a ban targeting big box retailers. The issue is such a political hot potato, in fact, that Daley's veto was his first in 17 years in office. He said the measure would hurt the city's poorest residents.
According to Jeannette Wicks-Lim, a research fellow at the Political Economy Research Institute, the retailers' stance had more to do with politics than economics-she says the financial impact of the legislation would have been relatively minor. She estimates that the legislation's goal, which would have put wages at big box stores approximately 62 percent above Illinois' current rate of $6.50, could have been easily absorbed by companies like Wal-Mart, which she claims could cover the cost by raising prices by just 0.2 percent.
"This could be covered by a 10 cent increase in the price of a $20 item," says Wicks-Lim. "My guess is that Chicago shoppers would not be swayed to travel outside the city limits in order to get a 0.2 percent discount on their consumer goods."
Opponents of the bill, however, argue that big box operators are not wedded to specific markets and would just as soon pass on cities that mandate higher wages to operate somewhere less expensive. David F. Vite, president and CEO of the Illinois Retail Merchants Association, a professional organization, estimates that the living wage ordinance, if enacted, would cost Chicagoans approximately 6,000 new jobs.
Mike Flynn, director of legislative affairs with the Employment Policies Institute, a Washington, D.C.-based non-profit research organization that is reportedly supported by corporate donors, cites the case of Santa Fe, N.M. as the perfect example why living wage legislation does not help poor people. According to a study commissioned by the Institute, in a 75,000-person job market, the measure resulted in the loss of 540 jobs - not a high number - but all of the people who were affected came from the poorest segments of society.
"Even if Wal-Mart goes in, they will change how they operate," Flynn says. "You will see a lot more self-checkout lanes. And they will have a different set of workers. In Chicago, with $13 in wages and benefits, they will seek out and recruit a highly skilled workforce. And so those people who would have been able to get the job for $9 an hour, will not be able to get it."
Flynn also points out that since Santa Fe's living wage legislation was enacted, the city's job growth reached a four-year low, whereas it previously led the state in job creation. Wicks-Lim counters this assertion, noting that a study completed by the University of New Mexico found that the living wage mandate has no discernible impact on overall employment per firm. The study did find, however, that retail businesses with 25 or more people had a 1.5 employee loss in 2004 relative to Albuquerque, where living wage legislation has not been enacted.