The liberals’ weird, irrational war against Wal-Mart continues (I call it irrational because the only basis for it I can think of is aesthetic: Big boxes selling cheap stuff to proles who drive SUVs aren’t as pretty as cute boutiques selling expensive stuff to classy people who drive Lexuses). Here’s the latest salvo, a brand-new ordinance passed by the Chicago City Council, as described by law-blogger Gary Becker (hat tip: Mirror of Justice):
The ordinance requires that beginning next July, companies with more than $1 billion in annual sales and having stores in Chicago with at least 90,000 square feet of space will have to pay Chicago employees a minimum of $9.25 an hour in wages and $1.50 an hour in fringe benefits, such as health insurance. By 2010 these will rise to $10 an hour in wages and $3 an hour in benefits. These minimums far exceed Illinois’ minimum wage of $6.50 per hours. About 40 existing stores in the city would be affected.
Chicago’s mayor Richard Daley, however, strongly opposes the ordinance, mostly because he, unlike the City Council members, has thought about the impact such a law will have: mainly driving Wal-Mart and other big-box stores right out of Chicago and into the suburbs, where only the more affluent Chicagoans will be able to reach them. Instead of protecting low-wage workers, it can be predicted with near-certainty, the ordinance will put more of them out of work, as chain retailers either shut down their Chicago operations or decline to open stores in Chicago to begin with. And that’s not even mentioning the low-income consumers to whom outfits like Wal-Mart cater, who can now expect to pay more for food, clothes, household furnishings, and other necessities.
The ordinance will raise the cost of using low skilled labor in Chicago by Wal-Mart, Target, Home Depot, and other big retailers with mega stores. Even without it, large cities are not attractive to mega retailers because space for large stores and for the parking they require is much more expensive in cities than in suburbs and smaller towns. These big box stores are much more common in suburbs of large cities than in the cities themselves partly for this reason, and partly because many suburban communities offer tax and other financial subsidies to these stores in order to induce them to locate there.
Even if retailers with mega stores were trying to cater at least in part to the Chicago market, this ordinance makes them more likely to open up in suburbs that could be reached by some Chicagoans as well as by those living in the suburbs. Large retailers that continue to operate in Chicago will reduce their use of low skilled workers by replacing some of them by more skilled employees, and by machinery and other capital. Retailers will also try to avoid being covered by the ordinance by reducing their space to just below 90,000 square feet.
In a city like Chicago the burden from these responses to the ordinance will fall disproportionately on African Americans and Latinos since fewer jobs will be available to workers in the city with less education and lower skills. In addition, prices in Chicago of items sold relatively cheaply by stores like Wal-Mart and Target will rise because fewer of these stores will open in the city. The mega stores that remain will raise their prices because their costs will go up. Since city customers of these stores are mainly families with modest incomes who seek low prices rather than elaborate service, they more than the affluent classes will be hurt by the rise in prices and reduced availability of big box outlets.
Most cities are desperate to lure big boxes–because they know that’s where a lot of people like to shop, and they can spell T-A-X R-E-V-E-N-U-E-S. Not Chicago, which seems to be in the thrall of unions and liberal ideologues. Like Becker, I hope Daley vetoes this silly new ordinance.