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Bastiat’s Bastions

What is seen and what is unseen.

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Living Wages…Are Dead

A few days ago, the city council in Chicago passed an ordinance requiring a so called “living wage”. This ordinance mandated a wage of $13 an hour (wage and benefits combined) for all employees, but only pertained to employees at so called “big box retailers”, stores with 90,000 square feet or more operated by companies with at least $1 billion a year in sales. These are stores like Target and Walmart.

Mayor Daley vetoed the ordinance, and the city council fell just short of overriding the veto. There will be no living wage in Chicago.

This proposal would have been a large increase in the minimum wage, the economics of which are well understood. Many low wage workers at big box retailers would get higher wages, but big box retailers wound respond by hiring fewer workers. Wage increases will cause prices at big box retailers to increase, thereby harming consumers.

What makes this one more interesting is that by raising the wage only at certain firms, and only in certain locations (Chicago), there are additional implications.

As the proposal only affects big box retailers, might this create a competitive advantage for firms that are competing against the big box retailers? Not mentioned in the article, but surely noted by Walmart’s competitors.

And as this proposal only affects firms within the city limits, might this create a competitive advantage for firms that are located in the suburbs? If the business environment in Chicago proper is unfavorable, firms will locate elsewhere (suburbs). This would affect the tax base, with which parks and social services are funded.

This is why Mayor Daley suggests that for a living wage proposal to be acceptable, it has to be state wide. A Chicago living wage may move jobs to the suburbs, but a state wide law wouldn’t presumably cause large job movements within the state. Might it move jobs to Wisconsin and Indiana, though? I think this is politics with Daley – he knows that state wide proposal won’t fly.

Why do people hate Walmart so much? I love it, as I am fan of low prices. Don’t people have the ability to shop at firms that pay their employees living wages (and charge high prices)? Why hasn’t this business model caught on?

–CT

This entry was posted on Thursday, September 14th, 2006 at 5:41 pm and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

2 Responses to “Living Wages…Are Dead”

  1. Dameyel Welsch Says:
    November 28th, 2006 at 4:32 pm

    Some people I know love Wal-Mart, but I am in love with Target. Some of Wal-Mart’s prices are low. These two stores are taking the world over. Half of the time you may go in Wal-Mart wanting to spend twenty dollars or less and you may end-up spending more. Wal-Mart and Target are monopolies who are taking business from smaller stores. Also, people pay taxes and buy items for businesses to stay open. Prices are already too high, so people do not have the ability to pay high prices. Anyway, some businesses probably do not agree with paying their employees, but some corporations pay their employer’s living wages because they want to work for them.

  2. Allegra Butler Says:
    December 3rd, 2006 at 1:26 pm

    Raising the wages does not seem like a bad idea, but is it needed? “Big Box Retailers” already start you off higher than minimum wage and even higher with experience. Being an employee of Sams who is owned by Wal-Mart, the only workers that may start off at minimum wage is the cart crew, and they are also entitled to the bonuses that they give throughout the year as well as raises throughout their career. So,while raising the wages will not be a bad idea, but keeping it as is, will not hurt much and also keep the prices from going up.

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