Chicago Targets Big Retailers for Mandated Wage Hikes

Published July 1, 2006

The Chicago City Council is considering requiring “big box” retailers to pay wages far above the federal minimum wage, as well as a guaranteed level of fringe benefits in addition to wages.

Chicago’s Finance Committee discussed the idea at a May 18 hearing and decided to study the matter further, especially as it would relate to Wal-Mart Stores Inc., the nation’s largest retailer. So-called “big box” retailers or “superstores” depend on low profit margins and high volumes rather than high price markups for profitability.

Several Proposals on Table

Chicago currently has several mandated wage proposals on the table. The toughest would apply to workers at both new and existing stores with at least 75,000 square feet of space owned by national companies with more than $1 billion in annual gross revenues.

Those companies would be required to pay an hourly wage of $10, in addition to $3 an hour in benefits to every employee who works more than five hours a week. It is estimated the proposal would cover about 35 stores currently within the Chicago city limits.

“We have to step in and force stores to treat their workers fairly and pay them just wages,” the Rev. Michael Pfleger, pastor of St. Sabina Catholic Church, told committee members during the hearing.

“I would love to see everyone in my community get an increase, but the truth of the matter is, that’s unrealistic,” countered Rev. Joseph Kyles of the 37th Ward Ministerial Association to the Chicago Defender newspaper in a May 19 article.

Job Losses Feared

Alderman Isaac Carothers (29th) argued at the hearing that the ordinance is not aimed at all large retailers but is intended to keep just one, Wal-Mart, out of Chicago. He supports the concept of the ordinance but opposes singling out Wal-Mart.

“This is not the big-box ordinance. This is the Wal-Mart ordinance,” Carothers said.

Alderwoman Emma Mitts (37th), who is fighting for a new Wal-Mart store in her near-west side ward, told reporters before the hearing that passage of the measure would “drive business and employment opportunities away. Let’s put politics aside and put our constituents first.”

“We don’t believe Chicago should be an island unto itself. I’m for people earning more money and getting benefits,” said David Vite, president of the Illinois Retail Merchants Association, to the committee. “But every time government mandates something like that, it has unintended consequences which will mean no jobs.”

John W. Skorburg ([email protected]) is a visiting lecturer in economics at the University of Illinois at Chicago and associate editor of Budget & Tax News.