Wednesday, September 1, 2004
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The blinkered economics of the Chicago City Council
Gary Washburn and H. Gregory Meyer report in today's Chicago Tribune that City Council opposition has succeeded in thwarting Wal-Mart's plans to open up a big box store in the South side of the city (for previous posts on this topic click here, here and here):
What might those two proposed ordinances be? Glad you asked:
While even free-market enthusiasts acknowledge that the effect of minimum wage laws is not cut and dried, I'm pretty sure even Alan Kruger would say that $12.43 would be a deleterious move. A $10 minimum wage with a grandfather clause would be equally bad. As for the content provision, well, that's just moronic.
As a south sider who would like to see more jobs and more commerce created in the neighborhood, I'd like to thank Alderman Joe Moore and Alderman Edward Burke for doing such bang-up jobs at public policy. If you'd like to thank them too, feel free to shoot an e-mail to Mr. Moore or an e-mail to Mr. Burke applauding them for their bold and imaginative contributions to urban planning and economic development!!posted by Dan on 09.01.04 at 11:06 AM
The politics of Illinois are the best argument i've ever heard against representative democracy. Alan Keyes for god's sake.posted by: Mark Buehner on 09.01.04 at 11:06 AM [permalink]
Don't forget about the Ikea store on the North side. Daley pissed away millions on tax revenues on that one.posted by: Rick T. on 09.01.04 at 11:06 AM [permalink]
I suppose the $10 figure was picked because it's the starting wage at Costco.
Big box stores, even nice ones like Costco, bring some major burdens and cities like to forgive them in the hope of economic development. But have you seen the traffic jams at the Interstate 80 exit for Emeryville, the city near Berkeley featuring an IKEA and a number of medium-sized malls? There's also the possibility, especially with Walmart, that down the road Chicago will be left with a vacant store in what was already a devastated neighborhood. (I'm in Chicago about twice a year for family reasons, and I'm seldom south of 59th Street.) While the economic arguments currently in play here may be poor, I don't think that [proves Walmart will be a desirable addition to any neighborhood, even poor ones.posted by: Andrew J. Lazarus on 09.01.04 at 11:06 AM [permalink]
I'm pretty sure even Alan Kruger would say that $12.43 would be a deleterious move. A $10 minimum wage with a grandfather clause would be equally bad. As for the content provision, well, that's just moronic.
posted by: Mike on 09.01.04 at 11:06 AM [permalink]
What a living wage is becomes problematic. The majority of those living under the poverty line in America still have air conditioning, cars, even playstations. The majority living under the poverty line in Haiti scrounge insects not to starve to death.
Does it make any sense to bump the 16 year old working after school at the DQ up to 10 bucks an hour along with the single mom working as a typist? How many jobs simply get eliminated, or potential jobs not produced because its simply not cost effective to pay somebody over a certain amount for certain work? I'd hardly call those questions 'pseudo-economics'. Is the current minimum wage preferable to unemployement?posted by: Mark buehner on 09.01.04 at 11:06 AM [permalink]
I’m so glad I live in Houston. Our city is adding population every year. Our Democratic mayor is pro-business. We don’t have time for such economic illiterate nonsense. Chicago is only making it very difficult for the poor. The city will eventually be home for only the relatively affluent---and welfare recipients. The working poor will be forced to move elsewhere.
Please note that those favoring this silliness are almost certainly John Kerry’s supporters. Where is Robert Rubin when you need him? I just made up a nice slogan: If you despise Wal-Mart---then vote for Kerry.posted by: David Thomson on 09.01.04 at 11:06 AM [permalink]
I have a question....when walmart spends more money on labor at the store in chicigo, do they rasie prices at that store (and just that store)to make up the difference is lost revenue.
or do the spread out the loses across all of their stores.
I would like to know what somone thinks on that , i have my ideas, email me of you have a good take on itposted by: cube on 09.01.04 at 11:06 AM [permalink]
Wal-Mart is godzilla with predatory practices(read about what it does to vendors), which imports $13B yr. from China. Any who think Wal-Mart is good for the U.S. is a fool.posted by: Alex on 09.01.04 at 11:06 AM [permalink]
I understand Wal-Mart reported lower profits this quarter. Who'd a thunk it. Maybe people are discovering that with Wally World you're getting what you pay for. I've found better quality for less at K-Mart. If you think Wal-Mart adds anything to your community, you really do need a lesson in economics.
And I see nothing wrong with cities demanding that if they are going to make changes in zoning or tax laws or anything else that they demand the merchants pay a decent wage. Wal-Mart's part-time employees, the majority, will thank them. And if the stores can operate with fewer staff, they would.posted by: chuck rightmire on 09.01.04 at 11:06 AM [permalink]
“If you think Wal-Mart adds anything to your community, you really do need a lesson in economics.”
The John Kerry campaign is currently under great stress. But there is one thing that these folks have successfully accomplished up to this point: convincing both Howard Dean and Robert Rubin that they are the real power behind the throne. Somebody obviously is being played for a fool. Is it Rubin or Dean?posted by: David Thomson on 09.01.04 at 11:06 AM [permalink]
So the bottom line of this argument is, the lower classes are too stupid to know that it is their solemn duty to pay higher prices so the Evil Walmart can be stymied, so it is incumbent on the government to inact this for them. Typical 'progressive' thought.posted by: Mark Buehner on 09.01.04 at 11:06 AM [permalink]
I have two causes I'm passionate enough about to spend a lot of my free time on: organizing retail workers and promoting public transportation. This issue pits those cause against each other a bit because the Chicago Transit Authority gets much of its revenue from the sales tax in the city. Nonetheless, I'm glad to see Wal-Mart give up building a store on the south side if they're going to refuse to pay their employees a decent wage. Retail employees, often single moms, deserve a better deal. And, taxpayers deserve a better deal, too. By paying their workers more, Wal-Mart would raise the number of those who contribute to the public coffers rather than draw from them.
Cube: "I have a question....when walmart spends more money on labor at the store in chicigo, do they rasie prices at that store (and just that store)to make up the difference is lost revenue."
Theoretically, prices are set based on what competitors will charge for the same product. If Wal-Mart alone had to pay higher labor costs, then their prices would remain the same. If their competition had to pay the same higher labor costs, they could then raise prices. The tough part here is deciding who Wal-Mart's competition would be. For instance, would suburban K-Marts make it more difficult to raise prices?
In any case, labor costs are usually far less than 10% of revenues for retailers. Wal-Mart could double its wages and prices would have to rise less than 10% to completely cover that rise, not taking into effect some advantages in efficiency the company would have from lower turnover. If Wal-Mart had to raise its starting pay to $10/hour, the rise in labor cost would be much less than 10% or revenues-- I'd bet it would be on the order of 1% or 2% of revenues. For most consumers, that's not a noticeable difference.
To answer Cube's question, Wal-Mart's response to higher labor costs would be to build fewer stores. Some retail stores in any given chain return a gigantic profit, some a modest profit, some a small profit, some break even and some operate at a loss. If Wal-Mart currently opens locations that they think would make a small profit in the current climate, rising labor costs would see them open new stores only in locations that they currently believe make modest or gigantic profits.
posted by: James Withrow on 09.01.04 at 11:06 AM [permalink]
"Nonetheless, I'm glad to see Wal-Mart give up building a store on the south side if they're going to refuse to pay their employees a decent wage."
1.What is a decent wage and why do you get to decide it?
From my experience with the products I bought at Wal-Mart, which are the reason I no longer shop there, the lower prices, if they exist in a highly competitive market, are just another flame out to exploit the poorer people. They are getting lower prices and they are getting lower quality when they buy anything that is Wal-Mart branded. Name brands, in my town, are not cheaper.
And David Thomsen, when you wipe the froth off your face, you might learn to spell.
And yet they still prosper. Stupid poor people needing taking care of again. Dont they know that Rolex is a better brand than Timex?posted by: Mark Buehner on 09.01.04 at 11:06 AM [permalink]
I look at Wal Mart as an extender of my take home pay. If a store would locate near me, my after tax dollars would go much further. In poorer neighborhoods the ability to obtain fresh produce at a reasonable price is a great boon. If I can afford steak this week I don't mind select grade because paying $22 a pound for filet mignon seems unreasonable. The idea that as a consumer I should be paying for the medical costs of those who serve me is genuinely stupid as is, of course, the idea that any employer should. Some ideas are, as the great GKC noted, so dumb that only intellectuals could believe them.posted by: leon dixon on 09.01.04 at 11:06 AM [permalink]
So, since the jobs that Walmart would provide do not currently exist there now, who will provide them instead of Wal Mart? The small shops in that economically devastated area have, for the most part, completely failed in that respect.
As far as paying a "living wage" - nobody is putting a gun to anybody's head and making them work at WalMart. If the wages they pay are substandard, then the workers will seek jobs elsewhere. Let's say I am a full-time worker at another job who just wants to make some extra money to help out my family. Big retail stores like this are good sources of those kind of jobs since they are open at odd hours and on weekends. When I was in college, I worked three part-time jobs in addition to going to school - it allowed me to have my own apartment while relieving my parents of the finacial burden on completely supporting my college education. Very few of the people I encountered in my retail career did it full-time, other than management.
Also, the people who live in the area have just lost a huge potential source of low cost goods and groceries to make their lives better. The city has boned a huge source of potential sales tax revenue and /or property tax revenue from moving into the city. Congrats.posted by: Don on 09.01.04 at 11:06 AM [permalink]
The people in that neighborhood should put real effort into wooing Costco. That way, they could purchase goods at real bargain prices. The city would benefit because Costco offers reasonable health insurance, thus less people would have to use the emergency room as a healthcare provider of last resort. And, the city and federal govt wins because Costco employees starting pay is at least $10.00 per hour so less families would need food stamps or have to visit food banks.posted by: costcorules on 09.01.04 at 11:06 AM [permalink]
Don: "Very few of the people I encountered in my retail career did it full-time, other than management."
You probably haven't worked in grocery stores then. Even in the non-unionized locations where I've worked, more than half the hours have gone to full-time employees. And that's the heart of the matter-- that Wal-Mart would be selling groceries.
The Jewels and Dominicks grocery stores in the city pay union wages, which means their employees tend to contribute to the public coffers rather than subtract from them. Wal-Mart would take sales away from those stores. Why should the city do Wal-Mart the favor of re-zoning or improving nearby infrastructure if it's going to create a tax problem? Wal-Mart was given the option of not selling groceries and it refused.
The last poster is right. Costco would has no problem competing in this environment. Wal-Mart, too, could compete if it wanted to pay the decent wages or not sell groceries. I honestly don't understand their answer on the second question, but the reason they won't do the first is that then they'd succeed while paying decent wages and would no longer have any good excuse not to. It's not that Wal-Mart can't pay well; the company just chooses not to because then their stockholders can pocket more profits.posted by: James Withrow on 09.01.04 at 11:06 AM [permalink]
"It's not that Wal-Mart can't pay well; the company just chooses not to because then their stockholders can pocket more profits."
Which is the reason they invest in Wal-mart. And with 401ks all over the place a lot of those stockholders are regular middle class people trying to save up for a good retirement and maybe not have to live off the government dole. This whole socialist, command economy argument is the same self-perpetuating spiral it has always been.
If Costco could compete in that environment, they would either be there, or be thinking of being there. If, perchance, the City Council DID allow Wal-Mart to open a retail store in the area, Costco (presumably) could put them out of business with their better prices and higher wages. Why not let the free market decide? It's normative decisions such as these that make any public policy troublesome. You (collectively) hope that people perform the action that will benefit others the most, but disregard the reality that people (almost) always act in their own best interest. Until the choice is reduced to one retailer, people have a choice in where and when they will buy each individual item that they desire. Sure, Wal-Mart is cheaper in some categories, and I purchase those items there. For meat and veggies, I go to local shops that are more attentive to my needs...although the prices are higher. It seems some of you are positing that once Wal-Mart arrives on the scene, all is lost. That is certainly not the case.posted by: skh on 09.01.04 at 11:06 AM [permalink]
One of the bizarre things about the "living wage" movement is the strange idea that the worker is the only wage earner in the family.posted by: David Nieporent on 09.01.04 at 11:06 AM [permalink]
In Rockford we slow development by both politics and incompetence.
What politicians fail to see is all the business that doesn't happen when people who pay less for X have more money for Y.
Capitalist economics are dynamic. Become more efficient or die.posted by: M. Simon on 09.01.04 at 11:06 AM [permalink]
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