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America vs. The World

The big trouble with dumb bastards is that they are too dumb to believe there is such a thing as being smart. — Kurt Vonnegut, Jr.

Tuesday, July 25, 2006

Shooting yourself in the economic foot

(updated below)

I don't shop at Wal-Mart. Among other reasons, because the Walton family uses the stores to promote their conservative politics (e.g. censoring media and refusing to sell the morning-after pill). And as a matter of simple aesthetics, I'm willing to pay higher prices in order to support some of America's older and smaller businesses.

Then again, I can afford to.

Much of the opposition to Wal-Mart and other "big-box retailers" is based around the view that they don't pay their employees enough to live on. But there is a lot of evidence that poor communities benefit from Wal-Mart's low prices more than enough to make up for the low wages they pay. From a paper by Jason Furman (PDF):
There is little dispute that Wal-Mart's price reductions have benefited the 120 million American workers employed outside of the retail sector. Plausible estimates of the magnitude of the savings from Wal-Mart are enormous — a total of $263 billion in 2004, or $2,329 per household. Even if you grant that Wal-Mart hurts workers in the retail sector — and the evidence for this is far from clear — the magnitude of any potential harm is small in comparison. One study, for example, found that the "Wal-Mart effect" lowered retail wages by $4.7 billion in 2000.
Is this bullshit? Maybe. And when both sides can make a good case, to me that signals we should just let the market work it out.

The Chicago City Council isn't having any of that laissez faire crap, though. A new ordinance up for a vote Wednesday would increase the minimum wage to $13 an hour in wages and benefits by 2010. But only for stores with at least 90,000 square feet and annual sales of $1 billion.

Sounds great for workers. But what about those big-boxers? Well, Target has put three new Chicago stores on hold as it awaits the result of Wednesday's vote. Not that the Council cares, apparently.
Ald. Joe Moore (49th), lead sponsor of the measure, scoffed at the Target report.

"They are clearly trying to threaten and intimidate the members of the City Council," he said. "It's nothing short of bullying tactics. If you look at other cities or states that have passed similar laws, there were similar kinds of threats and, after the dust settled, they went back to business as usual. I think it's an idle threat."
Bullying tactics? Who the fuck is this moron? Giant retailers like Wal-Mart and Target have built their entire business models on keeping costs low. (Wal-Mart operates on a profit margin of about 3.5 percent.) You tell them that you are going to increase one of their major expenses by about a third. Completely predictably, they then have second thoughts about opening new stores in your city — especially when they can build in Calumet City a few miles over and pay their employees whatever the hell they want.

This dumbass ordinance isn't even popular in the communities in line to get new Wal-Marts and Targets. Several aldermen from predominantly black and poor wards oppose the measure because they are counting on these huge new retail centers to help revitalize the community. A compromise proposed Monday would allow aldermen to opt out of the requirements on a ward-by-ward basis.

Ald. Moore isn't having any of this, either.
An opt-out provision "would completely undermine the purpose and effect of the ordinance," Moore declared. "I don't think whether a Chicago worker gets a living wage should depend on the whim and caprice of the individual alderman."
A living wage for all workers is a reasonable goal. But you can't just make it happen by magically waving the minimum-wage wand around. And you especially can't make it ha[[en by passing laws that mostly have the effect of driving employers out of your city.


UPDATE:

Well, the Chicago City Council passed the ordinance by a vote of 35 to 14. It still might face a veto by the mayor.

Predictably, suburban communities are already doing their best to woo Wal-Mart and other big-boxers away from the city.

2 Comments:

Anonymous Johnny5 said...

Man, agreed, this Alderman Moore character has his heart in the right place, but his execution doesn't seem like a great idea. Bullying tactics? Yeesh.

Anonymous P. Pirx said...

Well, two points here:

1) To quote one of the aldermen from the neighborhoods which are hoping to get some of the jobs in Walmart and Target, "before we talk about 'living wages', we would like to see just some wages.

2) There is a basic issue of fairness here. Passing a law setting a minimum wage, no matter how high, for all businesses, or at least for all businesses which are competing within same category, is fair. May not be smart (and often isn't) but at least it is fair. On the other hand, singling just specific businesses within a given category is an offense to any human perception of fairness and should not be tolerated, no matter how noble the motives of the proponents are.

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