Windy City Continues to Blow

In a nonsensical confluence of living-wage hype and anti-big box angst, Chicago just passed a bill forcing big-boxers to pay a higher minimum wage by 2010. The Chicago Tribune reveals Wal-Mart's less-than-surprising response to the latest in a string of stupid bills out of the city:

In an interview at Wal-Mart's Chicago office last week, Lewis said if the city council approved the bill, Wal-Mart would "put more time and effort in the suburbs," in particular focusing on those close to the city in order to draw shoppers across city lines.

"It would stand to reason that we would ring Chicago with Supercenters," Lewis said.

Comments

[Joe Majsterski]

The Chicago ordinance requires big-box retailers that are 90,000 square feet or more and generate $1 billion in annual sales to pay workers a minimum wage of $10 an hour and $3 in benefits by 2010.

That is a ton of money to hand out to employees. I applaud Chicago's efforts to decrease their tax revenue.

[gaijin]

I wonder if the employee discount gets counted as benefits?

[mitch]

Is Wal-Mart considering the "Wal-Mart Express" or "Wal-Boutique" strategy?

"Welcome to our new, cozy, 89,999 square foot location!"

[joe]

It also stands to reason that a major urban center wouldn't want to see its precious real estate sqandered on big boxes and their parking lots.

[ChrisO]

I suspect the real pay issue was not enough fat envelopes full of $100 bills being circulated.

[Number 6]

I could have sworn that the precious real-estate in question was owned by title-holders.

[mitch]

Ugh, "a major urban center wouldn't want to see its precious real estate sqandered...." Who decides if property is squandered? Individual owners of said property, or beauracrats and elected officials who can enforce their own judgements on the rest of us because they have a monopoly on the use of force?

Joe, are we all really just cogs in some huge machine, the direction of which is determined by "experts" who come up with new theories every few decades that contradict their old theories and politicians who are slaves to the whims and self-interest of the most excitable voters and contributors?

[Ayn_Randian]

Tee hee, joe, as the leet-kiddies say:

You were pWned by Number 6

To say the least, your feudalistic attitude that the lordships of Chicago own this land is enough to convince me that rationally arguing with you is hopeless.

[Lamar]

Right or wrong, it's probably better economically for the city to relegate the buying of cheap crap to outside the city limits. How many people binge at Walmart, then go off for a fancy, downtown dinner? Surely, the city is also afraid of Walmart's reputation as a public benefits hog (by its poorly paid employees).

[Number 6]

Lamar-I can only assume that if you've been to Chicago, your travels were limited to the gold coast. There are plenty of folks there who can't afford nice dinners, but could use a place to buy the cheap crap to which you so derisively refer.

[gaijin]

Surely, the city is also afraid of Walmart's reputation as a public benefits hog (by its poorly paid employees).

Some of the neighborhoods WalMart is trying to get established in have unemployment rates of 20% or more...so tell me again how employment creates a public benefits drain?

[Madog]

Yeah, we wouldn't want Walmart employees to hog all the benefits. It's not like people without jobs use more of those benefits or cost the city more or anything. And we wouldn't want those poor people to have an affordable place to shop either, would we? I'm sure they'd rather pay a premium to buy from small retailers in the city or else ride on the bus for an hour to get outside of the city limits...

[Jason Ligon]

This is inhumane because it only applies to big box retailers. Presumably, everyone employed by Mom and Pop is starving to death in the streets.

[Anon]

I realize everyone enjoys standing on general principles, but can anyone shed some light on the actual local politics? In particular, I assume that this ordinance was supported by Jewel's, Dominic's, and other grocery stores afraid of having to compete with Wal-Mart. Moreover, I imagine that the unionized workers who work at these stores (and who probably do live within the Chicago city limits) also supported this legislation. The photos accompanying the article seem to support this, although I haven't looked at them all yet. But was there any lobby in opposition -- not just Wal-Mart but say, local officials touting the benefits of Wal-Mart to their particular neighborhoods -- cheaper food prices being a prime example? Were there any arguments about fighting for better transportation infrastructure to deal with the Wal-Mart traffic flow -- did Wal-Mart itself address this issue for any of its potential development sites by suggesting that it would support such a fight? I know there are a few Chicago posters here, so I thought they might know.

Also, does anyone know if there any indication that Wal-Mart might actually prefer to ring the city with Supercenters -- Chicago has a large suburban spread, with correspondingly wealthier potential clientele. It's a strategy that has worked for various price clubs like CostCo, as well as just good old-fashioned deparment stores. Or is Wal-Mart really betting on its grocery business these days?

The rest of you may return to defending the principles of capitalism, or whatnot.

Anon

[Clean Hands]

The opposition to WalMart seems to be based primarily on elitism, as far as I can see.

Here in Portland, we have a city council member who flaunts his undying hatred for WalMart, but the city recently wildly celebrated groundbreaking on a new Ikea outlet.

Both are big-boxes.

Both are non-unionized.

Both have HUGE facilities footprints. (If anything, Ikea's a good deal larger.)

But somehow, Ikea=Good and WalMart=Bad.

I can only conclude that it's because the (clean, well-behaved) yuppies shop Ikea, while the (dirty, troublemaking) proles shop WalMart.

[gaijin]

This ordinance is just the latest in an ongoing battle between WalMart and the City. In January, WalMart built a supercenter on the southside...three blocks from the city limits. They got 25,000 applications for 500 jobs.

http://www.suntimes.com/output/news/cst-nws-walmart26.html

The local politics are simple: The aldermen with high unemployment want the jobs. Those from the other areas want to support their union/activist political base.

I'm in the Chicago burbs and there are already WalMarts everywhere here.

[Clean Hands]

The opposition to WalMart seems to be based primarily on elitism, as far as I can see.

Here in Portland, we have a city council member who flaunts his undying hatred for WalMart, but the city recently wildly celebrated groundbreaking on a new Ikea outlet.

Both are big-boxes.

Both are non-unionized.

Both have HUGE facilities footprints. (If anything, Ikea's a good deal larger.)

But somehow, Ikea=Good and WalMart=Bad.

I can only conclude that it's because the (clean, well-behaved) yuppies shop Ikea, while the (dirty, troublemaking) proles shop WalMart.

[highnumber]

Anon,

The mayor was against the ordinance, as was the chamber of commerce, I believe. I also heard on the radio an alderman from a neighborhood that is getting a Wal-Mart that she was not happy, because she has plans for a lot of development and this may put the kibosh on some of it.

Wal-Mart is saying that they will change their focus from buidling within the city to buidling in a ring around the city. Target is also saying that they will be switching their focus to the suburbs.

The Sun-Times has the right idea:

Maybe what they should do instead is open stores that are 89,999 square feet in size. That would expose the arbitrary and unfair nature of the law. McDonald's, for instance, has more than $1 billion in sales but isn't affected because it has lots of little outlets instead of fewer big ones. More to the point, so does Walgreens, whose inventory is similar to that of Wal-Mart. Why should the size of the store dictate the pay for its workers? That will probably be a question for the courts because a lawsuit is all but inevitable.

[happyjuggler0]

This discussion has been going on for a couple of days at Cafe Hayek.

[ECIBR]

Or is Wal-Mart really betting on its grocery business these days?

WalMart is the bull in the china shop for the grocery industry. It has targeted the high profit perimeter categories of the typical grocery story. Dairy, deli, bakery, produce,and meat.

Winn Dixie, located in the southeast, has declared bankruptcy due in large part to WalMart.

Look Chicago area grocers with high internal cost, poor customer service and mediocre selection to follow suite.

[Michael]

It also stands to reason that a major urban center wouldn't want to see its precious real estate sqandered on big boxes and their parking lots.

Precious real estate? Like the countless vacant lots that stretch for miles in my westside neighborhood? Yeah, it would be a real shame to squander those gems. This ordinance may well have been alternatively titled "Chicago's Wide Open Spaces Preservation Initiative".

[ChicagoTom]

Wal-Mart needs chicago more than chicago needs wal-mart.

They have already saturated all the suburban markets near the city -- their only growth opportunities is in the farther off suburbs.

The South and West sides of Chicago are exactly the income levels that Wal-Mart targets as consumers. So forgive me if I don't take the "we wont build in Chicago" threats serisouly. The ordinance also applies to Target who is threatening to close the store it just opened and stop construction on sites that have already broken ground. Again -- these threats are hard to take seriously. When it comes down to it, they will have higher benefit standards for all of about 1000 employees -- hardly something that will cripple Wal-Mart.

Personally, I find it interesting that the City Council 1) decided to call their bluff and 2) Went against Daley (Although I dont think Daley's opposition was very sincere. He didn't come out too strongly against it until after they had the votes lined up and It seems like these days, the City Council will stand up to Daley more since his admin seems to be under constant investigation)

The bottom line is that I think, unless a court overturns this, (like the court in Maryland did) I think that it's much ado about nothing. Wal-Mart and Target will not forgo the Chicago market, they will build more stores in the city and people will work there and all will be well.

If the courts do overturn it, I think at that point the City Council will give up this fight because they will be able to stake out the "we tried but the courts overturned us" position

[notJoe]

its precious real estate

Nice one joe. Didn't know the city of Chicago was a major real estate holder.

Or you just consider all property to be owned by the State unless proven otherwise in a court of law?

[Lurker Kurt]

I assume that this ordinance was supported by Jewel's, Dominic's, and other grocery stores afraid of having to compete with Wal-Mart. Moreover, I imagine that the unionized workers who work at these stores (and who probably do live within the Chicago city limits) also supported this legislation.

Bingo! This is a big part (if not openly discussed) of it.

I live in the Chicago Burbs and there is a new Super Target near me. It's basically the same as a regular Target with a grocery store added on to it. Mrs. Lurker says things are cheaper at Target than at Jewel. I assume that is because it is non-unionized. Also, IIRC, Dominick's union is in some kind of trouble. Adding Wal Mart super centers and Super Targets would just increase the pressure on them.

precious real estate

Joe, I'm not sure if you've been to Chicago, but on the south and west sides, where many of these stores are to be built, there are many, many square miles of unoccupied commercial and industrial property that produces no jobs and no tax revenue. It is anything but precious.

Also, does anyone know if there any indication that Wal-Mart might actually prefer to ring the city with Supercenters

As someone else said, the suburbs are saturated with Wal-Marts and other big box stores. You can't swing a dead cat without hitting one. I assume the reason the want to build in the city is to be closer to their new potential customers.

[Clean Hands]

It's sure hard to see how this passes muster under Equal Protections. Just like the Maryland law, it's pretty clearly a slap at one or two specific entities, to the benefit of other private entities.

I guess I don't understand your acceptance of this, ChiTom -- at the very least, it means that Chicago will have some of the most expensive WalMarts around to shop at... contrary to popular (statist) thinking, corporations don't just absorb higher costs imposed by state action - those costs are passed along directly to consumers.

[highnumber]

It seems like these days, the City Council will stand up to Daley more since his admin seems to be under constant investigation

To me, the most interesting thing about this story is that the council broke ranks wit da mare. Has Daley lost his infallibility? Are we going to see the contentious council we had before Daley assumed the throne?

Do you remember what Chicago's nickname was back in the early 80s when we did not have a king-like Mayor Daley and the city council was constantly fighting amongst themselves over stupid shit?
Hint: It's timely once again.

[downstater]

regarding the drain on public benefits vs. a provider of employment:

i'm more sympathetic to walmart's efforts to operate in urbanized areas as there is much greater competition to their presence. they don't seem to have nearly the negative impact (if any) in more urban areas than you see in rural areas.

however, walmart also has a nasty reputation for exploiting their status as a generator of sales tax revenue and jobs - albeit low paying - to milk a rediculous amount of public subsidization (TIF funds, etc.) that no organization of their means could possibly warrant.

granted, i do not know if they have been seeking funds in chicago - but their status as a drain or benefit to public resources really depends on the size of their subsidy vs. the generation of sales taxes & employment.

my concerns about urban walmarts (or any big box):

i do wonder how a clearly suburban-style development is supposed to integrate into an urban environment. why doesn't walmart build a 3 story building with the same square footage, but with a smaller footprint?

then it doesn't physically break up the neighborhood by closing off city blocks, achieves a status as an accessible neighborhood store as opposed to an island in a parking lot while still maintaining a presence in the urban market.

[Clean Hands]

It also stands to reason that a major urban center wouldn't want to see its precious real estate sqandered on big boxes and their parking lots.

Once again, joe demonstrates his keen understanding of the nature of private property.

[Clean Hands]

why doesn't walmart build a 3 story building with the same square footage, but with a smaller footprint?

1. How is this any of the gov't's business to dictate/suggest/imply?
2. Have you ever tried to move a shopping cart through a multi-level store? I've seen a number of approaches to the problem, none of which comes anywhere close to being as convenient as single-level shopping. WalMart, being a rational actor in the market, would be nuts to do this on their own. (Which brings us naturally back to point 1, above...)

[highnumber]

Have you ever tried to move a shopping cart through a multi-level store? I've seen a number of approaches to the problem, none of which comes anywhere close to being as convenient as single-level shopping.

I was in awe the first time I went to Ikea. Have you seen that shopping cart escalator. It's totally effen cool!

[Danny Moder]

The 89,999 idea is not a bad one, until you consider that (1) the ordinance had originally pegged the number at 70,000 square feet, and (2) the ordinance applies both to existing and to future businesses. So the Marshall Field's (soon Macy's) on State Street - which has been there since 1898 - must meet the requirements of the ordinance. So must a bunch of existing Sears, Kmart, Lowes, Home Depot, and Target stores.

If enough businesses built their 89,000 square foot stores, it is a safe bet that the City Council would just pass a new ordinance marking the number down and drawing those stores in.

It's pathetic.

[Timon19]

Big box-type stores in the UAE (a place with no shortage of open space in their cities, as big as they are) are almost all multi-level in some way.

Shopping-cart escalators are in constant and efficient use at places like Carrefour, the Co-operative Societies (Wal-Mart analogue), and Ikea.

I guess the Koreans came up with the idea some years ago.

[downstater]

"1. How is this any of the gov't's business to dictate/suggest/imply?
2. Have you ever tried to move a shopping cart through a multi-level store? I've seen a number of approaches to the problem, none of which comes anywhere close to being as convenient as single-level shopping. WalMart, being a rational actor in the market, would be nuts to do this on their own."

1. where in my post did i ever mention or imply that it was? unless you view any criticism or concern about such a development to be a call for state action. believe it or not - some people can raise such issues and not demand the govt. do something about it. mercy - relax!

2. yes, i have. it was not inconvenient at all.

So, when other large stores develop multi-level retail buildings complete with elevator access for carts in urbanized areas, they are not being rational actors in the market? in fact, not only that - they're nuts?

it would seem quite rational to me, in an urban area, to decrease the amount spent on expensive land acquisition, clearance, development and maintenance by maximizing a building on a smaller parcel for a customer-base which is less dependent on automobile travel to begin with. that's why lots of buildings go up instead of out in cities. nutty, i know.

[happyjuggler0]

Wal-Mart and Target will not forgo the Chicago market, they will build more stores in the city and people will work there and all will be well.

I'm inclined to disagree. WalMart is bright enough to use game theory here and realize that if they allow it to happen to their stores in Chicago, it will happen in slews of locations across the country and destroy their very successful business model.

In the meantime poor blacks will continue to have lousy chances of getting jobs and have to overpay for things on their already tight budgets. The KKK couldn't have come up with a more brilliant strategy.

[highnumber]

Didn't Wal-Mart close up shop & leave town when a Canadian store unionized? Yeah, I am inclined to agree with you, happyjuggler0. Wal-Mart is bright enough to stay out of town.

[Paul Davis]

So what are the small guys to do when all their people quit to work at Wal-Mart? Silly you say? If you?re Wal-Mart are you going to hire experienced workers or people who have no experience? This is truer than ever especially now that you have to pay the people above market wages. Also, doesn't this take place in 2010? If so that?s 4 years Wal-Mart has before they have to react to this.

[Lurker Kurt]

So what are the small guys to do when all their people quit to work at Wal-Mart?

They can hire the people who didn't get hired by Wal-Mart.

[Karl]

Dominick's wants to keep out the competition in part because it just went through (and largely lost) a brutal fight with the union. Albertson's was thisclose to selling the chain. That's how bad the economics are for the competition.

Wal-Mart's newly-announced strategy is thus an apt response: "You stop us from opening a store downtown, we'll bankrupt two of yours in the 'burbs." That -- as Sean Connery could tell you -- is the Chicago Way.

[joe]

The fact that the municipality doesn't own the property doesn't change the fact that the public, that is, the city as a whole, has an interest is what occurs there.

The owners are still free to build their Wal Mart if they want.

And, believe it or not, there are actually things in this world worth considering beyond property rights.

[joe]

Clean Hands, if you haven't noticed any difference in how Wal Mart and Ikea treat their employees, then your attempt to "see" has been limited, as usual, to exactly what you want to see.

Michael, "Precious real estate? Like the countless vacant lots that stretch for miles in my westside neighborhood?" If those lots are developed as a Wal Mart, they will never be anything other than a Wal Mart (at least for decades), and the properties around then will have their value stifled by the traffic and view. Not to mention the opportunity costs of not having those properties developed in a manner that enhances and respects the fabric of the neighborhood.

"Maybe what they should do instead is open stores that are 89,999 square feet in size. That would expose the arbitrary and unfair nature of the law. McDonald's, for instance, has more than $1 billion in sales but isn't affected because it has lots of little outlets instead of fewer big ones." Remember your Jane Jacobs: "lots of little" vs. "one big" is a very important distinction when it comes to the impact of development on a neighborhood and city.

[joe]

Clean Hands, I remember my mother taking me to a multi-level department store with a cart-escalator in the techno-paradise of Pawtucket, Rhode Island back in the 70s. You really are good at not knowing what you're talking about.

downstater, Wal Mart actually has a quite good urban model. Smaller footprint, smaller retail space (small enough to get in under the cutoff for this regulation), less parking, and a few other tweaks. Like many actual practitioners of capitalism (and unlike many of those cheerleading from the sidelines), Wal Mart has discovered that it is possible and profitable to adapt to the peculiarities of urban development, and to make a fortune doing so.

[highnumber]

"lots of little" vs. "one big" is a very important distinction when it comes to the impact of development on a neighborhood and city.

The ordinance has nothing to do with development and planning other than the unintended consequences.

[Jamie Kelly]

joe does not ever think of things in principle.
joe walks around blindly with a cane and formulates his opinions when he hits his head on something.
joe thinks like a bureaucrat.