Skip to comments.Target threatens to leave city (Chicago) if 'big-box' wage rule passes
Posted on 07/14/2006 4:02:49 AM PDT by Chi-townChief
Target is putting plans to build three South Side stores "on hold" -- and making veiled threats to close existing Chicago stores -- if the City Council mandates wage and benefit standards for "big-box" retailers, African-American aldermen warned Thursday.
The saber-rattling is intensifying as the clock winds down toward a July 26 showdown vote on plans to make Chicago the nation's first major city to establish a "living wage" for stores with at least 90,000 square feet of space operated by retailers with $1 billion in sales.
Minneapolis-based Target becomes the second retailing giant to threaten to pull out of the lucrative Chicago market in a last-ditch effort to stop an ordinance championed by organized labor that breezed through the City Council's Finance Committee 15-6 and has attracted support from 33 aldermen.
The current federal minimum wage is $5.15 an hour. Illinois' minimum wage is $6.50
Most Chicago area Wal-Mart employees average $10.99 an hour, with just a few making the starting wage of $7.25 an hour, Wal-Mart spokesman John Bisio recently said.
As of 2004, Target in many cities had a starting salary of about $7 an hour, published reports said. A few Target workers outside Illinois said they recently started with salaries as low as $6.25 an hour, according to postings on the Target Union! (www.targetunion.org) Web site for store employees.
Wal-Mart has threatened to cancel plans to build as many as 20 Chicago stores over the next five years if retailers are required to pay employees at least $10 an hour and $3 in benefits by July 1, 2010.
'It would be devastation for us'
Mayor Daley is taking the threat seriously. He has challenged aldermen who oppose Wal-Mart's 20-store expansion to describe how they would replace the 8,000 lost jobs.
Target failed to return calls on the admonition communicated to aldermen of the 5th, 9th and 34th wards in recent days. Target real estate executive Chris Case was scheduled to meet with African-American aldermen Thursday, but the meeting was canceled because of scheduling conflicts.
Ald. Carrie Austin (34th) said a Target pullout would be devastating to the 32-acre shopping mall at 119th and Marshfield that developers had hoped to build, with help from a $23 million city subsidy. Home Depot would likely follow Target out the door. As many as 1,000 jobs would be lost, Austin said.
"It would be devastation for us. Our largest employer in the 34th Ward is the Police Department. The second-largest for us would be Jewel. We have no other resources," Austin said.
Referring to the anti-Wal-Mart movement that gave birth to the big-box ordinance, Austin said, "If you want to bully up on Wal-Mart, you've got to bring in the other ones, and damned if you do on them. If they suffer from it, too bad. If you want to control Wal-Mart, you should go about that a different way."
Accused of 'bullying tactics'
Ald. Leslie Hairston (5th) said she has a letter of intent from Target to build a new store at Marquette and Stony Island in her ward. But the developer has told her the store is "on hold" and that Target may close existing Chicago stores if the big-box ordinance goes through.
Hairston called it little more than a scare tactic. And even if the threat turns out to be real, she's standing firm in support of organized labor.
"Wal-Mart and Target could pay their people a living wage. Then we wouldn't have this problem, and people could actually live on the money they made," Hairston said.
Ald. Joe Moore (49th), chief sponsor of the big-box ordinance, accused Target and Wal-Mart of using "bullying tactics" to stop a train that has already left the station.
"It's an idle threat. ... They're clearly trying to ... intimidate members of the City Council. I am very hopeful that members will hold firm. ... The votes are still there," Moore said. He predicted 33 votes for the ordinance, "maybe more," even though Daley has been buttonholing aldermen to try to stop it.
Ald. Howard Brookins (21st) is still searching for a big-box retailer to replace the Wal-Mart his colleagues nixed at 83rd and Stewart.
Brookins said Wal-Mart executives have told him they may take the lead of the riverboat casinos that ring Chicago and run free shuttle buses to their suburban stores if the big-box ordinance passes.
"I don't know if it was in jest, but they did say it. ... That is an option that they could employ. They could set up locations to have pickup and dropoff. I don't think that is that farfetched," Brookins said.
I feel the same about Target but I'm the same as you on the subject in that I don't feel the need to try to convince others to feel the same.
Some people don't like Wal-Mart for various reasons and that's fine, they can shop where they want to shop but many try to convince the rest with their socialist philosophy that Wal-Mart is evil.
I think the customers of WalMart (or any other retailer) are reflective of the community as a awhole. The WM customers where I shop run the gamut from migrant workers and chicken pluckers (poultry and ag are the largest private emplyers in the area) to high ranking military officers (large naval installation) to the wealthy waterfront dwellers........there is no other large retailer within 50 miles.
Hell, why not 100Gs a year; might as well go for broke!
I loved this part of your link:
""I'm for jobs in this community, but I have an insult level," said state Rep. Mary Flowers (D-Chicago). "People need a livable wage. As an African-American woman, I once worked for $1 an hour. I'm not talking about what I don't know."
Gee, as a Caucasian I once worked for $1 an hour, too - that is what is known as a starting wage. The general understanding is that you move up from there. Her assumption that only African Americans have to build from the ground up is unbelievable. I guess she thinks we all should start out in "management" positions and a wage to go with the title.
In Maryland, the Dems were shrewd enough to pass a law with a standard that Wal-Mart was pretty much already meeting.
The law in Maryland requires that Wal-Mart spend 8% of its payroll on health care. Prior to the law, Wal-Mart was spending over 7% of payroll on health care. Thus, the increased spending mandated by law was trivial, representing a small fraction of one percent of its sales in Maryland. Raise the price of that $10.97 item to $10.99, and they're done.
Or worse, permit wages to fall from an average, in Maryland, from $10.60 to perhaps $10.40, divert the savings to health insurance costs, and there you have it! I can't say that this has been Wal-Mart's intention, but I noticed that the average hourly wage paid in Maryland by Wal-Mart did actually decline a little bit from before the law was passed till the time after the law was passed.
However, the Chicago legislation mandates that Wal-Mart raise its minimum starting pay from $7.25 to $10 per hour. In that average pay in these stores is only $10.99 per hour, the net effect would be to bump the entire pay scale up by a couple of bucks per hour. That's not an increase in payroll costs of a fraction of one percent, but rather an increase likely of around 20%. Combined with the mandated $3 per hour in benefits, and suddenly, Wal-Mart has just seen the government of Chicago destroy its business plan in the city.
As well, Wal-Mart isn't speaking about breaking leases and stuff. Wal-Mart's threat is:
"Wal-Mart has threatened to cancel plans to build as many as 20 Chicago stores over the next five years if retailers are required to pay employees at least $10 an hour and $3 in benefits by July 1, 2010."
They'll just spend their finite development capital elsewhere.
Finally, even in Maryland, the extremely small burden the legislature put on Wal-Mart has had consequences. For the sake of less than a penny on the dollar of payroll, Wal-Mart has more or less decided not to locate a major distribution center on the Eastern Shore in Maryland. That center, with hundreds of jobs, along with its payroll taxes and other benefits to the government, will now likely be located in Delaware, or perhaps Virginia.
I have seen that quote by her before and the same thing occurs to me now. When she was earning $1 per hour she may have been really earning it, now she's an alderwoman and living 100% off others earnings.
Yeah. They backed off in Md, for the time being. But they'll be back.
You can also look at other states like MA, which now has "universal health care coverage." It's obviously going to harm business, but it's not going to result in big operators like Target simply pulling out of the state altogether. They'll remain, and they'll pass the cost onto the consumer. In the final analysis, it's not an issue of government vs. business, but of government vs. the consumer.
Every time government passes laws that cost businesses money, it's we the people who ultimately pay.
Doesn't surprise me one bit.
That only means they find what they want at a lower price and there is nothing wrong with that.
I've heard that as well.....I don't know how much luck they will have here on the shore though....the WalMartWatch.com people have put on a big push to keep a superstore out of Onley - I can only imagine the reaction to the distribution center being located in the proposed location.
OTOH, with Perdue and Tyson being the largest private employers in this county you would think the jobs would be welcome.
First, they came for the big-box stores....
How much effort do you think it would take to 'amend' this law to reduce the size threshhold to 50K sq ft? Could 25K be far behind?
You're fortunate, the alderwoman in the article says the police department is the largest employer in her area.
I think the outcome will be more mixed than you suggest. I doubt that a given law will drive a major big box retailer completely out of a state. Certainly, in Maryland, Wal-Mart wasn't going to give up billions of dollars in sales, and millions of dollars in profits, over a tiny increase in payroll costs, which of course, represent the minority of their costs in the first place.
But Maryland DID lose a distribution center. It won't be back. The Eastern Shore is a relatively compact place. You can drive from the Maryland/Delaware border to the Maryland/Virginia border in a relatively short time. Gabz lives over there, she could give you a pretty accurate time.
Wal-Mart can place the distribution center in Delaware or in Virginia without harming its own business plans one iota. But it will certainly rile voters on the Eastern Shore in Maryland who realized that their part of the state, which really needs the economic development, got screwed out of hundreds of jobs because the damned Dem politicians enthralled to the Big Labor bosses, decided to tweak Wal-Mart's nose.
However, in the Chicago case, I think it's quite likely that Wal-Mart will follow through on its threat not to build more stores inside of Chicago, for two reasons. The first reason is that the magnitude of the city council's action is very large. The ordered increase in wages probably swamps Wal-Mart's net margin in these stores, meaning that Wal-Mart would have to raise prices significantly (at least for Wal-Mart) to maintain profitability.
The second reason is that this is just a city, not an entire state. Wal-Mart can easily mitigate most of the damage by placing their stores just outside city limits, to avoid the hikes. It will be a modest inconvenience to some Chicago residents to get to a Wal-Mart, but most residents will hardly notice the difference.
Conversely, to abandon an entire state, even a small one, is to abandon much, or even most of the sales available in the state. In the case of Maryland, to abandon the state would mean that for someone like me, who lives roughly in the middle of the state, along with the majority of the state's population, driving to a Wal-Mart becomes something on the order of a day-trip. Ain't gonna do it. For the roughly couple of million folks in Maryland who don't live within 30 minutes or so drive from the state's borders with neighboring states, if Wal-Mart pulled out of the state, Wal-Mart would become inaccessible, practically speaking.
And all those potential sales would be lost.
Nonetheless, whether the big box retailers' response is to pass costs along, or to pull out of a city or a state, you're right, it really isn't about government vs. business, but rather government vs. consumer, since in either case, consumers lose.
Not much, which is why I am adamently against this going through.
The choice of location of Walmart stores in Chicago was totally a choice, not of Walmart management, but of the Poltiical machine and the "Economic Development Corporations" they control.
The main purpose of these "Economic Development Corporations" is to buy off (co-opt) any idealistic independent political types and suck them into the political machine.
And all this is done at the expense of taxpayers who send money to HUD, HHS and similar agencies.
I agree that they will reduce their presence. That's logical when your cost structure goes up. On the other hand, these threats to "pull out" are just grandstanding. Of course, I would make the threat if I were them too. But don't expect them to actually do it.
This is true.
From where I live in Virginia it takes me 15 minutes to get to WalMart, which is in Maryland.....it is less than an hour drive to the Maryland/Delaware line from there.
But it will certainly rile voters on the Eastern Shore in Maryland who realized that their part of the state, which really needs the economic development, got screwed out of hundreds of jobs because the damned Dem politicians enthralled to the Big Labor bosses, decided to tweak Wal-Mart's nose.
And there are few of those Dems or big labor for that matter, on the Shore. In fact Somersett County, where the DC was supposed to be located, has one of the highest, unemployment rates in Maryland.
...you're right, it really isn't about government vs. business, but rather government vs. consumer, since in either case, consumers lose.
I'm in full agreement with you both on that point.
Well, "reduce their presence" is a pretty significant threat, too. The article does present Target as saying they'll pull out of Chicago altogether. I don't think that is an idle threat, but it may turn out to be an exaggeration. Perhaps as leases come due, as it comes time to upgrade/update a store, instead of renewing the lease, or upgrading/updating the store, they'll just close it. The effect of this law may very well be that the number of big box stores in Chicago will decline dramatically over time.
However, Wal-Mart doesn't make that threat. They're threat is to merely refuse to expand in the city (and to add a distribution center on the Eastern Shore in Maryland). Twenty stores that won't be built. Mayor Daley gets it. That's 8,000 jobs that WON'T be coming to Chicago, proper.
That's a very believable threat.
As well, it isn't just the direct loss of those jobs. I know of retailers who actually build their business plans around locating next to, as close as they can get to, big box stores. These folks live off of the traffic brought by the big box. I know of an ethnic grocery retailer that likes to locate as close to a Wal-Mart as they can get. The owner says, hey, my products are a little different from what you can get in the Wal-Mart, better, tastier, roughly the same price. With thousands of folks going into the Wal-Mart, if just a small number of those folks stop by my store when they come to the Wal-Mart, I'm good to go!
This retailer thus accrues advantage from all the spending, advertising, marketing, promotion, etc., that Wal-Mart spends to bring folks to their stores. In losing those 20 new Wal-Marts, Chicago will also lose some number of retailers like this who would have opened up right after, right next to each new Wal-Mart.
There is absolutely nothing wrong with that you're right, I was responding to someone who asked for a "reliable" source that not just the poor shop at a Walmart or a Target.
Bottom line to my argument is I care how it all eventually affects MY bottom line.
What blows is that Flowers is my state rep.
They shop there, but that isn't their average customer. The average Target customer's household income I have read makes $6k/year than Walmart's. Both were a LOT lower than the grocery chain I work for (less than half).
By losing the jobs and tax revenue these stores will/do generate this idea hurts your bottom line far worse than dropping the whole idea and embracing the new stores with their jobs and tax revenue.
Not to beat this thing to death, but everything the government does is like this. Increasing the minimum wage is probably not as significant as requiring health insurance. Places like Chicago or Maryland can get away with doing it, so long as the costs can be passed on, which usually means either that on balance, competing jurisdictions are no more business friendly than they are, or that the affected industries don't really have meaningful competition in neighboring jurisdictions in any event, possibly because of the convenience factor.
That's just one more reason why a federalist system works better than a unified government. If they could impose their policies on the entire nation, then there would be no competition to bring them back to earth. On the other hand, if every jurisdiction agrees that the benefits of a policy outweigh its costs, then there is no problem with businesses fleeing the jurisdiction to avoid the policy because all jurisdictions will have the same policy.
Sorry, I misunderstood your comment. I thought you were saying that you weren't concerned because you fell under the size limit.
I'd have to disagree. Big Government and Big Business are fundementally different. Big Business may look impressive, but no matter how much money it has, the worst it can ever do is decline to deal with me, or deal with me only under conditions I don't like (i.e. charge prices I don't like). At any point, I am free to walk away from Big Business.
Government is different. I HAVE to pay them taxes. I HAVE to obey their edicts, whether or not I want to deal with them. And if I fall out of the favor of the state, they can lock me up for a long time, or even kill me.
It's true that Big Business can use the State to advance its agenda in illegitimate ways- for example, by pressuring a government to take possession of private property so the business can develop it. But the balance right now is so in favor of the government that most business lobbying activity is simply defensive in nature. A business that exerts influence on a politician to keep from jacking up the minimum wage yet again is not colluding against anyone's rights, they are merely trying to preserve their own right to contract.
That is exactly what is occurring with the anti-smoking campaigns....towns and counties with smoking bans are losing business to surrounding areas without them and so now they are demanding the entire state have them in order to not have the competition.
The government should have no place in making business decisions whether it be mandatory smoking bans or mandatory health insurance. Let the market decide with consumers and employees directing the decisions with their feet and wallets.
Well, I'm less concerned than they are. But in 10 years from now I could definately see this being lowered to 20k sq ft retail building. Our average wages right now in that area are close to $15/hr anyway but we have quite a few bag boys, cashiers, and service counter people that are around $7-8/hr part time. These are mainly high school & college kids. Throw on 2-3/raise + $3 in benefits and we'd consider leaving the Chicago area. Our stores are technically outside of Chicago for the time being (Geneva & Kildeer) but we have at this time plans to open 2 stores inside Chicago in the next couple of years.
"Brookins said Wal-Mart officials have told him that residents of his ward spent $17 million at their store and affiliated Sam's stores outside the city in 2005. And company executives have talked about using shuttle buses to help Chicagoans get to suburban locations in a strategy similar to the one used by casinos."
That's a very interesting tidbit.
I guess paying for a couple of shuttle buses is a lot cheaper than raising thousands of workers' pay by $2.75 per hour.
I don't have a source for what he said, but where I live, the only Walmarts and Targets are out in the suburbs where it is tough for inner-city people to reach them. I don't know if there are ANY of them in the city yet. The city folks shop at Salvation Army. So do the suburban folks, too. Yes, most of the Walmart/Target shoppers appear to have some bucks. Lots of expensive cars.
That's a potential for a lot of tax revenue the city is throwing away with this hairbrained scheme.
I hope Target folds their Chicago tents. Local/state governments dictating saleries to private industry. Remember, Chicago is a BIG union city. KMA, Chi-town.
If Chicago passes this asinine law, I can only hope that they pass a hundred others like it. That way they will drive all business out of Chicago and working, tax paying Chicago residents too, they won't have problems finding employment elsewhere but the libs will have to flee to Detroit, thereby making Illinois better for everyone and lowering the average IQ of Detroiters even further.
I know my theory is full of holes, I'm just frustrated at decades of living in central Illinois and having the will of Chicago dems imposed on me.
Before anyone tells me to simply move. See how easy that is after investing a life time in family, property, jobs etc. in a place.
I see my attorney and my physician and their families both shop at Wal Mart here.
There is a Fred Meyers next door where they could shop (and spend more) just as easily.
Pennys etc. is just a hop away also.
Sorry but you are the one who is wrong.
The following is copied and pasted from Target's website and I have first hand knowledge of my local store giving to the Salvation Army on more that one occasion."
Salvation Army Target has a long-standing solicitation policy at our stores nationwide.
In order to provide a distraction-free shopping environment for our guests, we do not allow solicitation or petitioning at our stores regardless of the cause being represented.
In January 2004 we informed The Salvation Army of our decision to consistently apply our solicitation policy. This policy does not diminish our support of The Salvation Army. In fact, Target and The Salvation Army recently announced a new partnership for an online Wish List designed to assist families in need. From November 25 through January 25, visitors to Target.com/salvation army can view and purchase clothing, household items, personal products, and Gift Cards to be donated to families across the country. Guests will also be able to link directly to The Salvation Army website to make a monetary contribution.
In addition, any non-profit organization, including The Salvation Army, can apply for a grant through its local Target store.
Store grants form the basis of Target's extensive commitment to supporting the communities in which it does business, and many local Salvation Army corps across the country benefit from Target store grants.
Here are a few examples of grants provided to local Salvation Army chapters in 2005: Monroe, LA - Educational Services Organization
Passaic, NJ - Salvation Army Family Enrichment (SAFE)
Dallas, TX - Domestic Violence Prevention Program
Phoenix, AZ - Domestic Violence Shelter
Monterey Bay Peninsula, CA, - Building Confident Families
Target has one of the largest and most respected corporate philanthropy programs in America, donating more than $2 million per week and hundreds of thousands of volunteer hours each year to non-profit organizations across the country.
Forbes magazine recently ranked Target as the "Most Charitable Company in America."
You are right that there are two alternatives to provide for low wage earners. The state can either mandate they be paid a certain wage, or they can be subsidized out of general tax revenue. To put it another way, we can choose to support the poor through higher prices or higher taxes.
Which solution is more just? If our society decides that everyone must have some minimum level of subsistence, that burden should fall on society as equally as possible. It's not fair to say that "big box" shoppers (or more accurately, "big box" customers) should be the only ones to support the poor in the form of higher prices. If society demands that everyone meet a certain standard of living, everyone in that society should play a part. Equitably structured taxes are the only way to accomplish that.
Which solution is more practical? Paying living wages is going to increase unemployment, particularly among those with fewer job skills, like the poor. There is only some small fraction of welfare recipients who could profitably be hired starting at, say, $12.00 an hour. Those who ARE hired are taken off welfare, most likely. But the bulk who are NOT hired have no chance at all but to stay on the dole.
If wages are set by market conditions, a much larger portion of the poor has a chance to get started. The majority of starting wages will be too low to get them off welfare...at first. But over time, some portion of those workers are going to improve their skills, learn more about the job, and will start to see wage increases approaching a living wage. Even those who can't quite rise to that level would have less need for assistance than the unemployed, so money could be saved there as well.
Will the long run results favor the market wage solution for reducing the welfare burden? I'm not sure, because it depends on how many people can work their way up to a living wage vs. how many could be hired starting at a living wage. In any case, I think it's a real possibility.
Supporting the poor through high wage/high price solutions is not the most just method, and it may not be the most efficient.
After I retired from my job in 1999 I got a job at Wal-Mart in store security for 6 months and it finally hit me why I retired in the first place, damn those time clocks!
The job I retired from was union and I was shocked to see how many of my local union leaders shopped at Wal-Mart- usually late at night. Shocked I tell you!
I have run into my family doc (retired) several times at Menards and Wal-Mart, professionals want the same best prices they can get just like everyone else.
He even asked my advice about rewiring his house, I gave him my best advice and told him that there were a lot of dead amateur electricians.
The thug unions control Chicago. Their existing contract escalators are tied to the mandated minimum wage.
A raise in the minimum raise increases the entire union scale.
(sorry couldn't resist)
".........increasing the minimun wage is not as significant..."
So you say! Calculate all of the contract wages that are tied to the minimum wage. They all go up. Calculate all of the additional revenue govt will rake in. Why do you think unions and government are in bed on this issue?
Heck, pretty soon all we'll have is PT jobs with no benes and be forced to accept Social Healthcare.
But as long as the Politicians, Lawyers and Corporate Execs are happy all is well!
If you don't have any skills, any education or any ambition to improve yourself, you are probably right.
And which union do you belong to?
Sounds like a good place to open a donut shop.
Hah! I never thought of that.
But like I said as long as the Politicians, Lawyers and Corporate Execs are happy all is well.
Which group do the two of you come from?