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.
WAGE WAR
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.
fspielman@suntimes.com
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.
Dear Brilliant,
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.
sitetest
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.
Paraphrasing:
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.
Dear Brilliant,
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.
sitetest
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.
Dear Brilliant,
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.
sitetest
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.
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