Chicago pushes living wage for big-box stores

Would a higher minimum wage for Chicago's big-box retailers really set a standard for other stores to follow and help their employees rise out of poverty, as proponents of such a wage contend?

Or would it ax the jobs entirely and keep big stores from moving into the city, when they can pay employees several dollars an hour less in neighboring suburbs?

The city – particularly Mayor Richard Daley – is now weighing these questions. The mayor is poised to exercise his first mayoral veto in 17 years on a new bill that sets a "living wage" of $10 an hour plus $3 an hour in benefits or additional wages by 2010 for stores of more than 90,000 square feet with at least $1 billion a year in corporate sales.

He has until Sept. 13 to do so – if, that is, he can win back at least two votes from the newly defiant city council to prevent an override of a veto.

In the meantime, Target, Wal-Mart, and Lowe's, all of which have new stores planned for the city, announced they may scrap those plans if the bill becomes law. The bill's proponents insist the stores are bluffing. Meanwhile, the retail industry is readying a legal challenge, and the mayor is working behind the scenes to win support for his views.

"It sends an antibusiness message to a specific segment of the business community," says Lori Healey, the city's commissioner of planning and development. "We spend so much time working in underserved neighborhoods trying to get retailers to come to those neighborhoods, and something like this is devastating."

But backers of the idea insist that it's good jobs – not just jobs – that are important, and point to cities such as San Francisco and Santa Fe, N.M., that have enacted similar laws without seeing big downsides.

"If we're to preserve the middle class in this country, we need to step in and do what we can as government officials," says Alderman Joe Moore, who sponsored the bill.

Santa Fe's law, which applies to all but the city's smallest employers, took effect a year ago. It currently mandates a minimum wage of $9.50 an hour, which will rise to $10.50 an hour in 2008, and gives employers credit for healthcare or child-care contributions. Since it took effect, a new Lowe's was built, and Wal-Mart is trying to build a third store in the city, says Santa Fe Mayor David Coss.

"Part of their pitch is 'we have no problem with your living wage,' " says Mayor Coss, who's coming to Chicago this week to talk about positive impacts of the law in his town.

Still, Chicago's situation is different. For one, it would be the first city in the country to apply a wage not to all businesses or to those who contract with the city, but to one small group. Some 40 existing stores would be impacted, including department stores like Sears and Marshall Fields, says David Vite, president of the Illinois Retail Merchants Association.

Moreover, companies looking to open stores have more options than they do in Santa Fe, because of Chicago's ring of densely populated suburbs.

The threats to pull stores aren't bluffs, says John Bisio, Wal-Mart's director of public affairs for Illinois. In Santa Fe, he says, it's a level playing field and the average per capita spending on retail is more than three times the rate in Chicago.

Mr. Bisio says Wal-Mart had plans to develop 10 to 20 stores in Chicago over the next decade, many in poor or underserved neighborhoods, but other than the city's first Wal–Mart, due to open on the city's west side next month, he doesn't think it makes sense to continue with the plans.

"We'll redirect focus on our superstore program in suburban Chicago," he says, noting that the area is far from being oversaturated with stores.

The other big issue – for both sides – is jobs.

Emma Mitts, a west-side alderman who fought to get the first Wal-Mart in her neighborhood, says she's thrilled about the 400 to 500 jobs that store represents. "It's like trying to make a baby walk before it'll crawl," she says of the bill. "You have to make them come in and give a wage before you raise it to a living wage."

Mr. Vite, meanwhile, says only about 4,000 people will see a pay raise from the ordinance, and many stores have indicated plans to lay off significant numbers of people if it takes effect. "When all is said and done, someone's going to pay," he says.

But living-wage proponents cite the importance of setting a standard, at the biggest companies, which they hope will trickle down to others.

Denise Dixon, a community activist with ACORN, says she worked hard on this issue because she for many years had only a minimum-wage job while supporting her two kids. "We want people to be able to not just have a job, but have a job that brings them dignity and also gives them the opportunity to lift themselves up out of poverty," she says. "These are the stores that can make a difference. If they change their habits, other corporations will follow."

It's unclear if the law could hold up in court. A similar law in Maryland, which would have forced Wal-Mart stores to pay benefits, was struck down last month because it ran afoul of the Employee Retirement Income Security Act. But proponents say Chicago's law would allow companies to pay either benefits or an equivalent amount in wages.