Bloomberg News

Chicago Wal-Mart Foe Retreats as Living Wage Stakes Rise

July 25, 2013

Chicago Wal-Mart Foe Retreating as Living Wage Stakes Rise

An employee adds price stickers to products a Home Depot Inc. store in Washington, D.C. Photographer: Andrew Harrer/Bloomberg

Chicago Alderman Anthony Beale says he will be celebrating this fall when a Wal-Mart SuperCenter opens in his South Side neighborhood, bringing 400 jobs and an $8.75-an-hour starting wage.

It’s a victory heavy with contradictions for Beale, who in 2006 voted to force big retailers to pay $10 an hour and benefits. The “living-wage” measure was vetoed by then-Mayor Richard Daley, opening the city’s doors to Wal-Mart Stores Inc. (WMT:US) Last week, the company opened its ninth store in Chicago, where it employs about 2,000.

“These are not jobs where you can pay a mortgage or raise a family,” Beale said. “I am a supporter of a living wage. But without Wal-Mart, my site would still be vacant.”

Washington Mayor Vincent Gray is living Beale’s conundrum. Gray soon must decide whether to veto a bill requiring non-unionized retailers grossing $1 billion or more a year to pay at least $12.50 an hour -- 50 percent more than the local minimum wage. The city council approved the measure on a 8-5 vote this month after intensive lobbying by civic, religious and labor leaders.

Gray, who hasn’t said whether he’s running for re-election next year, risks enraging that powerful political bloc if he vetoes the bill. If he doesn’t, Wal-Mart has vowed to abandon at least three urban renewal projects in the city’s poorest neighborhoods. Home Depot Inc., Target Corp. (TGT:US) and Macy’s Inc. (M:US) are among retailers that say they might shelve expansions if the bill becomes law.

Legislation Supporter

“People say this is a something-or-nothing proposition,” said the Reverend James Coleman, pastor of the All Nations Baptist Church in Washington and a supporter of the legislation. “Sometimes, something isn’t better than nothing.”

Persistent income inequality, a plodding recovery and the economy’s growing reliance on low-wage service jobs have given urgency to the ideal that all workers should earn enough to afford basics such as food and rent. Labor groups, church leaders and advocates for the poor say forcing employers to pay living wages would lift the economy and reduce spending on food stamps, public housing and other social services.

Congress last voted to raise the federal minimum wage in 2007 and President Barack Obama’s call to raise it to $9 from $7.25 has gone nowhere with lawmakers. That’s sent activists into states and cities, where they’re pressing municipal leaders like Gray to make a difficult call: embrace any and all job creation, or give employers, even big ones, an ultimatum that could send them packing.

‘Huge Impact’

“This has a huge impact,” said Victor Hoskins, Gray’s deputy mayor for planning and economic development, who opposes the measure. “Raising the minimum wage -- I don’t think anybody has any issue with that. Raise the minimum wage for everyone.”

In Chicago some civic leaders remain ambivalent about whether Wal-Mart’s jobs have been a net plus or minus.

“I wouldn’t say the city was worse off. But if we were doing a living wage, everybody would be better off,” said Booker Vance, pastor of St. Stephen’s Lutheran Church and a veteran of the city’s living wage battle. “People are still scraping and scrambling and trying to make ends meet. In that sense we’re not better off.”

More than 140 cities and counties have approved living wage ordinances in the past two decades, according to a study from the Urban Institute in Washington. The earliest adopters, including Baltimore, singled out city contractors. Some laws go further, forcing all employers to link pay to regional costs of living and offer benefits such as health care. Most recently, advocates claimed victories in San Jose, California, and Albuquerque, New Mexico, which raised minimum wage standards for all employers after voter referendums in November.

Higher Minimum

“A lot of it is motivated by the federal government dragging its feet,” said Jack Temple, a policy analyst at the National Employment Law Project, which supports higher minimum wages.

“You’ve seen this structural shift from an industrial to a services economy,” Temple said. “It’s low-wage jobs that have driven that shift, and that’s driving wage inequality.”

Over the next decade, retail will be the second-largest source of new employment behind health care, according to Labor Department data. The United Food & Commercial Workers International Union, which represents restaurant and retail employees, has helped organize and finance local campaigns, which are putting public pressure on employers and governments and mobilizing workers.

$7.35 an Hour

One of them is Cinnamon Tigner, 22, who said she makes $7.35 an hour at a Wendy’s in St. Louis, where she rings up orders, tends the drive-through and handles paperwork. Her fiancé earns $10 an hour managing a McDonald’s. Together they support their two-year-old daughter.

“I work every day,” Tigner said. “It’s not enough. You’re living check to check.” A pay raise might give her the chance to start saving, buy a car or maybe go back to nursing school, which she gave up when she had her daughter, she said.

“I’d have money to actually live my life instead of living day to day,” she said.

In the past year, fast food workers have walked off the job in St. Louis, Milwaukee, New York and Chicago as part of a campaign to raise minimum wages. In Washington, food court workers blocked rush-hour traffic near the White House on July 2 to protest low pay at government-owned buildings.

Singling Out

Wal-Mart spokesman Steven Restivo faults local leaders for singling out a particular industry.

“Local governments should adopt policies that encourage job creation and economic development rather than create arbitrary hurdles that create an unlevel playing field,” Restivo said.

As the number of low-wage positions multiplies, workers in those jobs are losing ground. Between 2002 and 2012, real median wages fell by 5 percent or more in five of the top 10 low-wage jobs, including food preparers, home health aides and housekeepers, Temple said.

The average sales clerk in Alaska, the state with the highest average retail pay, would have to work 262 years to match the average $6.45 million annual salary of a retail company chief executive, according to data compiled by Bloomberg. The gap has widened since the recession. In Washington D.C., sales clerks earned an average $23,320 in 2012 and would have had to work more than 276 years to make a chief executive’s salary. That’s 105 years more than it would have taken in 2007, according to data compiled by Bloomberg.

Ward 7

In Washington’s Ward 7, where Wal-Mart has plans to anchor an 18.5-acre town center of new homes, retail and offices, almost 26 percent of residents live in poverty, according to the U.S. Census Bureau. Unemployment last year was 15 percent, the highest in the city, where joblessness is 8.5 percent.

Without Wal-Mart or another big store, the Ward 7 project can’t get financed, smaller tenants won’t come, and the community will be deprived of jobs and services, said Gary Rappaport, chief executive officer of the Rappaport Cos. in McLean, Virginia, the project developer. He and others fault the city’s living wage bill for singling out retailers.

“These are the poorest wards that need these services the most,” Rappaport said. “If retailers could make money and open stores and it’s all on a level playing field then wages should be higher everywhere.” The city loses about $1 billion a year in retail spending to neighboring Maryland and Virginia, according to the mayor’s office.

From Chicago, Beale said Wal-Mart, with its new construction, produce aisles and “starter jobs”, has made his Pullman neighborhood more attractive to other employers even before it opens. On July 16, Method Products Inc., a maker of soaps and cleaning liquids, said it would open its first U.S. factory there and hire 100 workers.

“It’s really opened up the door for all kinds of jobs to start coming back into the area,” Beale said, even as he stands by his 2006 vote.

“At the time it was the right thing to do,” he said. “Sometimes we have to make tough decisions.”

To contact the reporter on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net


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Companies Mentioned

  • WMT
    (Wal-Mart Stores Inc)
    • $76.12 USD
    • -0.35
    • -0.46%
  • TGT
    (Target Corp)
    • $62.07 USD
    • -0.61
    • -0.98%
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