Wednesday, July 26, 2006

Chicago takes the lead on creating a better economy

Alderman Joe Moore and 34 of his colleagues on the Chicago City Council took a big step towards creating a middle class today by passing the big-box ordinance requiring the most profitable retail companies in the world to pay their workers a living wage.

It's important to remember the context: the federal government has dramatically shifted wealth to the wealthiest Americans and largely impoverished the rest of us, both by increasing the real tax burden on working people (counting state and local taxes, as well as tuition and fees that must rise due to a lack of federal resources to states and cities) and by ensuring wages do not rise by (a) making it harder to form unions and (b) not raising the minimum wage.

And don't forget some of the other big policies that make most of us poorer: eliminating trade barriers and outsourcing jobs to put massive downward pressure on wages. Why are manufacturing jobs disappearing? Because the federal government approved trade agreements where American manufacturers compete with workers who are paid less than a dollar per day.

That's why the Chicago City Council's move, backed by SEIU's vivid and muscular threat to challenge legislators who vote with big business instead of with workers, is so important.

The best retort I've heard to the argument that retailers will avoid Chicago because they just can't afford to buy health insurance for the workers is Eric Zorn's column in the Trib yesterday. Corporate America isn't afraid that their arguments about killing jobs will be proven right... they are petrified that the urban market with billions in purchasing power will lure retailers into the city anyway, and the retailers will pay a living wage, and they will still be enormously profitable!

Because then, the rest of the country will start following progressive cities like Chicago and raise the minimum wage.

Why not all of Cook County?

We should pass a county ordinance raising wages. That would be a boon for the Cook County economy, because you can't outsource retail! And the increase in income for Cook County workers will get spent in Cook County, not sucked up into the profits and distributed throughout the world to the shareholders.

Today makes me proud and happy to live in the Capital of Blue America where elected officials show that government raises our standard of living.


respectful said...

Not to rain on Dan's parade, but it's premature to celebrate until we learn whether or not Walmart and Target will follow through on their threats to eschew the City and build exclusively in the 'burbs. If that happens, would Chicago be better off?

As far as a countywide policy, remember that business already pays higher property taxes in Cook County than elsewhere in the state; to impose a higher minimum wage as well would hurt retailers.

Larry Horse said...

Wow, you make me feel pretty ashamed to be a felly University of Chicago alum and Democrat with a post like that that has such a wrong sense of basic economics. Bringing Walmart or other big boxes into communities expands middle class purchasing power as they compete to give shoppers the lowest prices (as does free trade, which helps many more people than it hurts - although Bush's deals like CAFTA I will admit are nothing near to free trade but rather a managed system to enrich multinational corporations).

I hope that Wal-Mart does come to the city, but that they build buildings one square inch under the big box limit so that people can actually get the jobs and low prices from increased competition that the likes of you and Joe Moore desperately want to keep from them.

This bill is as anti-working class as the Bush tax cuts, only on a smaller scale.

Deirdre Helfferich said...

Wal-Mart is in the news with regard to their operations in Germany: the company tanked. When required to put their business on a level playing field with the rest of German businesses (by providing what Germany considers basic amenities in benefits, etc.), Wal-Mart was pricier than comparative German retailers and the quality was less. Germans are sticklers about quality. And Wal-Mart blew it with their one-size-fits-all formula, forgetting that local culture is IMPORTANT. All those smilers and greeters just gave people the creeps.

So Wal-Mart is pulling out.

With regard to Larry Horse's comments, it seems to me that companies like Wal-Mart depend on driving down the working class--you can't hire people for cheap without them being desperate for a job, any job, nor can you sell them cheap plastic crud without them being too poor to afford good quality merchandise. Wal-Mart depends on a large group of people in near poverty. Its anti-union stance is about as anti-working class as you can get.

What we really need is universal health care, so the companies don't have to bear that burden, and basic standards relating to work week, job safety, wages, and time off. Wal-Mart makes money by keeping people poor and unable to fight back.

Larry Horse said...

I agree about Wal-mart being anti-union. I am totally pro-union, which is why I want as many Wal-marts in Chicago as possible. In order for Wal-mart to be unionized, you need to start by getting at least a few stores unionized. Chicago has the most pro-union laws and environment in the country, so this is that place that Wal-mart unionization would most likely happen.

If you don't want Wal-mart in Chicago, you effectively don't want to see Wal-mart workers have union representation.

Steve Bartin said...

Dan's comment about "you can't outsource retail" is rather interesting.One could buy products from Amazon and avoid the highest retail sales tax which is going on right now.Also,Wal-Mart has set up shop on Toughy in Niles right across the street from Chicago.So,to say retail can't be "outsourced" you might want to think again on that one.

Bill Baar said...

Can big box retailers build in Cicero?

That's the logical place for many to go.

Dan Johnson-Weinberger said...

Thanks for the interesting discussion. It seems to me that the main problem with the ordinance is that it only covers Chicago. If it covered the entire State of Illinois, then I don' think there would be any reason to think that the big box retailers would leave the market. There are too many consumers here. We'd run into border issues (going to Indiana or Missouri), but that only affects people at the margin. So, bringing in more retailers that lower prices is a good thing, but Larry Horse, there's more to it than that. There's a cost to low wages. Higher wages are good for our economy. And frankly, there's quite enough room in the profit margin of these companies to lift up wages. With price pressure from competition, I'd expect to see prices stay low. To reiterate to react to respectful, Steve Bartin and Bill, the answer to your concerns about the big boxes avoiding the city is to expand the reach of the ordinance.

respectful said...

So Dan's solution is a statewide big-box minimum wage. But why just big box retailers? Why not a universal $10 minimum wage plus $3 in benefits?

Bill Baar said...

What's magic about $10 and $3?

Why not $20 and $6?

Dan Johnson-Weinberger said...

What's magic about $5.15 and $0 in benefits? (The current federal minimum wage and the current federal minimum in benefits). The answer is, of course, nothing. It's entirely a pragmatic decision with imperfect information designed to maximize utility. I think more people are better off with a higher minimum wage and a higher benefits requirements, because the loss of profits from the shareholders is less of a negative than the gain of benefits from the workers. And the loss of jobs on the margins does not outweigh the benefits from a living wage. At some point, the price of the wage is too high. $10 and $3 doesn't seem too high to me to make it a bad deal. And to respectful, I'm not against a universal $10 minimum wage. That doesn't strike me as obviously too high. I believe high wages create purchasing power which stimulates economic activity which creates jobs. And low wages depress puchasing power which depresses economic activity which depresses job creation. So anything that creates higher wages I am generally in favor of. There's a limit of course, but I don't think $10 is it.

Bill Baar said...

It's entirely a pragmatic decision with imperfect information designed to maximize utility.

I'd like to see the econometrics behind this...

...I'm guessing they pulled a number out of a hat.

So why not pull a bigger one?

Bill Baar said...

For that matter, what would make more sense is McGovern's (James Tobin's) old demogrants plan.

Nixon gave it to us as EIC... and Bush gave it a nice twist with Ownership accounts.

I'd rather the Gov just give every kid an IRA account at birth.

Makes more sense then shooting the revenue goose which this big box thing does.

Liberals aren't liberal anymore with ploys like this...

Tobin dead and forgotten.

RD said...

"Today makes me proud and happy to live in the Capital of Blue America where elected officials show that government raises our standard of living."

Daley Veto's: how do you feel now?