Wednesday, August 09, 2006

Chicago: “Big Box Ordinance” Aimed at Wal-Mart Threatens Lowe’s, Target Stores

In Chicago, where labor unions are strong and liberal Yuppies pretty numerous, the City Council passed a “Big Box” ordinance setting a very high minimum wage on big box stores and mandating lavish spending for benefits. According to the Chicago Tribune:
The big-box measure applies to stores of at least 90,000 square feet operated by firms with $1 billion or more in annual sales. By 2010, the minimum wage for employees will be $10 an hour and $3 in fringe benefits. Automatic annual cost-of-living increases will apply thereafter.

By comparison, the federal minimum wage is $5.15 an hour, while the state minimum is $6.50, though both amounts can be less if employees receive tips.
People who favor such legislation appear to be economic illiterates who think that government can set prices (including the price of labor) at any level it wants, without unfortunate consequences.

But the economic consequences have not been long coming in Chicago.
Lowe’s has halted plans for two home-improvement centers in Chicago while Mayor Richard Daley weighs whether he will try to block the city’s new “big-box” minimum-wage ordinance, a South Side alderman said Tuesday.

The company’s concerns about the law caused it to shelve plans for stores at 83rd Street and Stewart Avenue and at 79th Street and Cicero Avenue, said Ald. Howard Brookins Jr. (21st).

“They changed their mind,” said Brookins, whose ward includes the proposed store at 83rd and Stewart. “They now want to wait and see what happens.”

Daley opposes the ordinance, which was passed by the City Council on July 26, but he has refused to say whether he would veto it. He has until Sept. 13 to decide whether he will exercise his veto power for the first time in his 17-year tenure as mayor.

David Katz of Northbrook-based A&R Management Inc., which manages the Scottsdale Shopping Center at 79th and Cicero, confirmed that Lowe’s officials have postponed closing the deal for a new store there.

“They won’t sign the lease at this point,” Katz said. “They are waiting to see if the mayor will veto the ordinance. Chances are they will pull out” unless the ordinance is vetoed.

Officials of Wal-Mart Stores have said that as many as 20 new outlets in Chicago that had been in the planning stages were on hold because of the ordinance. And last week, it was revealed that Target Corp. has taken a similar stance on a list of planned stores here. They include one that was to have been an anchor of a $90 million shopping center on a long-vacant site at 119th Street and Marshfield Avenue and another that was to have anchored the Wilson Yard development, a $113 million project in Uptown.

Meanwhile, Daley stepped up the rhetoric against the ordinance Tuesday, contending that suburban mayors are salivating at the prospect of getting retail development that won’t be coming to Chicago.
In a modern, globalized, highly mobile economy, old-style notions about how business can be coerced into paying more than the market dictates become less and less viable.

Chicago used to be known as “the city that works” (in contrast to New York, which was the city that didn’t). If the ordinance stands, Chicago will be known as a city addicted to yesterday’s economic ideas.


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