In a potential blow to Wal-Mart's efforts to expand into urban areas, the Chicago City Council yesterday approved an ordinance requiring big-box employers to pay a "living wage". The proposal calls for retailers with at least 90,000 square feet of floor space and sales of over $1 billion to pay $13 an hour in wages and benefits by 2010.
Chicago's is the latest attempt by state and local governments to force the Wal-Marts of the world to pay their workers more; it resembles a recently overturned Maryland law that would have required Wal-Mart to spend more on employee health insurance. Although it's unclear if Mayor Richard Daley, a Democrat, will be able to kill the proposal with a veto—he has supported efforts to bring a Wal-Mart store to Chicago's economically depressed Austin neighborhood—this debate will almost certainly replay itself in other cities, as the $285 billion behemoth seeks to expand into urban areas.
Putting aside the moral question of whether Wal-Mart's employees should get a "living wage", there's the also the issue of whether the company can actually afford to pay one. In his book, the Wal-Mart Effect, Fast Company writer Charles Fishman points out that even if Wal-Mart were to give all of its profits to its 1.8 million employees, that would only amount to a raise of about $3 dollars an hour. That would be a big improvement for Wal-Mart's low wage workers, but it probably still wouldn't be enough to live on.
A more relevant question for business owners, especially small retailers, is whether big-box retailers can be part of a successful urban redevelopment strategy. Will inner city Wal-Marts create economic spillover to other businesses or will they simply price them out of existence?