Wal-Mart and the "Living Wage"

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?

Senior contributing writer Max Chafkin has profiled companies such as Yelp, Zappos, Twitter, Threadless, and Tesla for the magazine. He lives in Brooklyn, New York. @chafkin