Living Wage - Granite Grok

Living Wage

We’ll be commenting in the future about the "living wage" – especially why it is such a dunderheaded idea from a purely economic standpoint.

Be that as it may, what happens when activists and politicians are trying to ram something down the marketplace’s throat, and the marketplace decides to not play, pick up its ball and  go home? In Maryland, a law was passed that essentially targets Wal-Mart to force it to pay health care benefits to its norms (and the union activists behind the law, sore that all efforts so far to unionize Wal-Mart have failed).  I’ve been waiting to see what Wal-Mart was going to do.

Then this came up – from the Chicago-Sun Times:

 Target is putting plans to build three South Side stores "on hold" — and making veiled threats to close existing Chicago stores — if the City Council mandates wage and benefit standards for "big-box" retailers, African-American aldermen warned Thursday.

Uh-oh, the retailers, I think, have been pushed to far.  Why Target?  Well, it’s not just Target, it is any big retailer that fits this:

The saber-rattling is intensifying as the clock winds down toward a July 26 showdown vote on plans to make Chicago the nation’s first major city to establish a "living wage" for stores with at least 90,000 square feet of space operated by retailers with $1 billion in sales.

Here we go with the "living wage" meme again.  This is "playing chicken" in the economic sense – who is going to blink first?  My bet is the politicians.  Why?  They can only control what is within their jurisdiction – they are helpless if the retailer moves out….and then they will have to discuss the ramification with their angry constituents (some of whom will lose their jobs).  Why do I think this is likely?

Here’s the reason:

Minneapolis-based Target becomes the second retailing giant to threaten to pull out of the lucrative Chicago market in a last-ditch effort to stop an ordinance championed by organized labor that breezed through the City Council’s Finance Committee 15-6 and has attracted support from 33 aldermen.

Wal-Mart has threatened to cancel plans to build as many as 20 Chicago stores over the next five years if retailers are required to pay employees at least $10 an hour and $3 in benefits by July 1, 2010.

Politicians reaction – not too bright:

Ald. Leslie Hairston (5th) said she has a letter of intent from Target to build a new store at Marquette and Stony Island in her ward. But the developer has told her the store is "on hold" and that Target may close existing Chicago stores if the big-box ordinance goes through.

Economic Theory says that if your costs are too high, don’t do business there…. 

Hairston called it little more than a scare tactic. And even if the threat turns out to be real, she’s standing firm in support of organized labor.

Maybe…but maybe not.  Reaction again – a petulant "I don’t care" – even if it will hurt her constituents. 

"Wal-Mart and Target could pay their people a living wage. Then we wouldn’t have this problem, and people could actually live on the money they made," Hairston said.

And you know this, how? 

So start the chuckling because of this alleged reaction from the big-boxers:

…said Wal-Mart executives have told him they may take the lead of the riverboat casinos that ring Chicago and run free shuttle buses to their suburban stores if the big-box ordinance passes.

"I don’t know if it was in jest, but they did say it. … That is an option that they could employ. They could set up locations to have pickup and dropoff. I don’t think that is that farfetched,"

Capitalism is clever – it will seek out a niche and opportunities.  And when presented with difficulties, it generally will find a way to fulfill those needs.  If they do use the buses, they get what they want and the politicians get…..nothing.