A second look at large retailers

Punishing targeted businesses hurts us all

Carl Gipson
is the director for Washington Policy Center’s Small Business Center. Visit www.washingtonpolicy.org or call 206-937-9691.

For the past decade, groups opposed to Wal-Mart have targeted the large retailer for a variety of reasons ranging from health care plans to their union-free work environment. As the anti-Wal-Mart movement gained ground, more and more bills were introduced to force the company to change the way it conducts business and pays its employees.

It appears now that the anti-Wal-Mart crowd has expanded its opposition efforts to include all large discount retailers.

For the past few years, a small but growing movement has been pushing the idea of a mandatory living wage for the employees of large retail companies. Smaller retailers are exempt. Recently, Chicago passed a living wage ordinance, despite the vocal cries of its Chamber of Commerce, Mayor Richard Daley and consumer groups.

Washingtonians should watch what is happening in Chicago because the same proposal could face the voters of the city of Spokane in 2007. And if Spokane passes the living wage proposal, look for it to turn up elsewhere in our state.

A living wage differs from a minimum wage in that it is supposed to guarantee that the employee can support a family while living off of a predetermined wage. In Chicago, the minimum wage is $6.50 an hour. The living wage ordinance will move that wage up to $10 an hour, or more if the employees are not covered by health care.

Chicago’s law, and similar proposals around the nation, only target large retailers. The targeted retailers include Fred Meyer, Costco, Target, JCPenney and, yes, Wal-Mart. It is a law that affects 42 stores in the Chicago area.

In Spokane, large retailers with over 95,000 square feet of store space would be required to pay 135 percent of minimum wage plus health care, or 165 percent of minimum wage without health care. That equates to $10.30 an hour with health insurance or $12.58 without. But unionized employers are exempt – even if their workers make less than the living wage.

In light of the recent Labor Day holiday, the anti-business crowd is marketing the living wage as a tool to lift the poor and minority communities off the bottom rung of the economic ladder – economic and academic evidence to the contrary notwithstanding.

The discount retailers are also the stores that usually offer the lowest-cost goods for families on a budget. These stores also employ hundreds, if not thousands, of people in a neighborhood. The economic and social benefits of these large retailers are undeniable. Making them a target for specific legislation that punishes them for simply being "big" is shortsighted and bad public policy.

Besides being bad policy, such proposals are misdirected. The U.S. Small Business Administration says that 54 percent of all minimum wage workers are employed by small businesses. Again, this appears to be a case of larger, successful companies being attacked only because they are big.

The large discount retailers in the Chicago area have practically stopped all planned expansions or new store openings inside city limits because of the living wage law. Instead, they simply relocate, expand or set up a new shop in the neighboring suburbs. But most of the retailers’ employees come from the city, thereby making it harder for employees to get to work. And the city of Chicago no longer gets all the tax revenue generated by the retailers. Much of that money was going to programs that were designed to assist the very same people this new living wage law was supposed to help.

The idea behind Washington’s artificially increasing minimum wage is controversial enough. Arbitrarily determining the price of labor for everyone limits options. Instituting a living wage makes the impact of labor price controls even worse.

Now that the living wage movement is upon us, lawmakers need to look at how businesses will react in the short and long term. Labor is often a business’ biggest expense. Increasing those costs by 35 to 65 percent may mean more money for a select few in the short run, but will mean fewer jobs, less tax revenue and disrupted communities in the future.

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