American cities are starting to weigh up the pros and cons of ‘big-box’ retailers
By Professor David Barron*
24 August 2006: Not so long ago, America’s big cities were so desperate to attract commercial development they gladly would have given away the store to get one. But not now, as Wal-Mart and other super-retailers recently discovered. On 25 July 2006, the Chicago Board of Aldermen passed an ordinance requiring big-box retailers - those with $1 billion in sales and 90,000 square feet of shopping space in their stores - to give their employees a living wage. By 2010, the stores would have to pay workers US$10 an hour and provide an additional $3 in benefits.
Despite strong support from local unions and merchants, and concerns that an influx of low-paying big-box retail jobs could do more harm than good, the mayor has threatened to veto the measure, and some are talking about asking the courts to strike it down if it’s enacted. They say the new law is not only unfair but also bad policy. It would, they argue, deprive the city of sales taxes, force consumers to pay higher prices, take jobs from poor people, and push new development to the suburbs.
But whatever one thinks of the merits of this debate, the fact that Chicago is even having it is important. Other cities, including Boston, are already thinking about following the aldermen’s lead: As Wal-Mart contemplates its first store in Boston, city councilors Chuck Turner and Felix Arroyo have said they plan to explore an ordinance similar to Chicago’s. This surge of interest in regulating big-box retail shows that, at last, America’s cities are beginning to think of themselves as choosers rather than beggars. They have emerged from decades of decline with newfound financial strength, and they are now beginning to assert their public powers to decide the kind of cities they want to be.
And so, with demand for urban locations higher, cities-as free marketers should be the first to realize-are no longer willing to sell themselves at any price. The Chicago Sun-Times, in the process of condemning the aldermen’s action, hit on just this point: "[They] think the dense Chicago market is too attractive for the retailers to pass up, especially since most suburban areas already are saturated. They’re taking a risk that Wal-Mart and Target are bluffing." Exactly right. The aldermen are betting that big-box retailers will build even if the ordinance becomes law, but it’s a safer bet than the Sun-Times allows. After all, the new measure does not bar big-box retailers from doing business in the city. It just requires that they provide employees high enough wages and benefits so that the city won’t have to make up the difference through the social services it provides.
In that way, the proposed measure is a lot like the linkage ordinances that Boston helped to pioneer two decades ago. Those measures required new, large-scale office developers to contribute to a housing trust fund in order to shoulder some of the burdens-particularly the increased demand for housing that comes with new jobs-that new construction imposes on a city.
Like new office buildings, big-box retailers also bring burdens along with benefits. Some studies show they may depress wages in related businesses or threaten small, usually family-owned retailers. In many cities, including Chicago, it is the growing immigrant neighborhoods, chock-full of such small family-run establishments, that are re-knitting the urban fabric and producing significant amounts of social capital. A law restricting big-box companies from using low wages to support price cuts that might force these important community retailers to close is arguably a tailored response to a reasonable concern. Certainly it’s hard to say that Chicago is acting recklessly.
Which is why, if the Chicago ordinance passes, it would be a mistake for courts to strike it down. Some suggest that such a measure is discriminatory, but that same argument failed to win the day in an otherwise successful suit against a similar law that Maryland enacted. Like that measure, this one also identifies an open-ended class of retailers, not just one company. And there’s something hollow in Wal-Mart, which used to ask for special local tax treatment, now complaining about being unfairly singled out.
Others say that decisions like this should be made nationally so as not to create a patchwork of regulation. But that argument has it exactly backwards. The impact of these stores is felt much more acutely within a city than in the national economy. Before we set rules for big-box employers nationwide, why not let local communities experiment with regulations of their own that seek to balance their costs and benefits? Chicago’s mayor has suggested that the proposed ordinance is itself insufficiently attentive to local needs. He’s proposed leaving it up to each ward within the city to set the terms for big-box development.
The Chicago debate is not really just about Wal-Mart, nor is it even about how big-box retailers should be regulated. It’s also about our cities-both how we should think about them and how they should think about themselves. And for those who believe that a strong nation needs strong cities-a view that a growing body of research supports-this renewal in urban self-confidence is a welcome development indeed. For that reason, efforts to strip Chicago and other cities of the legal power to make decisions like this one should be rejected. They would stifle a long-dormant debate about the future of our cities before it has even had a chance to get off the ground.
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And so, with demand for urban locations higher, cities-as free marketers should be the first to realize-are no longer willing to sell themselves at any price. The Chicago Sun-Times, in the process of condemning the aldermen’s action, hit on just this point: "[They] think the dense Chicago market is too attractive for the retailers to pass up, especially since most suburban areas already are saturated. They’re taking a risk that Wal-Mart and Target are bluffing." Exactly right. The aldermen are betting that big-box retailers will build even if the ordinance becomes law, but it’s a safer bet than the Sun-Times allows. After all, the new measure does not bar big-box retailers from doing business in the city. It just requires that they provide employees high enough wages and benefits so that the city won’t have to make up the difference through the social services it provides.
2006-11-09 08:23:09
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In that way, the proposed measure is a lot like the linkage ordinances that Boston helped to pioneer two decades ago. Those measures required new, large-scale office developers to contribute to a housing trust fund in order to shoulder some of the burdens-particularly the increased demand for housing that comes with new jobs-that new construction imposes on a city.
Like new office buildings, big-box retailers also bring burdens along with benefits. Some studies show they may depress wages in related businesses or threaten small, usually family-owned retailers. In many cities, including Chicago, it is the growing immigrant neighborhoods, chock-full of such small family-run establishments, that are re-knitting the urban fabric and producing significant amounts of social capital. A law restricting big-box companies from using low wages to support price cuts that might force these important community retailers to close is arguably a tailored response to a reasonable concern. Certainly it’s hard to say that Chicago is acting recklessly.
Which is why, if the Chicago ordinance passes, it would be a mistake for courts to strike it down. Some suggest that such a measure is discriminatory, but that same argument failed to win the day in an otherwise successful suit against a similar law that Maryland enacted. Like that measure, this one also identifies an open-ended class of retailers, not just one company. And there’s something hollow in Wal-Mart, which used to ask for special local tax treatment, now complaining about being unfairly singled out.
Others say that decisions like this should be made nationally so as not to create a patchwork of regulation. But that argument has it exactly backwards. The impact of these stores is felt much more acutely within a city than in the national economy. Before we set rules for big-box employers nationwide, why not let local communities experiment with regulations of their own that seek to balance their costs and benefits? Chicago’s mayor has suggested that the proposed ordinance is itself insufficiently attentive to local needs. He’s proposed leaving it up to each ward within the city to set the terms for big-box development.
The Chicago debate is not really just about Wal-Mart, nor is it even about how big-box retailers should be regulated. It’s also about our cities-both how we should think about them and how they should think about themselves. And for those who believe that a strong nation needs strong cities-a view that a growing body of research supports-this renewal in urban self-confidence is a welcome development indeed. For that reason, efforts to strip Chicago and other cities of the legal power to make decisions like this one should be rejected. They would stifle a long-dormant debate about the future of our cities before it has even had a chance to get off the ground.
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