"It's sad – this puts politics ahead of working men and women," said John Simley, Wal-Mart spokesman.

Federation of Labor President Dennis Gannon is convinced the vote sends the message that Chicago is not interested in jobs that do not provide a living wage for working men and women.

Mayor Richard Daley warned the measure will drive development and much-needed jobs out of the neighborhoods of working men and women.

In case you missed it, on July 26, by a vote of 35-14, Chicago's City Council approved a measure requiring big retailers to pay a higher minimum wage than most other Chicago employers. The so-called "big-box" ordinance applies to stores of at least 90,000 square feet and operated by firms with $1 billion or more annual sales. By July of 2007, their employees must be paid a minimum of $9.25 an hour. That will rise to $10 by 2010. Benefits by 2010 must be at least $3 an hour. There will be automatic cost-of-living increases after that.

Although apparently aimed at Wal-Mart, there are 35 or 40 existing stores in the city that may fall under the ordinance. These include stores operated by Target, Sears, Menards, Home Depot, Staples, Costco, K-Mart, Toys "R" Us, Lowes, and possibly Nordstrom's and Marshall Field's, as well as Wal-Mart.

Wal-Mart is rethinking plans to open any more stores in Chicago, and Target is putting on hold its plans to build three South Side stores.

It is obvious from the comments above that there is no consensus on how this vote will affect the working men and women of Chicago. It depends on whether you're on the paying or the receiving end of the deal, whether or not you believe that employers are exploitive monsters from whom helpless workers cannot protect themselves without assistance from the government, and whether or not you understand that the repercussions of governmental interference in the free market do not stop at the door of the business being over-regulated.

One aspect of this issue that hasn't received as much attention is the effect this ordinance will have on smaller businesses. At first glance it looks as if the Chicago City Council has protected Wal-Mart's small competitors. After all, this misbegotten rule applies to only huge retailers. What has been overlooked is the fact that competition is not confined to businesses trying to keep their prices down in an effort to lure customers away from other businesses. Competition exists also when businesses offer the best wage-and-benefit package they can afford in an effort to lure good employees away from other businesses. With a starting salary of $7.25 and an average salary of about $11 an hour, every time a new Wal-Mart opens prospective employees line up around the block to submit their applications. With a starting wage that is effectively $13 an hour, the line will be that much longer. What happens to the line of good employees waiting to apply at the tiny retail store a couple of blocks over? Would it be better to require the same higher wages of all businesses, large and small? Or leave the small businesses subject to the current $6.50 an hour minimum wage, as the Chicago City Council has done? It doesn't matter. At the higher wage they go out of business. At the lower wage they lose their people to Wal-Mart. The small guys are toast either way.

The Economic Policy Institute (EPI), which bills itself as "a nonprofit, nonpartisan think tank that seeks to broaden the public debate about strategies to achieve a prosperous and fair economy," published an op-ed piece that originally appeared in the Chicago Sun-Times on July 8, 2006, arguing in favor of the then-impending ordinance. In it, they state, "...the central question comes down to this: Can Wal-Mart do better by its workers and still profitably offer its trademark ‘everyday low prices'?" They go on to demonstrate that the 20 percent raise required by the ordinance could be achieved by Wal-Mart lowering its profit margin from 3.6 to 2.9 percent and raising its prices 0.7 percent. They then proceed to compare the resulting profit margin to that of Costco and Target, and even to Wal-Mart's own financial history.¹

Well, maybe that's achievable and maybe it's not. But that's hardly the point, is it? While The EPI has every right to compile and publish its figures and to say what they think Wal-Mart or any other business should do, the point is this: Nobody outside the boardroom of a private company, including a think tank or the government at any level, should be able to dictate wages, profit margin, or prices to that company. The owners of the company make their choices and they live with the consequences.

And do you really think it will end with Chicago's Wal-Mart? Don't kid yourself. One of the Chicago aldermen who supported the ordinance said that the retail giants were fearful of Chicago's approval of the measure. "They know what happens in Chicago is going to be duplicated everywhere else," he said.²

When asked if he would veto the measure, Chicago Mayor Richard Daley said the council's next move might be to vote to reduce the size of stores that come under the wage requirements and, ultimately, work down to such franchise operations as McDonald's.

Precisely.

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Sharon DuBois is the president of Senior Ease (www.seniorease.com), as well as the editor of KsSmallBiz.com. Comments and responses may be emailed to This email address is being protected from spam bots, you need Javascript enabled to view it .

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1. http://www.epi.org/content.cfm?id=2423

2. http://www.chicagotribune.com/news/custom/newsroom/chi-060726bigbox-vote,1,7029868.story