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Wal-Mart Deal for Higher Wages in Chicago Highlights Need for Industry-Specific Wage Legislation

For the first time in the nation, Wal-Mart has agreed to a higher wage standard at a new store to be built in Chicago, Illinois.  The retail giant’s commitment was part of an agreement to assure City Council support for zoning approvals, on which the Council voted Wednesday.  The deal also concludes a six-year fight over what will be only Wal-Mart’s second store in the Windy City.  As we reported previously, Wal-Mart reached a stalemate with labor unions in 2006, after the City Council passed an industry-specific wage standard for big box retailers, which was later vetoed by Mayor Richard M. Daley.

Under the new agreement, Wal-Mart commits to a starting wage of $8.75, $0.50 per hour higher than the minimum wage for new employees.  After one year of employment, Wal-Mart will raise workers’ wages by $0.60 to $9.35 per hour.  Wal-Mart also agreed to pay prevailing wage, use union contractors to build the store and to provide $20 million to local non-profits over five years.  The company claims the deal paves the way for it to move forward with plans to open two-dozen more stores in Chicago by 2015, although the agreement does not cover any other stores. 

Legislation Needed to Lock-in Higher Wage Standards:  Despite conventional assumptions about the economy, the Wal-Mart case shows that state and local governments still have good opportunities to raise wage and labor standards, particularly on an industry-specific basis.  Still, this is a an agreement for only one store, rather than the city-wide policy embodied in the original ordinance approved by the City Council.  Wal-Mart was able to negotiate its compromise by fragmenting the opposition with promises of temporary benefits to the building trades and non-profits and avoiding broader legislation.  If Chicago enacted its 2006 wage ordinance, the local economy would have benefited from thousands of workers throughout the city’s big-box retail sector being lifted out of poverty and depending less on public services. 

While the deal represents a first for Wal-Mart, it falls short of other actions cities and states are taking to set higher industry-specific wage and labor standards.  For instance, in 2008 Los Angeles passed a law that sets a living wage standard at all hotels near the LAX airport; and in 2009, New York state passed a law requiring labor peace agreements for all hotels developed or financed by the state through its public benefit corporations.  New York is also considering a bill that would set a prevailing wage standard for building service workers employed by public utilities. 

A similar fight is looming over Wal-Mart’s plans to build its first store in New York City, where the City Council in December stood strong by rejecting another retail project because the developer would not agree to a living wage standard.  According to City Council Speaker Christine Quinn, the question for elected officials is not about creating jobs or not creating jobs, but about what kind of jobs the city should be creating:  “We don't want companies that have led the nation in law suits being brought against them by workers,” she said.  “We don't want companies that have the largest class-action in history brought against them.  We don't want companies where women are, over and over, paid less than men and not promoted.”

Resources
National Employment Law Project - The Road to Responsible Contracting
Good Jobs First - High Road or Low Road? Job Quality in the New Green Economy
Good Jobs First - Making the Connection: Transit-Oriented Jobs and Development
Economic Policy Institute - The Employment Impact of a Comprehensive Living Wage Law, Evidence from California