The winds of change are blowing in the Windy City. The approval by Chicago’s city council in July of an ordinance that would affect retailers earning $1 billion or more in annual sales – dubbed “big box” – is dividing the city’s aldermen and members of its central government, including Mayor Richard Daley. At issue is whether big retailers like Wal-Mart, Target, Home Depot and others within city limits should raise their minimum pay for workers to $13 per hour by 2010. Mayor Daley has until September 13 to sign or veto the measure.
Under the ordinance, $10 of the wages would be salary and $3 would constitute health benefits – something aldermen who support the measure say is sorely lacking for workers at many large retailers. For its part, Wal-Mart appears to be moving to stave off criticism of low worker pay and insufficient benefits, as well as beating Chicago’s city council to the punch: Last month the retailer announced that it would raise wages at a third of its 4,000 U.S. stores. Representatives for the company say this move is partly intended to meet a need for workers as it continues to expand.
Nationally, workers’ needs are being addressed by Congress, albeit sluggishly and with much debate. While the House of Representatives approved a combined minimum wage and inheritance tax package at the end of July, the Senate failed to vote on the measure before adjourning for the summer. The bill, which would raise the current federal minimum wage of $5.15 an hour (a rate that has not changed since 1997) to $7.25 an hour, has been criticized by congressional Republicans and business special interest groups, who argue that the market should dictate worker pay, not the government.
Yet, whether locally, statewide or nationally – through the private or public sector – something must be done to show workers in organizations of all sizes that they’re valued. The current federal minimum wage does not achieve this goal. According to former Federal Reserve Vice Chairman Alan Binder, the minimum wage is at its lowest level in 50 years when adjusted for inflation. Binder supports raising the minimum wage because it would result in cost savings from reduced job turnover, increased productivity as a result of better worker morale and the ability to recruit more talented employees through higher wages.
And Binder is not alone in this assessment. Washington’s Economic Policy Institute has said that boosting the minimum wage would benefit roughly 15 million people. The raise’s effect of pulling workers above the poverty line would produce an additional benefit: fewer Americans being reliant on public aid. For Chicago taxpayers, this would translate to a savings of $40 million annually according to a recent University of Illinois at Chicago study.
One criticism that has resonated with opponents of both the Chicago and federal wage-increasing measures is that such an increase would curtail future business growth and, thus, result in higher unemployment and fewer jobs. Yet, cities like Santa Fe, New Mexico, and San Francisco have passed “living wage” laws and seen job growth remain steady. The Christian Science Monitor even reported recently that in Santa Fe, whose mandated wage increase will bring the lowest wages to $10.50 an hour by 2008, a new Lowe’s Home Improvement store has been built since the law took effect a year ago. In addition, Wal-Mart – the chief retailer covered in the Chicago big box battle – is set to build its third Santa Fe store. Evidence such as this suggests that Wal-Mart isn’t going anywhere, despite its threats to cease building new stores in Chicago if the big box ordinance is passed.
One thing to keep in mind is that, especially in larger organizations, direct labor is a relatively small cost. At Fel-Pro, the auto parts manufacturer my family formerly co-owned, which employed about 3,000 people, materials made up the biggest cost, followed by general and administrative costs. It made good business sense for us to keep our workers’ wages competitive in order to see the long-term benefits of decreased turnover and increased morale and productivity.
Employers owe it to their workforces to show their commitment to them by paying them a sufficient living wage. Many workers, especially low-income workers, are only one paycheck, one health care episode or one bad experience away from losing everything. If one of those situations occurred, who could blame a worker for not having his or her mind be totally on the work? The result would be a loss of productivity for the enterprise.
Therefore, paying workers a decent wage is not a zero-sum game. Instead, it’s a win-win scenario that improves employees’ peace of mind and, consequently, the bottom line of organizations. Here’s to hoping that the city of Chicago and, on a broader scale, Congress make this connection – and soon.