Poor Chicago

by Russ Roberts on September 27, 2006

in Wal-Mart

Poor Chicago. A Wal-Mart finally opened there, right in the city. The Associate Press story is worth reading.  Here are the two highlights of the article.  The first is this summary from the article:

Self-professed "shopaholic" Julie
Edwards arrived at Chicago’s first Wal-Mart store two hours before its
grand opening Wednesday — and she wasn’t alone.

Lines
snaked around the mega-retailer’s West Side building long before it
opened, filled with residents excited to welcome the store, its
bargains and its jobs to the area.

"I love this store," Edwards said. "It’s about time we get nice stores in this neighborhood."

Bringing
Wal-Mart to Chicago was a four-year journey that pitted unions and
small business owners against politicians and activists eager to bring
jobs to the city’s economically depressed West Side.

Yes, it did pit unions against politicians. But it really pitted unions against consumers and potential employees. That’s the unseen struggle that’s going in the Wal-Mart debate.

The second highlight is the article’s take on Wal-Mart’s impact on jobs and wages.

More than 15,000 people applied for the
400 jobs at the new store, where an estimated 98 percent of workers
live in the neighborhood, said store manager Ed Smith.

The
store’s opening comes two weeks to the day after aldermen failed to
override Chicago Mayor Richard Daley’s veto of the city’s so-called
"big-box ordinance."

The measure would have required large
stores like Wal-Mart to pay workers at least $10 an hour — plus $3 in
fringe benefits — by mid-2010. The rules would have applied only to
companies with more than $1 billion in annual sales and stores of at
least 90,000 square feet.

At the time, Wal-Mart officials
cheered the measure’s defeat, saying the aldermen who voted against it
were supporting "valuable job opportunities and increased savings for
the working families of Chicago."

On Wednesday, Smith said the lowest paid person at the store makes $7.25 an hour, and only two workers make that.

Daley and other opponents of the ordinance said it would have jeopardized the city’s ability to draw and keep large retailers.

Residents
like Edwards echoed the sentiments of many Wal-Mart supporters who said
a job that pays minimum wage is better than no job at all.

"I
want to see them make $10 an hour, but if they can’t, at least they can
make something," Edwards said. "They’re creating jobs for our
community."

FIFTEEN THOUSAND people applied for the 400 jobs. Only an econometrician unconstrained by economics could conclude that somehow the increase in demand for workers by Wal-Mart can somehow lower wages in the Chicago area. I’ll stick with Julie Edwards’s assessment.

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{ 18 comments }

dj superflat September 27, 2006 at 2:08 pm

what amazes me about the walmart "debate": with that many people applying for the jobs, walmart is clearly overpaying (i can't imagine that all but the 400 hired were not competent to do the jobs). walmart almost certainly has reasons to do so, but with that much demand, they could likely staff the store with the equivalent of interns (who could leverage that first job into another paying job, etc.).

Student September 27, 2006 at 3:08 pm

Where did the journalist say that Walmart would suppress wages?

He didn't. You see what you want to see. You come into the article expecting a hidden bias against Walmart and find one. I'm not suprised.

I could just as easily argue that the fact the author included the fact about 15,000 people applying for 400 jobs to show how Walmart is providing jobs for the many people that want them.

leftymetalhead September 27, 2006 at 3:45 pm

Sure, Walmart created 400 jobs in the city. But are they QUALITY jobs? How many of these 400 workers do we expect to stay at Walmart for at least a year? Many people, typically conservatives, rely on sheer numbers when analyzing job growth. Unfortunately, quality takes the back seat. Walmart has one of the highest employee turnover rates. I wonder why?

Russ Roberts September 27, 2006 at 3:58 pm

Student,

There was no hidden bias in the article. Didn't mean to imply there was one. In fact, I really liked the article.

I was reacting to the view some people have that Wal-Mart lowers wages and jobs. I think that view is mistaken.

dj superflat September 27, 2006 at 4:02 pm

don't the jobs have to be quality, by definition, with that many people applying? (anticipating response that the numbers just demonstrate there are no other jobs available: when there are no jobs available, any job is a quality job.)

rick feyn September 27, 2006 at 5:44 pm

lefty -

15 thousand people decided that those jobs were of better quality than the ones they currently have (or don't have as the case may be).

Nobody goes and applies for a job saying, "this is really a good chance to step down"

What you should do is go ask those 15,000 people about the quality jobs they had before Walmart came in. When you're through, you should call Lee Scott and thank him.

SK Peterson September 27, 2006 at 5:48 pm

dj superflat-

You're right and it echoes Julie Edwards' assessment: a paying job is better than no job.

And, leftmetalhead-

I do expect turnover to be large at Wal-Mart, and Target and McDonald's and Safeway and any other number of businesses that employ lower skilled workers. Having that first job at any of those establishments then increases the human capital of the labor force, enabling those workers to leave for better paying, higher quality jobs elsewhere.

Randy September 27, 2006 at 5:49 pm

Leftymetalhead,

Re; "Walmart has one of the highest employee turnover rates."

For a worker to obtain job skills and move on to something better is a good thing. Where would they learn such skills if not at places like Walmart?

happyjuggler0 September 27, 2006 at 7:50 pm

Chicago needs two things:

1) For Chicago's politicians to enact policies that encourage *more* companies like WalMart to come in hire low skill workers. Increased demand relative to supply increases price for the good/service in question, in this case wages.

2) For Chicago's politicians to change the K-12 school system to a system that increases the quality of its graduates. In addition to raising future wages of these graduates, this decrease in supply of low skill workers will increase the price that low skill workers receive for their labor.

Robert Speirs September 27, 2006 at 8:08 pm

What makes you think that the NEA and the political bureaucrat have any idea of "how to increase the quality of the graduates" in the K-12 school system? What evidence is there that government bureaucrats have any idea whatever of how to educate kids? All they know how to do is to spend as much money as they can squeeze out of the taxpayer in as profligate a manner as can possibly be imagined.

bibliochef September 27, 2006 at 8:49 pm

Hi. To help with an effort at the local level check out the walmart pieces on my site, http://cookingwithideas.typepad.com — Geneva NY is resisting a superstore. HELP.

sparky September 28, 2006 at 10:21 am

Randy,
You beat me to my point. The problem is we have too many low-skilled workers. The solution is to quit making so many. It means addressing issues like schools (vouchers) and young single mothers who can't raise productive children. Not easy stuff.

Also,I totally agree that, as either David Brooks or John Teirney said, "WMT is the greatest anti-poverty program of our generation". The skills they teach, simple stuff like showing up on time, sober and dressed, are an indispensible first step. We go to Racine a lot and watched the Unions fight the WMT Superstore on Rt 11; After it opened, everyone was happy except the Teamsters. As we drove home one day, we passed a delapidated ROC (Racine Opportunity Center); I told my son the real "opportunity center" was over on Rt 11……

JohnDewey September 28, 2006 at 10:52 am

sparky: "The problem is we have too many low-skilled workers. … It means addressing issues like schools (vouchers) and young single mothers who can't raise productive children"

I agree with the second part. But I also feel our economy could absorb all the low-skilled native workers – if those workers were allowed to work for the wage their low-skills are worth. And if they were sufficiently motivated to work for that wage. But too many voters and politicians steadfastly refuse to believe that supply and demand applies to labor.

happyjuggler0 September 28, 2006 at 5:09 pm

Robert Speirs,

I was careful to say change the school *system*. It is precisely the government monopoly on taxpayer funded schools that is the problem. Monopolies are bad as any leftist will tell you. Unfortunately they also favor a monopoly on our most important industry, education. Once again, specifically, taxpayer funded K-12 education.

happyjuggler0 September 28, 2006 at 5:11 pm

Also, I didn't specify vouchers or the government monopoly for a good reason. The idea is to point out that Chicago's politicians need to look in the mirror and realize they are the ones at fault if their citizens can't make a "large enough" wage via the crappy skills the learned, or didn't learn, in Chicago's schools.

Beerme September 30, 2006 at 9:27 am

"Monopolies are bad as any leftist will tell you"-happyjuggler0

Actually, Marx and many on the left saw the rise of capitalist monopolies as the pinnacle of the capitalist system. This is one of the things that signaled the coming decline of the system to Marx. Furthermore, the consolidation of power and decision-making skills in an educated elite, making top-down, central planning-type decisions, is a hallmark of leftist beliefs.

Ann September 30, 2006 at 8:30 pm

Good point, Beerme. Leftists generally believe in one big monopoly, in the hands of the government. The fact that they're against corporations doesn't mean that they like competition.

CalcaMutin October 3, 2006 at 9:57 am

Russ,

I of course agree with you and Boudreaux on the Wal-Mart issue. On the other hand, I myself try not to shop there for anything that I need to rely on, e.g. in the past I bought an alarm clock, a cofee grinder a food processor from WM and these items didn't last more than a month. So it's fine with me if other people want to shop there, but I probably won't.

Calca.

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