After months of fevered lobbying and bitter debate, the Chicago City Council passed a ground-breaking ordinance yesterday requiring â€œbig boxâ€ stores, like Wal-Mart and Home Depot, to pay a minimum wage of $10 an hour by 2010, along with at least $3 an hour worth of benefits.
The ordinance, imposing the requirement on stores that occupy more than 90,000 square feet and are part of companies grossing more than $1 billion annually, would be the first in the country to single out large retailers for wage rules.
Apparently they thought about passing a law that applied only to firms with names rhyming with “haul cart”, but decided that this approach would be cleverer.
We know that the advent of a Wal-Mart drives down prices. So to the extent that this ordinance changes behaviour, we can think of it as a transfer from Wal-Mart shoppers to low-wage workers. If the family income of the average Wal-Mart shopper is lower (higher) than that of the average Wal-Mart worker, then it will increase (decrease)Â family income inequality. But given some reasonable wage growth between now and when it comes into force inÂ 2010, it may not bind on more than a small share of Wal-Mart’s workforce.