Chicago’s City Council passed a measure last week that mandates “big box” stores such as Wal-Mart, Best Buy and Lowe’s to pay workers — regardless of experience — a minimum wage of $13 an hour including benefits by 2010. See the opinion piece in today’s Wall Street Journal.
The justification is to help poor people have a better standard of living. Is this another example of good intentions mixed with bad economics? This time I doubt the intentions are to help the poor. They may be to reduce the number of aesthetically unpleasing “big box” stores to make the neighborhoods look nicer, but it surely won’t help the poor. What it will do is move jobs from the city to the suburbs, discourage Wal-Mart and others from staying and expanding in Chicago, and in addition to creating higher unemployment result in an increase in prices at these stores.
People forget that a higher standard of living isn’t just measured by one’s salary, but also by the cost of goods. A salary increase that is accompanied by an equal increase in the cost of goods doesn’t mean a higher standard of living. I agree that big box stores are aesthetically unpleasing, but I also recognize that they enable Americans to buy many household goods at low prices and enjoy a standard of living better than anywhere else in the world. When I lived in Nicaragua, a halogen lamp cost almost three times as much as it did in the States — that’s was because there weren’t places like Wal-Mart to provide them more cheaply — and that meant that only people of a higher income level could afford to buy them. My question is that when the prices inevitably increase will the Chicago City Council mandate “everyday low prices” too?