In a fascist economic system, businesses are privately owned, but government controlled. In any economic system, some regulation is necessary to ensure safety and to enable redress of fraud. When the government micro-manages private businesses, it threatens to cross over the line of fascism.

The latest attempt at government control of business is Chicago’s proposed “living wage” ordinance. If it passes the July 26 vote, stores with 90,000 square feet operated by retailers who earn at least $1 billion in sales must pay all employees who work at least 10 hours per week $9.25 per hour plus $1.50 per hour in benefits on July 1, 2007. Those employers must pay $9.50 per hour and $2.00 per hour in benefits in 2008, $9.75 an hour and $2.50 per hour in benefits in 2009 and $10.00 per hour plus $3.00 per hour in benefits by 2010. After 2010, the “living wage” will be increased annually to match the inflation rate.

In a free market, a potential employer decides what wage he is willing to pay for a specific job and a potential employee decides what wage he is willing to do the job for. When an agreement is reached, the employer hires the employee. An employee is unlikely to volunteer to work for less than he can live on. That is supported by the facts that approximately 2% of workers over the age of 25 earn the minimum wage and more than 82% of minimum wage earners have no dependents. Those facts are ignored by proponents of a “living wage” who often portray typical minimum wage earners as single mothers. Most minimum wage earners are students and recent high school graduates who do not yet have many job skills. Raising minimum wages and creating “living wages” reduces the demand for unskilled workers. This makes it harder for young people to get their first jobs where they learn skills and get the work experience that will make them employable at higher wages. Employers are less likely to provide training at higher wages because they expect better paid employees to be able to do their jobs without help. Mandated wages and benefits also lead employers to find ways to maintain production levels with fewer workers. Fewer available jobs increases the difficulty of finding work for the unskilled or inexperienced.

Those pressuring for legislation requiring “big box” retailers to pay a “living wage” and mandated benefits generally aren’t those working in retail or those earning minimum wage. Most of the pressure comes from labor unions. Fran Spielman’s June 28 Chicago Sun-Times article, “Stone: Labor playing rough on wage issue,” quotes 50^th ward Alderman Bernard Stone, who said, “The unions have backed aldermen against the wall. They’ve threatened to fund opponents against them and to solicit opponents to run against” those who don’t support the ordinance. This year the AFL-CIO; United Food and Commercial Workers’ Union, (UFCW); and Service Employees International Union, (SEIU), successfully lobbied the Maryland state legislature to override the governor’s veto of the “Fair Share Health Care Act.” SEIU even helped draft the “Fair Share Health Care Act” that requires companies with more than 10,000 employees to pay 8% of their payrolls on healthcare or pay the difference into a state fund. Since the only employer in the state to be affected is Wal-Mart, the act became known as the Wal-Mart bill. Labor unions pressure for such legislation because non-union big box retailers undercut the prices charged by grocers and other retailers who have union shops. Attempts to unionize Wal-Mart employees have been unsuccessful, so labor unions are trying to increase non-union retailers’ costs of doing business through legislation.

The affected retailers may be ready to fight back. Wal-Mart had planned to build 10 to 20 new stores in Chicago over the next five years. Wal-Mart will reconsider this plan if the “living wage” law passes. Mayor Daley challenged aldermen to explain how they will replace 8,000 jobs if Wal-Mart cancels those plans. Wal-Mart also put plans on hold for two distribution centers in Maryland after the passage of the “Fair Share Health Care Act.” In Chicago, Target is following Wal-Mart’s lead. Target is suspending its plans to build three new stores and has implied that it may also close existing Chicago stores if the “living wage” law passes. 34^th ward Alderman Carrie Austin told the Chicago Sun-Times that a pullout by Target could jeopardize the development of a new mall and that Home Depot is likely to pull out of the proposed mall if Target does. In her July 13, 2006 piece, “Target may close stores if city OKs wage rules,” Fran Spielman quotes Austin saying up to 1,000 jobs may be lost if the mall project fails.

49^th ward Alderman Joe Moore, the ordinance’s chief sponsor, told the Chicago Sun-Times, “It’s an idle threat.” Time will tell if that’s the case. Moore also accused Wal-Mart and Target of using bullying tactics. The same could be said of labor unions that pressure legislatures to pass laws designed to increase expenses for non-union retailers.

People who think government control of wages and benefits is ok when it only affects Wal-Mart should rethink the issue. In his February 28, 2006 OpinionJournal column, “Always High Taxes,” Brendan Miniter interviewed Maryland Delegate James Hubbard, a supporter of the “Fair Share Health Care Act.” Hubbard has already introduced a bill requiring employers of over 1,000 to spend 4.5% of payroll on health care or pay the difference into a state fund. Additionally, he plans to draft a similar bill that would apply to companies with fewer than 1,000 employees. After laws affecting big businesses pass, they can be expanded to apply to others. Those who own or work for small businesses should be concerned.

Copyright Eva Ellsworth, 07/16/06, all rights reserved