Targeted Minimum Wages: Big Box Veto and Local Minima
Mayor Daley has vetoed Chicago's Big Box Ordinance, though this chapter of local history remains open until is known whether the City Council will override the veto - and whether a new, somewhat different ordinance will be proposed. Proponents might draft a yet more refined minimum, or "living," wage bill. The federal minimum is $5.15; the Illinois minimum is $6.50 (another example of asymmetrical preemption by federal law); the proposed Chicago minimum would have been $9.25 (plus some benefits and then increases over several years) but only for firms that are $1 billion in size and then in business properties occupying 90,000 square feet or more. My subject here is what to make of such targeted minimum wages.
Starting with the anti-Walmart taste some voters and politicians have, let us assume that it is lawful to design legislation that places burdens on big stores and not on other businesses. Perhaps some interest groups are thought able to defend themselves so that law need only worry about discrimination against dispersed minority interests. Alternatively, once we admit a variety of taxes and regulations, the clever regulator and legislator can overcome judicial and constitutional rules and eventually discriminate as they like through proxies. A federal tax on, or subsidy for, Illinois alone or immigrants from a specified country might not pass muster in federal court, but one aimed at small grocers or Fermilab or airports of a certain size will do just fine. Similarly, there may be plenty of room to redesign the Big Box Tax. If the Mayor is worried that the discriminatory minimum wage will keep stores from opening and creating jobs, then a newly drafted law might exempt new stores and take aim at inframarginal stores. (I was entertained last night by my 8th grader's homework assignment, to write a letter to Mayor Daley about what he ought to do. The assignment was preceded by one in which students had calculated the cost of supporting a family of four in "their community," so that they were pushed to think that a job "must" pay a living wage. Still, not unaware of the problem of discouraging stores from coming in to Chicago, a letter was produced in which the Mayor was encouraged to accept the minimum wage but exempt stores from the high minimum wage if they opened in areas that needed jobs or lower prices.) It might exempt employers for a given number of years. It might provide exemptions if the city "determines" that the benefits of lower prices exceed the benefits of higher wages. I am not arguing for this sort of drafting, and certainly not for the rent-seeking that would take place under such statutes. The point is simply that tailoring by state or city has only begun.
But is such tailoring bad? In the case of minimum wages, perhaps not, or not too much because it is somewhat self-correcting. If Chicago wants a $10 minimum wage, then it can have some higher-paying jobs (because there will be some employers and some jobs regarding which the law will have bite), and then somewhat fewer jobs and somewhat higher prices. It can hope that prices will stay low because of competition from stores across the city's borders or from small stores (!) but overall consumers will prefer to shop closer to home. A locality can in this way choose between low prices and low wages, and it cannot quite bar one without denying the other. The association between low wages and low prices will influence even the most populist politician. The trick will be to try to enjoy low prices and high wages, but this is almost impossible to do for retailing, at least so long as people want to shop in real stores.