The Economy Blows Walmart into the Windy City Wth Momentum to Spare
First the recession gave Walmart (WMT) a financial boost as consumers turned to it for inexpensive goods and now the economic downturn has proved a portal to the future, one that goes right through Chicago.
The recessionary boost Walmart enjoyed in its established stores may have peaked. Yet, the retailer's prospects in the big city are gaining as the prolonged economic downturn softens urban opposition in markets where a growth push could get its business rolling again.
Right now, the job-creation arguments Walmart makes to convince communities to let it open stores over labor/activist opposition are more compelling than usual. Chicago's 10-and-a-half percent unemployment rate already tops the national average. Walmart held out hopes for 12,000 Chicago jobs if the city council signs off on the "dozens" of stores the company says it plans for the Windy City. Chicago unions said they negotiated a deal with Walmart for worker starting salaries of $8.75 an hour with a raise of about 50 cents after a year in return for their dropping opposition to new supercenter on the city's South Side. The $8.75 salary is 50 cents over minimum wage but well below "living wage" demands made of the company not long ago.
Walmart's hand in negations with urban unions and activists clearly is stronger today, and will remain so. Walmart seems to have acknowledged the $8.75 part of the deal, if vaguely, but even as it won a Chicago City Council zoning committee vote on the new store, the company stated that the raise wasn't automatic but rather based on merit and already part of its compensation policy.
By agreeing to the $8.75 a hour deal unions and their activist allies essentially conceded they had done as much as they could to hold Walmart back. However, the unions have tied themselves to a figure Walmart may or may not feel obliged to support. The retailer could cite its fiduciary responsibility to hire seasonal workers at less than the agreed-upon rate or otherwise retool the deal in its favor. Political powers that provided the legislative substance to union/activist opposition are unlikely to turn on Walmart once new tax revenues and jobs begin to flow into their communities.
Think otherwise? Consider what is happening in New York's Harlem neighborhood and with a retail employer that has a better labor reputation: Costco (COST).
Recently, Costco laid off 160 workers from the store it opened in Harlem last year. Community leaders thought they had a deal on labor practices with the warehouse club operator both in terms of employment level and proportion of workers from the neighborhood. According to them, Costco didn't lived up to its terms, but they didn't do much about it beyond look for city funds to help Costco pay the workers facing unemployment.
The club retailer seems to have regarded that deal as conditional on sales levels, job qualifications and other factors that it typically considers when staffing locations. Walmart's repudiation of any raise agreement in its Chicago arrangements suggests that the retailer regards the non-legally binding deals it has struck as subject to company policy and market reality. With 17 percent unemployment in the area where Costco operates, the 300 jobs that it continues offering are important. Despite Walmart's equivocations on its local pay obligations, Chicago's city council unanimously voted to green light the retailer's South Side store. Unemployment estimates in the neighborhood run even higher than that in Harlem, and as hard pressed Chicago residents see the prospect of new jobs arriving, convincing them that they would be better off without Walmart seems a tough sell.
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