Living Wages and the Big Box Issue

1
Living Wages and the Big Box Issue

• Group 2
• Wilson Chang
• T.J. Clifton
• George Dillard
• Sara Kerkemeyer Anastasia Sokolova

2
Minimum Wage

• The Fair Labor Standards Act requires employers
  to pay covered employees at least the federal
  minimum wage
• The Federal minimum wage is 5.15/hour and has
  not changed since September 1st, 1997
• The minimum wage in Illinois is 6.50/hour

3
Current Federal Poverty Level

• Current federal poverty level is 9,800 for a
  household of one, plus 3400 for each additional
  person
• Hourly wages to reach the federal poverty level
  for a family with one working parent (40
  hrs/week), one non-working parent, and one child
  is 8.00

4
What are Living Wages

• Living wages refer to the minimum hourly wages
  sufficient to provide the necessities and
  comforts essential to an acceptable standard of
  living

5
Current Living Wages

• Current living wages assuming only one provider,
  working full time (40 hrs/week)

6
Current Issue

• Wide discrepancy between poverty level and
  minimum wages
• Wider discrepancy between living and minimum
  wages
• Current issue with big box retailers because they
  pay minimum wage and dont provide good benefits

7
What is a big box retailer?

• Large scale establishments
• Industrial style buildings or stores
• Footprints ranging from 20,000 to 200,000 sq. ft.
• Typically single story structure with three story
  mass
• Stand at more than 30 ft. tall

8
What is a big box retailer?

• Typically no-frill stores
• Try to attract customers with low prices or large
  selection
• Possible because of large store space and high
  volume sales

9
Subcategories

• Discount Department Stores
• Target, Wal-Mart, Kmart
• Category killers
• Circuit City, Office Depot, Toys-R-Us, Sports
  Authority
• Outlet Stores
• Nordstrom Rack, J.C. Penny Outlet, Nike
• Warehouse Clubs
• Costco Wholesale, Sams Club

10
Chicago Example

• July 2006
• City Council approves an ordinance regulating big
  box retailers with a 35-14 vote
• Requires retail stores of at least 90,000 sq. ft.
  and those owned by retailers with 1 billion in
  sales to
• Initially 9.25/hour with 1.50/hour in fringe
  benefits
• By 2010 10/hour with 3/hour in fringe benefits

11
Reactions

• The city council did what was right for the
  benefit of working men and women.
• Dennis Gannon, President of the Chicago
  Federation of Labor
• This sends a message that Chicago is an
  unpredictable place to do business.
• Gerald Roper, President and CEO of the Chicago
  land Federation of Labor
• Wal-Mart and Target both put holds on current
  expansion projects in the city

12
Mayor Daleys Action

• September 2006 Uses his veto power for the first
  time in his 17 years in office
• I believe it would drive jobs and businesses
  from our city, penalizing neighborhoods that need
  additional economic activity the most.
• Mayor Richard Daley
• Set stage for huge debate
• Council only needed 34 votes to override the veto
• However, Daley did some campaigning and swayed
  multiple voters
• To date, issue has not been overturned

13
What do you think?

• What are the advantages and disadvantages to
  increasing the minimum wage for big box
  retailers?

14
Pros and Cons of Big Box Regulation?

• Pros
• Reduce the impact of risen inflation on lower
  class workers
• Improve employees purchasing power
• Improve the overall quality of life for employees
• Increase tax revenue for city and state
• Redistribute revenue and give a greater
  percentage of profits to employees

15
Pros and Cons of Big Box Regulation?

• Cons
• Force companies to layoff employees
• Raise the cost of goods and services
• Force companies to eliminate some of their
  employee benefits
• Could be unfair because it is targeting isolated
  businesses
• Note Federal government monitoring impact!

16
HR Recommendations

• Strive to retain employees to lower turnover
  rates and costs, while increasing performance and
  efficiency
• Employee Retention
• Integrate stronger socialization process
• Introduce a training program to improve store and
  employee performance
• Introduce socialization programs such as
  ceremonies and outings that promote company
  values and team building

17
HR Recommendations

• Gain ability to increase benefits and wages
• Less focus on base pay, and short-term incentives
• Merit-based bonuses (based on team performance,
  store performance)
• Long-term incentives like raises, escalating
  bonus schedule (to reward longevity, and low
  turnover)
• Increase benefit packages for employees