June 24 (Bloomberg) -- Chicago aldermen gave zoning approval today for Wal-Mart Stores Inc. to build a second store in the city, praising a union agreement with the retailer to guarantee raises within a year. Moments after the vote, a Wal-Mart spokesman said there was no such deal.
Wages are at the center of efforts by the world’s largest retailer to expand in Chicago, where the unemployment rate is more than 10 percent. Wal-Mart has only one store within the city’s limits, and organized labor is challenging plans to add dozens more unless workers are paid more.
The Chicago City Council’s zoning committee voted to rezone property on the far south side where Wal-Mart is seeking to build a store that would sell food as well as general merchandise. The retailer said this week that it would build several dozen stores in Chicago during the next five years if it could obtain approval.
Labor and political leaders said Wal-Mart promised to pay at least $8.75 an hour to workers and minimum raises of 40 cents within a year. The minimum wage in Illinois as of July 1 will be $8.25 an hour.
This is the “first time that the largest retailer in the world had seen fit to offer 50 cents more than minimum wage as starting pay,” said Alderman Ed Burke, waving a printout of an e-mail from Maggie Sans, vice president of public affairs for the Bentonville, Arkansas-based retailer, during a meeting of the city council’s zoning committee.
The United Food and Commercial Workers International Union trumpeted what it called “the Chicago agreement,” writing in a statement that it “signifies a new era in which Walmart recognizes the importance of setting minimum working standards and putting those standards in writing.”
Yet Steven Restivo, a Wal-Mart spokesman, later said there was no such agreement and that the e-mail from Sans simply clarified the company’s existing policies on raises.
“There are no deals,” Restivo said. “All raises are based on performance.”
The council’s 50 aldermen face re-election in February, risking the wrath of either labor unions or out-of-work voters over Wal-Mart’s plans.
“They’re saying, ‘We want to enter the urban marketplace with rural wages,’” said Jorge Ramirez, secretary treasurer of the Chicago Federation of Labor.
The Bentonville, Arkansas-based retailer eventually wants to open several dozen Chicago stores that will “eradicate the food deserts” of neighborhoods without grocery stores while creating 12,000 jobs, said Hank Mullany, executive vice president and president of Wal-Mart’s northern U.S. division, at a news conference earlier this week.
The city’s unemployment rate was 10.5 percent in May, compared with the 9.7 percent national average, according to preliminary figures from the U.S. Bureau of Labor Statistics. The jobless rate in Illinois was 10.8 percent.
Mayor Richard M. Daley has used such numbers to argue in favor of Wal-Mart’s plans, which he reviewed with company executives earlier this month at the U.S. Conference of Mayors annual meeting.
“He met with Wal-Mart officials in Oklahoma City to discuss the proposal and to ensure that it included better benefits for Chicago’s communities including higher wages,” Bill McCaffrey, a spokesman for the mayor, wrote in an e-mail.
Daley, 68, has yet to announce whether he will run next year for a seventh term.
Vote Next Week
The full city council is scheduled to vote next week on a development plan for the far south side that would include a Wal-Mart store.
If Wal-Mart prevails, its experience may serve as a blueprint for expansion into other cities, said Leon Nicholas, a director at consulting firm Kantar Retail in Cambridge, Massachusetts.
“Chicago could very well be a model for how Wal-Mart expands into urban areas -- a multiformat, localized approach that leverages Wal-Mart’s growing community-relations skills to capture urban market share,” Nicholas said in a telephone interview. “Chicago opens up the opportunity for small-store urban expansion that they’ve been talking about for a while.”
The Chicago stores are part of a broader strategy that Chief Executive Officer Mike Duke has outlined during the past year to fuel growth in the U.S., where sales at stores open at least a year have declined for four consecutive quarters.
Since Duke took the helm in February 2009, Wal-Mart shares have increased about 7 percent, compared with a 30 percent gain for the Standard & Poor’s 500 Index.
“We definitely see an opportunity for us to enter other large cities in the U.S.,” Mullany said in a telephone interview. “And we think the way to do that is with smaller stores and different formats.”
The proposed Wal-Mart in the city’s Pullman neighborhood wouldn’t have much competition within walking distance. Jewel-Osco and Save-A-Lot are about 2.5 miles away.
Chicago’s lone Wal-Mart pays employees an average of $11.77 per hour, Mullany said at the news conference. The average full-time wage for Wal-Mart employees in the U.S. is $11.75, according to the retailer’s website.
The wages “are as good, if not better than, the businesses we compete with,” Restivo said.
The city council four years ago passed an ordinance for a so-called living wage of $13 an hour including benefits. Daley vetoed the measure, saying it would dissuade businesses from locating in the city.
Even those who came to City Hall this morning pushing Wal-Mart to offer a living wage couldn’t agree on what that might be.
“It’s expensive to live here in Chicago and $8.75 is not going to do it,” said Michelle Young, president of Action Now, a Chicago community organization focused on working families.
Labor leaders have asked Wal-Mart for beginning workers to be paid $9.25 an hour. Young and other activists said that’s not enough.
“Ten dollars would be a good start,” she said.
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