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Wal-Mart Wages Cloud Chicago Expansion as Aldermen Sweat Vote

Wal-Mart Stores President and CEO Mike Duke listens during meeting in New York. Photographer: Jin Lee/Bloomberg
Wal-Mart Stores President and CEO Mike Duke listens during meeting in New York. Photographer: Jin Lee/Bloomberg

June 24 (Bloomberg) -- Chicago Alderman Anthony Beale called a news conference this week to trumpet Wal-Mart Stores Inc. bringing $8.75-an-hour wages to his far south side neighborhood. One hiccup: The Wal-Mart executive flanking him wouldn’t confirm the number.

The world’s largest retailer has only one store within Chicago’s city limits, and organized labor is rebuffing efforts to add dozens more. The unions want the jobs to pay at least 50 cents more an hour as the city struggles with an unemployment rate of 10 percent.

A City Council panel is scheduled to vote today on whether to rezone property for Wal-Mart to open a second store in the nation’s third-largest city. 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 Chicago Tribune reported that Alderman Daniel Solis, chairman of the council’s zoning committee, may delay today’s vote. Solis didn’t respond to telephone or e-mail messages left late yesterday. Supporters expect the full council next week to consider a broader development plan in Beale’s ward that would include a Wal-Mart.

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 Monday’s news conference.

Unemployed Chicagoans

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.

Sticky Situation

Alderman Ed Smith, a member of the zoning committee, is one of the politicians stuck between unions and unemployed constituents. His West Side ward also doesn’t have easy access to fresh food, he said, though he declined to say how he would vote.

“Every man has to make his own decision,” Smith said.

If Wal-Mart prevails with Chicago aldermen, 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.”

Declining Sales

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 9 percent, compared with a 32 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.”

Chicago’s Wal-Mart skeptics gained ammunition from a December 2009 study that found about 300 jobs were lost after Wal-Mart opened its store on the city’s west side in 2006. It pushed out smaller retailers, said David Merriman, the study’s author and head of the economics department at the University of Illinois at Chicago.

“Some other stores are going to sell less,” he said in a telephone interview.

Cautious Comparison

Merriman cautioned against comparing the impact of Wal-Mart’s first Chicago store to the one it wants to build on the far south side.

“They don’t have a lot of small stores like in the Austin neighborhood,” he said.

The proposed Wal-Mart, which would sell groceries as well as general merchandise, wouldn’t have much competition within walking distance. Jewel-Osco and Save-A-Lot are about 2.5 miles away.

Monday’s news conference was part of an effort to build support for Wal-Mart’s plans on the eve of the scheduled zoning committee vote. The full 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.

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.

More Than Minimum

The wages “are as good, if not better than, the businesses we compete with,” Steven Restivo, a Wal-Mart spokesman, said in a telephone interview. He declined to confirm Beale’s statement that Wal-Mart is willing to pay Chicago workers at least $8.75 an hour, 50 cents more than the state’s minimum wage as of July 1.

“Our policy in general is not to comment on starting wages for proprietary reasons,” he said.

While the union representing organized grocery workers nationwide dismissed Wal-Mart’s $8.75 offer as a “PR stunt,” it declined to provide figures for unionized workers at Jewel-Osco and Dominick’s, two of Chicago’s biggest grocery chains.

“It’s comparing apples to oranges,” said Marina Faz-Huppert, legislative and political director for Local 881 of the United Food and Commercial Workers International Union.

Unions helped defeat several aldermen in 2007 after they voted against the living-wage ordinance. Today’s vote will show whether the unions can muster support -- if the vote takes place.

“Anything could happen,” said Cathy Van Alstin, a zoning committee staff member.

To contact the reporter on this story: Leslie Patton in Chicago at

To contact the editor responsible for this story: Flynn McRoberts at

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