Why the academy needs a South Side fellowship

In the pages of the Boston Globe, Harvard Law professor David Barron looks at how the city of Chicago is treating big box retailers and believes it to be a good thing: On July 25, the Chicago Board of Aldermen passed an ordinance requiring big-box retailers-those with $1 billion in sales and 90,000 square feet of shopping space in their stores-to give their employees a living wage. By 2010, the stores would have to pay workers $10 an hour and provide an additional $3 in benefits. Despite strong support from local unions and merchants, and concerns that an influx of low-paying big-box retail jobs could do more harm than good, the mayor has threatened to veto the measure, and some are talking about asking the courts to strike it down if it's enacted. They say the new law is not only unfair but also bad policy. It would, they argue, deprive the city of sales taxes, force consumers to pay higher prices, take jobs from poor people, and push new development to the suburbs. But whatever one thinks of the merits of this debate, the fact that Chicago is even having it is important. Other cities, including Boston, are already thinking about following the aldermen's lead: As Wal-Mart contemplates its first store in Boston, city councilors Chuck Turner and Felix Arroyo have said they plan to explore an ordinance similar to Chicago's. This surge of interest in regulating big-box retail shows that, at last, America's cities are beginning to think of themselves as choosers rather than beggars. They have emerged from decades of decline with newfound financial strength, and they are now beginning to assert their public powers to decide the kind of cities they want to be.... And so, with demand for urban locations higher, cities-as free marketers should be the first to realize-are no longer willing to sell themselves at any price. The Chicago Sun-Times, in the process of condemning the aldermen's action, hit on just this point: ``[They] think the dense Chicago market is too attractive for the retailers to pass up, especially since most suburban areas already are saturated. They're taking a risk that Wal-Mart and Target are bluffing." Exactly right. The aldermen are betting that big-box retailers will build even if the ordinance becomes law, but it's a safer bet than the Sun-Times allows. After all, the new measure does not bar big-box retailers from doing business in the city. It just requires that they provide employees high enough wages and benefits so that the city won't have to make up the difference through the social services it provides.... Like new office buildings, big-box retailers also bring burdens along with benefits. Some studies show they may depress wages in related businesses or threaten small, usually family-owned retailers. In many cities, including Chicago, it is the growing immigrant neighborhoods, chock-full of such small family-run establishments, that are re-knitting the urban fabric and producing significant amounts of social capital. A law restricting big-box companies from using low wages to support price cuts that might force these important community retailers to close is arguably a tailored response to a reasonable concern. Certainly it's hard to say that Chicago is acting recklessly. As I've said before about this case two years ago, Chicago is acting recklessly. Erecting significant barriers against big box retailers moving into the inner city does little more to hurt the poor. Barron seems to assume that without Wal-Mart, the whole of Chicago is this nirvana of small, quaint shopkeepers who provide a diversity of goods and services with a smile and a fair price. Having lived close to the area where Wal-Mart was planning on putting its South Side location, I can assert that Barron doesn't know what he's talking about. There are very few, "small family-run establishments" to displace. The absence of any big-box retailer between Roosevelt Rd. and 85th St. makes it fantastically difficult for the poorest members of the city of Chicago to buy low-priced goods. Barron's focus on unions and small merchants at the expense of, well, everyone else is more than a bit disconcerting. [He's right about abstaining from tax breaks and the like, though, right?--ed. There's a valid point to be made about putting a halt to cities throwing tax breaks around like candy in a vain effort to attract corporate headquarters, manufacturing plants and the like. However, Barron's implicit economic assumption is that because cities have considerable market power, they can use it to advance the cause of good. The trouble with that argument is that anyone who has ever chatted with a Chicago alderman knows full well that good has very little to do with urban plicy.] It might behoove some foundation to create a fellowship for enthusiasts of urban reform to spend a year on the South Side in order to get a taste of what it's actually like to live in the inner city before pontificating about policy [Would this apply to free-marketers as well?--ed. Sure.] UPDATE: Barron responds on his blog. Key section: I was not arguing that Chicago should pass the ordinance but rather that Chicago should have the legal power to make the policy judgment for itself. Drezner, an economist, skipped right over that distinction. (If I need a fellowship to take me to the South Side, as he suggests, then maybe he needs one to take him to law school.) Actually, though, Drezner is on to something interesting and important. He emphasizes rightly that not all city neighborhoods are the same. It might be that the city would be wise to permit bix box retail in some neighborhoods within the city on more favorable terms than others. The mayor has suggested as much, proposing that each ward be able to decide the matter for itself. It's a complex policy question, however, whether such neighborhood-based tailoring is a good idea or a bad one, and it depends a lot on the particularities of the retail market in the Chicago area. I am skeptical it is a good idea, but open to being persuaded otherwise. But, for me, the key point for now is that a city could not tailor its policy in this neighborhood-focused manner even it was a good idea for it to do so unless it had the legal power to enact such living wage ordinances at all. And that's part of the reason why I think the Chicago ordinance, if enacted, should be upheld against the home rule, equal protection, and ERISA-preemption challenges that are sure to follow. Question to readers: should a city have the right to mandate a living wage and apply that mandate asymmetrically to businesses? I suspect that for most people this depends on whether you believe a living wage is sensible policy. One could adopt a process-based position that says regardless of the stupidity of such an approach, an elected council has the right to enact such a policy. At the local level, however, on measures that impose asymmetrical barriers to entry, I strongly lean towards a combination of a public choice perspective, which is skeptical that any city-wide ordinance would actually represent something approximating the general will, and a classical liberal perspective, which would be profoundly skeptical of the city imposing property rights constraints.