Walmart’s announcement two weeks ago that it is cutting health insurance for part-timers working less than 24 hours a week and increasing premiums significantly for full-time employees was no surprise to Chicago union leaders and other Walmart critics who — five years after controversy raged around Chicago’s first Walmart — continue to fight the retailer even as it has done much to change its image…and to open new stores throughout the city.
Walmart critics including the United Food and Commercial Workers (UFCW) union say that Walmart’s moves in the past year to increase minority and women suppliers, improve opportunities for women employees, alleviate food deserts and “green” its stores are largely window dressing…and that the health insurance move shows that Walmart is still a cut-throat company driven by the bottom line.
In contrast to the political opposition that greeted Walmart’s first proposed store in Chicago in 2005, however, opponents now find themselves outmatched as the company opened a new store on Chicago’s South Side in July and is planning “dozens” more including in upscale neighborhoods like Lakeview, River North and the West Loop.
Walmart spokesman Steven Restivo told me that there are nine Walmarts already “in the pipeline” for Chicago within the next year, and more to come after that. With its image makeover, Walmart seems to have gained support from many civic leaders, elected officials and building trade unions. And opponents have less leverage since unlike the first Chicago store most of the planned new ones don’t need zoning changes approved by city council.
One city councilman, Joe Moore, said members are discussing an ordinance similar to one in San Francisco that would require special council permission for large chain stores. An ordinance passed by the city council in 2006 but vetoed by then-Mayor Richard M. Daley would have required big box stores in Chicago to pay a living wage of at least $10 an hour with $3 an hour worth of benefits.
UFCW Local 881 spokesperson Elizabeth Drea said Daley’s veto has had long-standing political ripple effects:
They get away with practices like paying less, cutting hours, having barebones benefits if any, so everyone else tries to follow that business model…City council had a wonderful opportunity to establish standards to minimize the impact of this global mega-retailer. When the ordinance was vetoed, that basically said to Walmart, ‘Have at it, do whatever you want.’
In general the company long known for sprawling supercenters in rural or suburban areas is now focusing on smaller stores in dense urban enclaves. At the Metropolitan Planning Council’s annual luncheon in Chicago June 27, Walmart U.S. executive vice president Thomas A. Mars said Chicago is “critically important” to this strategy. Walmart spokesman Restivo told me:
We’ve found that the more people get to know the facts, the more they see the value in bringing a Walmart to their community and the more they come to recognize that all the scary talk from our critics was based mostly on urban legend and misinformation.
While many union leaders and members still oppose Walmart, the company has mollified some key Chicago labor figures. Last spring Walmart officials met with labor leaders as city council was considering the zoning changes needed for the Pullman store. In June 2010 the Chicago Federation of Labor announced that Walmart had agreed to pay workers $8.75 to start – 50 cents above state minimum wage – with 40 to 60 cent per hour raises each year. Restivo said that no deal was struck with the labor federation, and that Walmart believes its wages are already similar to other Chicago retailers. ]
Also last June, Walmart made a formal agreement with the Chicago & Cook County Building & Construction Trades Council, a conglomeration of construction-related unions, that for three years all new stores in northern Illinois will be built by union workers.
University of Illinois at Chicago economics professor David Merriman said he thinks Walmart’s planned Chicago stores will face challenges, especially in achieving the economies of scale that keep their costs low. He is one of the authors of a study saying the city’s first Walmart caused a net loss of 300 full-time jobs in the area, and that retailers closer to the Walmart have been disproportionately more likely to go out of business, with 82 of 306 local businesses surveyed closing in the two years after Walmart opened.
Walmart’s website offers a point-by-point critique of the study, including that it does not account for 22 new businesses that opened nearby and that it doesn’t adequately consider the national economic crisis that began in the months after the Walmart opened. Walmart officials say the west side store created 400 new jobs, generated $20 million in tax revenue and employs 90 percent local residents. Merriman told me:
Walmart’s success has been on delivering and inventory management – all that stuff is harder when you’re in a dense urban area where you can’t bring in large trucks, you can’t necessarily build such generic stores.
Stacy Mitchell, author of the book Big Box Swindle about Walmart’s effect on local business, told me she thinks Walmart’s urban stores will be able to outcompete local businesses even in more upscale neighborhoods.
I think they’re expanding in urban areas the same way they have in rural areas, which is to put in a few stores and then fill in between them until they’ve saturated the market so much that they are cannibalizing their own stores…Other businesses will have to downsize, meaning vacancies and layoffs.
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Kari Lydersen is a Chicago-based journalist, author and assistant professor at Northwestern University, where she leads the investigative specialization at the Medill School of Journalism, Media, Integrated Marketing Communications. Her books include Mayor 1%: Rahm Emanuel and the Rise of Chicago’s 99%.
