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Friday, August 04, 2006

Chicago Attacks Walmart-Ends Up Like Hezbollah

Free market principles are so simple to understand when explained by eminent professors like Doctor Gary Becker.

In Chicago, the "carers of the little guy" in its town council have passed mandatory wage and benefits rules for large "Big Box" retailers like Walmart. You know the drill. To protect employees from these large employers, the municipality mandates wages or benefits that price the low-or- no experience employees beyond their production value. The result is the retailers either reduce their store area to below the regulation requirements or just hire fewer workers or simply skip the municipality completely.

Becker explains who gets hurt:

In a city like Chicago the burden from these responses to the ordinance will fall disproportionately on African Americans and Latinos since fewer jobs will be available to workers in the city with less education and lower skills. In addition, prices in Chicago of items sold relatively cheaply by stores like Wal-Mart and Target will rise because fewer of these stores will open in the city. The mega stores that remain will raise their prices because their costs will go up. Since city customers of these stores are mainly families with modest incomes who seek low prices rather than elaborate service, they more than the affluent classes will be hurt by the rise in prices and reduced availability of big box outlets.

Who would favor such a bad ordinance that will harm the very groups it is claimed to help? Support for the ordinance from more conventional supermarket chains and clothing stores is easy to understand since the mega stores drain away customers and force prices down. The absence of opposition from low-income consumers who shop at these stores is not surprising since they are not well organized to exert political pressure on the City Council.

If that was not clear then read Becker's co-blogger Judge Richard Posner. His more professorial explanation is (he is also a professor in Chicago):

The first-order economic analysis of minimum wage laws shows that they reduce employment by raising the price of labor; the Law of Demand teaches that an increase in the price of a good reduces the quantity of it that is demanded.

So the result of the meddling is fewer jobs, higher retail prices and less competition. Happens all the time. But the proposal's supporters and the politicians get to feel real good about themselves. And that is what really counts.

4 Comments:

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