VitalAccurateThinking

Chicago - The Price Of Government intervention

H/T to Cafe Hayek:

The Chicago City Council wants companies that operate in the Chicago area with more that a billion in sales and stores greater than 90,000 square feet to pay workers in those stores at least $10 an hour and provide $3 in benefits.

It appears to me that the city councilmen are trying to economically destroy their city in much the same way that Japan does by discriminating against large retail stores (called "big box stores"). In fact, the big box stores are frequently credited with being the major source of productivity growth in the US over the last 20 years.

An excellent source for information on this subject is a book called The Power of Productivity by William W. Lewis whose premise is that excess government interference like propose wage floor in Chicago are a source of underperforming productivity. For instance:

A combination of misguided zoning laws, taxes, and subsidies have distorted competition and allowed the smallest, most inefficient retailers still to account for slightly over half of all retailing employment in Japan.

The Japanese format mix is so different from the one in the United States because it is virtually impossible for a Japanese or, for that matter, foreign business to open a large supermarket or a big box general merchandise store in Japan, and tax laws and government subsidies favor traditional stores.

The Japanese don't [chose to spend at Wal-Mart] because of the Large-scale Retail Store Law in Japan. For many years, this law simply prohibited the building of stores larger than 1,000 square meters.

The result:

Japan's productivity in retailing is only half that of the United States because the mix of store formats in Japan has evolved much less towards the modern, specialized (and high-productivity) type store. Moreover, the traditional mom-and-pop stores in Japan are especially small-scale, with productivity only one-third of that of the traditional stores left in the United States.

So, to the Chicago City Council I say this: If you want to kill economic productivity in your city, I think this effort will do nicely.

Update: The City Council passed the law. H/T again, Cafe Hayek

posted by Jim VAT @ 7:10 PM