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Could the Living-Wage Law Price Out Discount Stores?

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Retailers looking to open new stores in the city who were originally exempt from the living-wage law might have to start shelling out bigger paychecks and more benefits to its employees. The existing law doesn't apply to tenants of developments receiving city money, but Crain's New York reports that Mayor Bill de Blasio and the City Council are trying to extend its coverage to commercial tenants.

They explain: "The law, enacted in 2012, forces developers receiving substantial city subsidies for projects to pay its workers at those sites at least $10 an hour plus benefits, or $11.50 without benefits." In laymans terms, stores may "avoid leasing space where the additional labor costs are required."

The solution for developers? Higher-end retail stores, which have the money to compensate its workers with more substantial paychecks. (Instead of, for example, Marshall's, which according to the article, pays its employees just over minimum wage—barely.)

Discount stores are already having a tough time in New York City's retail landscape. Loehmann's is on its way out in just a matter of days, and Daffy's and Filene's Basement are now mere memories. On the other hand, others—like Century21 and even Marshall's—are expanding.

Outlet stores like Nordstrom Rack and Saks Off Fifth (the latter of which doesn't have a store in Manhattan yet, but plans to make the ones it has elsewhere a little more messy) might be in the best position to comply with the law for any new stores, given that they're an offshoot of major department stores that could back them financially.

But according to the policy analyst cited in the article, the increase in prices would just be a small uptick. "Most retailers would need to raise the price of their goods by as little as 1%, passing on a smaller cost to consumers than some might expect" in order to offset the wages. A spokeswoman for the Retail, Wholesale and Department Store Union adds: "Other cities similar to New York City have robust living-wage laws and, as a result, the retail environment has never suffered."
· Wage bill may mean pricier shops [Crain's New York Business]
· Does Loehmann's Signal Discount Department Stores' Demise? [Racked NY]