New Study Identifies Effect of Wal-Mart on Local Economies
Roland Chlapowski
There has been a lot of debate about the effect that Wal-Mart has on the communities it moves into - in particular, whether or not it affects the overall employment and wages of the localities that allow Wal-Mart into their borders.
A recent academic study from October, 2005 tries to cut through the controversy by identifying and eliminating biases that may have affected the usefulness of some earlier studies. The results do have caveats, such as mixed evidence on whether or not Wal-Marts raise or lower employment rates in the towns they reside in. But, rather unambiguously, this study finds evidence that Wal-Mart stores reduce overall earnings - regardless of their effect on the absolute number of jobs in the community. The abstract reads:
"There is strong evidence that total payrolls per person decline, by nearly five percent in the aggregate, implying that residents of local labor markets earn less following the opening of Wal-Mart stores. And in the South, where Wal-Mart stores are most prevalent and have been open the longest, the evidence indicates that Wal-Mart reduces retail employment, total employment, and total payrolls per person."
You can read the Wal-Mart Study here in adobe.pdf format, and learn about the methodology the researchers used to adjust for already existing trends in local earnings and labor outlooks. (In short, they take into account the existing economic conditions by factoring in the dates that Wal-Mart stores opened in new regions.)
Sam continues to oppose the proposed Sellwood Wal-Mart for many reasons, including the effect Wal-Marts have on small, locally-owned businesses, the consequences for wages and employment, the store's anti-union policies, and the documented increase in demand Wal-Mart creates for social services - and the burden that creates for taxpayers.
Posted by Roland Chlapowski on December 14, 2005
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Filed Under Front Page, Jobs & Economy, Wal-Mart, Workforce
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Yesterday I was at an event where I had some good conversation with a friend of mine that I had not seen for sometime. He happened to mention his wife worked at Wal-Mart in one of the smaller outlying communities around Portland. At my asking, we had short discussion related to Wal-Mart. Here is part of the discussion: His wife has worked at Wal-Mart for approximately five years. She is now in management and makes more money and receives better benefits than he does after ten years on his job, (and he is a very talented person). Most employees start out at minimum wage like many other area employers, but at Wal-Mart can work their way up. The parking lots at Wal-Mart are always crowded from that day they open showing buyer support for the business. The community in which this Wal-Mart is located has a downtown full of thriving local businesses without attempts to do an expensive entire downtown makeover. If a business is competitive and good to and for customers, it will carry on.
From my prospective Wal-Mart sounds like it provides far better opportunities for employment than do for example the majority of contract call centers that also start employees at minimum wage, often treat employees like garbage and usually turn over employees at a percentage of greater that 50 percent a year. Yet, several months back, PDC was willing to subsidize a call center if it moved and refurbished building on MLK Blvd.. Furthermore, the majority of business PDC subsidizes can be classified as upscale, such as high end grocery stores rather than Wal-Marts, Win-Cos or other discount that provide welcome shopping opportunities for middle and low income people.
Personally I am neutral towards Wal-Mart. Too often it is only the well funded loud and vocal critics or supporters that are heard on issues. This posting was made simply to present some differing views that go unheard.
Posted by: Terry Parker | Dec 19, 2005 1:13:17 PM
Terry:
You must not have received the email. Sam has already made up his mind (all of the below comments are satire, for those who are already drinking this afternoon)...
Wal-Mart is EVIL and low prices are the proof of their evil doing. The only way the evildoers can afford to sell things so cheap is by relying on Chinese prison labor and giving lousy wages and benefits to the downtrodden Americans that work in their stores.
Wal-Mart is BAD. Very, very, bad. And low prices are bad too. Very, berry, terry, bad too. And your friend is probably lying about his wife: she probably works for their public relations department or something. Maybe you're a shill working for their ad agency, or something. Bad Terry, very berry bad Terry.
Most people who work at Wal-Mart hate their jobs, that's why they stay there.
And all of Wal-Mart's competitors offer better wages and benefits than Wal-Mart. Especially the mom and pop stores: they usually have the best wages and benefits, which is why everybody would rather work for a mom and pop store instead of Wal-Mart.
Did I mention that low prices are evil? So what's the name of your ad agency Terry? KILL MOM AND POPS, Inc.
Posted by: WAL-MART is EVIL | Dec 19, 2005 2:48:05 PM
Big Box Balderdash
by Paul Krugman
The New York Times
December 12, 2005
I think I've just seen the worst economic argument of 2005. Given what the Bush administration tried to put over on us during its unsuccessful sales pitch for Social Security privatization, that's saying a lot.
The argument came in the course of the latest exchange between Wal-Mart and its critics. A union-supported group, Wake Up Wal-Mart, has released a TV ad accusing Wal-Mart of violating religious values, backed by a letter from religious leaders attacking the retail giant for paying low wages and offering poor benefits. The letter declares that "Jesus would not embrace Wal-Mart's values of greed and profits at any cost."
You may think that this particular campaign - which has, inevitably, been dubbed "Where would Jesus shop?" - is a bit over the top. But it's clear why those concerned about the state of American workers focus their criticism on Wal-Mart. The company isn't just America's largest private employer. It's also a symbol of the state of our economy, which delivers rising G.D.P. but stagnant or falling living standards for working Americans. For Wal-Mart is a huge and hugely profitable company that pays badly and offers minimal benefits.
Attacks on Wal-Mart have hurt its image, and perhaps even its business. The company has set up a campaign-style war room to devise responses. So how did Wal-Mart respond to this latest critique?
Wal-Mart can claim, with considerable justice, that its business practices make America as a whole richer. The fact is that Wal-Mart sells many products more cheaply than traditional stores, and that its low prices aren't solely or even mainly the result of the low wages it pays. Wal-Mart has been able to reduce prices largely because it has brought genuine technological and organizational innovation to the retail business.
It's harder for Wal-Mart to defend its pay and benefits policies. Still, the company could try to argue that despite its awesome size and market dominance it cannot defy the iron laws of supply and demand, which force it to pay low wages. (I disagree, but that's a subject for another column.)
But instead of resting its case on these honest or at least defensible answers to criticism, Wal-Mart has decided to insult our intelligence by claiming to be, of all things, an engine of job creation. Judging from its press release in response to the religious values campaign, the assertion that Wal-Mart "creates 100,000 jobs a year" is now the core of the company's public relations strategy.
It's true, of course, that the company is getting bigger every year. But adding 100,000 people to Wal-Mart's work force doesn't mean adding 100,000 jobs to the economy. On the contrary, there's every reason to believe that as Wal-Mart expands, it destroys at least as many jobs as it creates, and drives down workers' wages in the process.
Think about what happens when Wal-Mart opens a store in a previously untouched city or county. The new store takes sales away from stores that are already in the area; these stores lay off workers or even go out of business. Because Wal-Mart's big-box stores employ fewer workers per dollar of sales than the smaller stores they replace, overall retail employment surely goes down, not up, when Wal-Mart comes to town. And if the jobs lost come from employers who pay more generously than Wal-Mart does, overall wages will fall when Wal-Mart moves in.
This isn't just speculation on my part. A recent study by David Neumark of the University of California at Irvine and two associates at the Public Policy Institute of California, "The Effects of Wal-Mart on Local Labor Markets," uses sophisticated statistical analysis to estimate the effects on jobs and wages as Wal-Mart spread out from its original center in Arkansas.
The authors find that retail employment did, indeed, fall when Wal-Mart arrived in a new county. It's not clear in their data whether overall employment in a county rose or fell when a Wal-Mart store opened. But it's clear that average wages fell: "residents of local labor markets," the study reports, "earn less following the opening of Wal-Mart stores."
So Wal-Mart has chosen to defend itself with a really poor argument. If that's the best the company can come up with, it's going to keep losing the public relations war with its critics. Maybe it should consider an alternative strategy, such as paying higher wages.
Posted by: Eric Berg | Dec 20, 2005 9:46:02 PM
Nice story in today's NY Times. Maryland is now requiring all employers with > 10,000 employees to spend 8% or more of their payroll on healthcare.
Seems to me the way to cure the ills of WalMart's business practices is not to shut your doors to them, but to make them act like responsible corporate citizens:
http://www.nytimes.com/2006/01/13/business/13walmart.html?hp&ex=1137214800&en=21d0fec926319b31&ei=5094&partner=homepage
Posted by: paul | Jan 13, 2006 8:42:23 AM
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So if Portland has 10 Wal-Marts, there will be a 50% reduction in the overall payroll of Portland?
This shows how figures don’t lie, but liars figure.
If I define the “community” as Wal-Mart and all retail only businesses within perhaps ½ mile, the studies conclusion might be correct. But it ignores that people from 10 or 20 miles away will benefit for low prices and good quality products.
I believe that the real agenda is the non-union employees. Note that most non-biaseed government employees are union members.
Posted by: John Elliott | Dec 17, 2005 10:31:56 PM