Employment myths used falsely to keep Wal-Mart in the doghouse 

Regional coalitions of labor unions and advocacy groups routinely campaign against Wal-Mart plans for opening new stores. These opponents claim that the big-box behemoth kills jobs, reduces wages and destroys communities. However, research suggests that these claims are little more than myths.

That people want jobs at Wal-Mart is obvious — new Wal-Marts in cities such as Oakland, Cleveland and Glendale, Ariz., have received thousands of applications for hundreds of jobs. But does Wal-Mart displace as many or more jobs than it creates?

Studies show that the effect of Wal-Mart on retail employment is, at worst, ambiguous. Economist Emek Basker estimated that new Wal-Marts cause net job creation in the retail sector, albeit with slight job losses in wholesale. Another study estimated that each new Wal-Mart job displaces 1.4 retail jobs, but still creates enough new labor in other sectors that its overall effect is neutral.

This is consistent with state-level data, which suggests there is no detectable “Wal-Mart effect” on the performance of the small business sector.

Does the retail giant drive down wages, as its critics suggest? A trio of researchers estimated that Wal-Mart might have lowered total retail wages by some $4.5 billion in 2000. But does it actually reduce their purchasing power? Based on estimates of Wal-Mart price effects, Charles Courtemanche and I made a back-of-the-envelope calculation that Wal-Mart Supercenters (i.e., those that also sell groceries) alone saved the average household
$177 in 2002. If we multiply that conservative estimate by the number of households in the 2000 census, we get a savings of $18.7 billion—more than four times the supposed loss in earnings.

Wal-Mart’s effect on prices — particularly food prices — is one of the reasons economist Jason Furman called the company “a progressive success story.” Wal-Mart’s effect on food prices disproportionately benefits poorer households, which tend to spend a larger percentage of their income on food than wealthier households.

Another common objection from Wal-Mart critics is that the company destroys communities and saps them of the social capital they need to really flourish. In two 2009 papers, Courtemanche, Jeremy Meiners and I explored a range of indicators that measure “social capital” and “individual values” and found that evidence for this claim is pretty weak. Most likely, Wal-Mart just doesn’t matter.

Art Carden is an assistant professor of economics at Rhodes College in Memphis, Tenn., and a regular contributor to Forbes.com.

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Art Carden

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