Wal-Mart Debate
The Economic Policy Institute released a report last week titled “The Wal-Mart Debate: A False Choice Between Prices and Wages.”
Not sure why Wal-Mart inspires passionate debate, but I find that it does. Some findings in the report:
- A robust set of research findings shows that Wal-Mart’s entry into local labor markets reduces the pay of workers in competing stores. This effect is largest in the South, where Wal-Mart expansion has been greatest.
- Wal-Mart could raise wages and benefits significantly without raising prices, yet still earn a healthy profit. For example, while still maintaining a profit margin almost 50% greater than Costco, a key competitor, Wal-Mart could have raised the wages and benefits of each of its non-supervisory employees in 2005 by more than $2,000 without raising prices a penny.
This is provocative enough that I am going to excerpt some more here…
Wal-Mart essentially gives people the ability to buy food, apparel, household goods, and furniture at reduced prices. As seen in Figure A, the share of expenditure in each of these categories has shrunk over time. By contrast, the expenditure shares on health care, housing, and transportation for families have gone up over time. These cannot be bought at Wal-Mart, yet they constitute an ever-growing share of American household expenditures. In short, the benefits from the same price effect in Wal-Mart’s product areas are shrinking over time. The real pressures on family income are coming from items that can’t be bought at Wal-Mart. These products and services can, however, be bought with higher wages.
The idea that encouraging Wal-Mart’s expansion constitutes a progressive endeavor that will provide big benefits to poor Americans in the future is misguided; truly progressive policy should focus on the big-ticket items in most families’ budget—health care, housing, and education.
Some critics claim that Wal-Mart puts a burden on state governments because it does not adequately compensate workers. The report states, “A recent internal Wal-Mart memo revealed, for example, that 46% of Wal-Mart workers’ children are uninsured or on Medicaid. This compares to 29% for large retailers and 32% for all retailers.” So are taxpayers subsidizing Wal-Mart and its profits?
I find this reading very thought-provoking. If you are even a little interested in this issue, I suggest that you read the whole article.
(R) Jeff Sessions (1-19)
(D) Vivian Figures (33-1)
(D) Artur Davis (1-49)
(R) Mike Hubbard (13-1)
(?) David Bronner (OFF)