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Wal-Mart lowers costs at a price: studies

November 4, 2005

By Emily Kaiser

WASHINGTON (Reuters) – Wal-Mart Stores Inc. lowers consumer
costs and adds jobs but has also led to a decline in wages and
an increase in the number of people relying on government aid
for health care, studies released on Friday show.

At a conference sponsored by Wal-Mart to examine its impact
on the U.S. economy, researchers found that the world’s biggest
retailer accounted for some 210,000 net jobs last year while
driving nominal wages down 2.2 percent.

The world’s biggest retailer also lowered consumer prices
by 3.1 percent, and real disposable income was 0.9 percent
higher than it would have been in a world without Wal-Mart,
researchers at Global Insight concluded.

The one-day event comes as rapidly expanding Wal-Mart tries
to counter increasingly vocal critics who contend that the
retailer drives competitors out of business and pays
poverty-level wages that push employees to seek government aid.

Wal-Mart, which stressed that it made no attempt to
influence the studies, gave Global Insight access to its wage
data from October 2004 and sales and employment information
dating back to the mid-1980s.

In addition to that study, the research firm also vetted
papers from other researchers and accepted nine, some of which
were far more critical. One found that Wal-Mart stores increase
Medicaid spending, while another showed that the retailer
actually reduced employment in the retail sector.

“When Wal-Mart enters a market, we compete with some
businesses, which can result in job losses,” Tom Schoewe,
Wal-Mart’s chief financial officer, said in a statement.

“But we expand opportunities for many other businesses,
which results in job growth. Overall, Wal-Mart’s economic
impact on communities is a big net positive,” he said.

Schoewe was scheduled to speak at the conference here but
had to cancel at the last minute for an undisclosed reason.

OPPONENTS WEIGH IN

The retailer accounts for just under 1 percent of the U.S.
work force and has become a lightning rod for those who contend
that its devotion to low prices ends up hurting the economy as
profit-pinched suppliers shift jobs overseas to meet Wal-Mart’s
rigorous pricing requirements.

The conference did not examine how Wal-Mart’s suppliers
affect the economy, however — an omission that some
participants said made the studies less useful.

One of Wal-Mart’s most aggressive critics — Wake-Up
Wal-Mart, a union-funded group that has pressured Wal-Mart to
improve wages and benefits — held a news conference at the
same hotel as Wal-Mart’s event to announce a new national
association for Wal-Mart workers.

The group said the association would “help empower Wal-Mart
workers to join together in order to improve their working
conditions, their lives, and change Wal-Mart into a more
responsible and moral corporation.”

Wake-Up Wal-Mart was not invited to attend the Wal-Mart
event, which was restricted to a few dozen journalists along
with academics and economists.

Wal-Mart has stepped up its public relations campaign in
the hope of countering such criticism, which has become a
bigger issue as the retailer faces increasing opposition to its
efforts to expand into major urban areas.

Friday’s event offered ammunition both to Wal-Mart and its
critics.

Global Insight estimated that Wal-Mart’s low prices saved
consumers $263 billion in 2004, or about $895 per person. But
other studies suggested those savings came at a cost.

Michael Hicks, a professor at the Air Force Institute of
Technology and Marshall University, studied Wal-Mart’s economic
impact in Ohio from 1985 through 2003 and found Medicaid
spending grew, amounting to about 16 additional cases per
county attributable to a single Wal-Mart store.

A study by researchers at the Public Policy Institute of
California found that Wal-Mart stores reduced retail sector
employment by 2-4 percent. But they also found that Wal-Mart
lowered prices, clouding the politically charged question of
whether Wal-Mart is actually good or bad for the economy.

“The evidence is, on balance, more consistent with the
claims of critics of Wal-Mart, although questions remain,” the
researchers concluded.


Source: reuters



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