A case against the case against Walmart

Great article by Art Carden in The Washington Examiner. Carden is an assistant professor of economics at Rhodes College in Memphis.

"As people crowded into local D.C. grocery stores last weekend, gobbling up a limited supply of water and canned goods in preparation for Hurricane Irene, some may have found themselves pining for the open aisles, vast selection, and efficient check-out operation offered by Walmart.
These shoppers may get their wish in time for next year's hurricane season, as the retail giant has announced plans to open four stores in the District starting in 2012.

A coalition of labor unions and advocacy groups calling itself "Living Wages, Healthy Communities" has staked out opposition to this plan, arguing that the big-box behemoth claims jobs, reduces wages and destroys communities. Research suggests that these claims are little more than myths.

That people want jobs at Walmart is obvious -- new Walmarts in cities like Cleveland, Oakland, Calif., and Glendale, Ariz., have received thousands of applications for hundreds of jobs. But does Walmart displace as many or more jobs than it creates? Studies show that the effect of Walmart on retail employment is, at worst, ambiguous. The economist Emek Basker estimated that new Walmarts cause net job creation in the retail sector, albeit with slight job losses in wholesale. Another study estimated that each new Walmart 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 "Walmart 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 Walmart 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 Walmart price effects, Charles Courtemanche and I made a back-of-the-envelope calculation that Walmart Supercenters (i.e., those that 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.

Walmart's effect on prices -- particularly food prices -- is one of the reasons economist Jason Furman called the company "a progressive success story." Walmart'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 Walmart 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, Walmart just doesn't matter.

In a paper critical of the company's practices, historian and business ethicist James Hoopes conceded that Walmart employees have "high morale" and that "it is not known how many Walmart workers have real prospects of moving on to better-paying jobs, how many have working spouses or partners, how many are single, how many are supporting children, how many are pensioners supporting Social Security, how many live below the poverty line, how many are homeless. A study answering those questions would be a great contribution to understanding our society today."

Such knowledge would not merely be "a great contribution." It is absolutely necessary for anyone to make the kinds of claims that Walmart's critics make routinely. The burden of proof in this situation is not on Walmart, but on those condemning the corporation."