Wal-Mart: A Progressive Success Story



Productivity is the principal driver of economic progress. It is the only force that can make everyone better off: workers, consumers, and owners of capital. Wal-Mart has indisputably made a tremendous contribution to productivity. From its sophisticated inventory systems to its pricing innovations, Wal-Mart has blazed a path that numerous other retailers are now following, many of them vigorously competing with Wal-Mart. Today, Wal-Mart is the largest private employer in the country, the largest grocery store in the country, and the third largest pharmacy. Eight in ten Americans shop at Wal-Mart. There is little dispute that Wal-Mart's price reductions have benefited the 120 million American workers employed outside of the retail sector. Plausible estimates of the magnitude of the savings from Wal-Mart are enormous – a total of $263 billion in 2004, or $2,329 per household. 2 Even if you grant that Wal-Mart hurts workers in the retail sector – and the evidence for this is far from clear – the magnitude of any potential harm is small in comparison. One study, for example, found that the "Wal-Mart effect" lowered retail wages by $4.7 billion in 2000. 3 But Wal-Mart, like other retailers and employers of less-skilled workers, does not pay enough for a family to live the dignified life Americans have come to expect and demand. That is where a second progressive success story comes in: the transformation of our social safety net from a support for the indigent to a system to that makes work pay. In the 1990s, President Clinton fought for expansions in support for low-income workers, including a more generous Earned Income Tax Credit (EITC) and efforts to ensure that children did not lose their Medicaid if their parents took a low-paid job. The bulk of the benefits of these expansions go to the workers that receive them, not to the corporations that employ them.

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    • "Moreover, the role of individual brand associations is important to consider. For instance, in the retail sector, Wal-Mart is often vilified by the same consumers for whom the firm has created ample value (Furman 2005). Meanwhile, Target seems to enjoy greater consumer perceptions of social value, though some commentators argue that its practices are less sustainable than those of Wal-Mart (Schwartz 2010). "
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    DESCRIPTION: Although firms can profit through either harmful or beneficial practices, six studies show that consumers readily perceive the harmful incentives of profit while neglecting its incentives for good. Studies 1 and 2 find a strong negative correlation between profit and perceived social value across real U.S. firms and entire industries: business profits are overwhelmingly thought to come at the expense of others. Study 3 finds that the more profitable of two hypothetical competing firms is judged as worse, while Study 4 shows that an otherwise identically-described organization is judged as more harmful when called “for-profit” rather than “non-profit.” Study 5 finds that consumers neglect the incentive value of profit and believe that society would be better off even without profits that they themselves agree do not arise from harmful practices. Finally, Study 6 shows that prompting consumers to consider the dynamic incentive value of profit attenuates anti-profit beliefs. Together, results suggest that profit is excessively viewed as zero-sum. In contrast to economic first principles, consumers typically reject the possibility that profit-seeking can increase social good.
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    • "Where these policies are sufficiently generous and accessible, they can make a substantial contribution to 3 See, for example, Furman (2005). 4 The two preceding quotes are from Furman (2005). Some conservatives endorse a variant of this make-work-pay agenda, see, for example, "
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    ABSTRACT: This essay examines the impact of unionization on the pay and benefits in fifteen important low-wage occupations. Even after controlling for important differences between union and nonunion workers—including such factors as age and education level—unionization substantially improves the pay and benefits offered in what are otherwise low-paying occupations.On average, in the low-wage occupations analyzed here, unionization raised workers’ wages by just over 16 percent—about $1.75 per hour—compared to those of nonunion workers. Unionization also raises the likelihood that a worker has employer-provided health insurance or an employer-sponsored retirement plan by 25 percentage points. These union wage and benefit effects are particularly impressive given the widespread belief that many of the jobs analyzed here are inherently incapable of providing decent pay and benefits.
    WorkingUSA 08/2008; 11(3):337 - 348. DOI:10.1111/j.1743-4580.2008.00209.x
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    • "At any rate, the evidence does not support the claim that Wal-Mart substantially lowers wages through either monopsony power or anti-union activities. Moreover, to echo a point made by Furman (2005), it should also be noted that these wage effects do not take into account Wal-Mart's substantial effects on local price levels (Basker, 2005b; Hausman and Leibtag, 2005). Indeed, in light of the estimated price effects, it is likely that a $2/week decrease in nominal compensation actually amounts to a modest raise in real terms. "
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    ABSTRACT: Contrary to popular opinion and previous estimates, this paper finds that Wal-Mart raises local retail (and possibly non-retail) employment, but has little effect on wages or the number of establishments. The main discrepancy with earlier studies arises because we control for trends that pre-date Wal-Mart's entry. Results indicate that Wal-Mart tends to expand where on-going growth is relatively strong overall, but relatively weak in the retail sector, so most previous work has been biased toward those conclusions. We also identify two reasons why effects are likely smaller now than previously: increased competition and Wal-Mart's shift toward more populous counties.. We thank Wal-Mart Stores, Inc., for providing data on store locations and opening dates; we have no other ties to the corporation. We are also grateful for comments by, staff at the Bureau of Labor Statistics, and participants of a seminar at the Midwest Economics Association meetings. All remaining flaws are our responsibility.
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