Out of Control Policy Blog

Progressive Wal-Mart

A very interesting piece by Sebastian Mallaby:

    Wal-Mart's critics allege that the retailer is bad for poor Americans. This claim is backward: As Jason Furman of New York University puts it, Wal-Mart is "a progressive success story." Furman advised John "Benedict Arnold" Kerry in the 2004 campaign and has never received any payment from Wal-Mart; he is no corporate apologist. But he points out that Wal-Mart's discounting on food alone boosts the welfare of American shoppers by at least $50 billion a year. The savings are possibly five times that much if you count all of Wal-Mart's products.

    These gains are especially important to poor and moderate-income families. The average Wal-Mart customer earns $35,000 a year, compared with $50,000 at Target and $74,000 at Costco. Moreover, Wal-Mart's "every day low prices" make the biggest difference to the poor, since they spend a higher proportion of income on food and other basics. As a force for poverty relief, Wal-Mart's $200 billion-plus assistance to consumers may rival many federal programs. Those programs are better targeted at the needy, but they are dramatically smaller. Food stamps were worth $33 billion in 2005, and the earned-income tax credit was worth $40 billion.

    Set against these savings for consumers, Wal-Mart's alleged suppression of wages appears trivial. Arindrajit Dube of the University of California at Berkeley, a leading Wal-Mart critic, has calculated that the firm has caused a $4.7 billion annual loss of wages for workers in the retail sector. This number is disputed: Wal-Mart's pay and benefits can be made to look good or bad depending on which other firms you compare them to. When Wal-Mart opened a store in Glendale, Ariz., last year, it received 8,000 applications for 525 jobs, suggesting that not everyone believes the pay and benefits are unattractive.

    But let's say we accept Dube's calculation that retail workers take home $4.7 billion less per year because Wal-Mart has busted unions and generally been ruthless. That loss to workers would still be dwarfed by the $50 billion-plus that Wal-Mart consumers save on food, never mind the much larger sums that they save altogether. Indeed, Furman points out that the wage suppression is so small that even its "victims" may be better off. Retail workers may take home less pay, but their purchasing power probably still grows thanks to Wal-Mart's low prices.
    ...

    Wal-Mart's critics also paint the company as a parasite on taxpayers, because 5 percent of its workers are on Medicaid. Actually that's a typical level for large retail firms, and the national average for all firms is 4 percent. Moreover, it's ironic that Wal-Mart's enemies, who are mainly progressives, should even raise this issue. In the 1990s progressives argued loudly for the reform that allowed poor Americans to keep Medicaid benefits even if they had a job. Now that this policy is helping workers at Wal-Mart, progressives shouldn't blame the company. Besides, many progressives favor a national health system. In other words, they attack Wal-Mart for having 5 percent of its workers receive health care courtesy of taxpayers when the policy that they support would increase that share to 100 percent.

Ted Balaker is Producer


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