Wal-Mart And The War Against The Poor

Do a Google search for “anti Walmart” and you get your choice of about 6,880,000 links. The search term “walmart hurts america” returns 537,000 results. Clearly, there are plenty of folks out there who don’t like Wal-Mart. It hurts small business, they claim. It reduces wages, they assert. It contributes to suburban sprawl, claim others. As Sebastian Mallaby points out in today’s Washington Post, however, Wal-Mart has been a positive force in the economy and those who attempt to use the political arena to slow its expansion are, in reality, hurting the poor.

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.

Of course, Wal-Mart’s low prices aren’t an assistance program targeted at the poor, they are a competitive strategy that has succeeded marvelously by tapping in to a market that the Target’s and Costco’s of the world have neglected. If it weren’t for Wal-Mart, where would the people making $ 35,000 a year, or less, shop ? Sure, they’d find something but it wouldn’t be as cheap, or as convenient.

But what about those low wages ?

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.

I disagree with Mallaby’s concession on the wage issue, but his point is valid nonetheless. More important, though, is the question of why those 8,000 people would want to work at Wal-Mart if conditions were so bad. The answer, of course, is that the Wal-Mart job is obviously more attractive to them than whatever the alternative might be in their hometown, assuming there even is a viable alternative. If Wal-Mart didn’t exist, the truth of the matter is that most of the people wearing the blue vest today either wouldn’t be employed at all or would working longer, more dangerous hours somewhere else. Just as Wal-Mart has benefited consumers at the lower end of the economic spectrum, it has benefited workers as well.

Of course, as Mallaby points out, the leftist critics of Wal-Mart are guilty of even greater hypocrisy

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.

Its easy, I think, for the critics of Wal-Mart to say that the company should raise the wages it pays employees or increase health care benefits. For the most part, they don’t shop there and most of them probably don’t need to shop there. If Wal-Mart had to raise prices, they wouldn’t be the ones who would pay the price.

Wal-Mart is at the center of the globalized, technology-driven economy that’s radically increased American inequality, so it’s not surprising that it has critics. But globalization and business innovation are nonetheless the engines of progress; and if that sounds too abstract, think of the $200 billion-plus that Wal-Mart consumers gain annually. If critics prevent the firm from opening new branches, they will prevent ordinary families from sharing in those gains. Poor Americans will be chief among the casualties.

I will be the first to admit that I’m not a fan of Wal-Mart. I don’t enjoy shopping there, and the products they sell don’t appeal to me. For a large segment of America, however, Sam Walton’s creation has opened up opportunities that didn’t exist before. To argue that you care about the working poor at the same time you attack the one institution that has helped them the most in the past 20 years is the height of hypocrisy.

Cross-Posted at Below The Beltway