2. RETAIL EMPLOYMENT These studies examine whether the arrival of a superstore increases or decreases the number of retail jobs in the region.
The Effects of Wal-Mart on Local Labor Markets - by David Neumark (University of California-Irvine), Junfu Zhang (Clark University), and Stephen Ciccarella (Cornell University), Journal of Urban Economics, Mar. 2008
This study presents the most sophisticated analysis to date of Wal-Marts impact on retail employment and wages. Analyzing national data, the study found that the opening of a Wal-Mart store reduces county-level retail employment by 150 jobs. Because Wal-Mart stores employ an average of 360 workers, this suggests that for every new retail job created by Wal-Mart, 1.4 jobs are lost as existing businesses downsize or close. The study also found that the arrival of a Wal-Mart store reduces total county-wide retail payroll by an average of about $1.2 million. This study improves substantially on previous studies by convincingly accounting for the endogeneity of the location and timing of Wal-Marts entry into a particular local market. That is, Wal-Mart presumably does not locate stores randomly. When expanding into a particular region, it may, for example, opt to build in towns experiencing greater job growth. Unless this location selection bias is accounted for, one might compare job growth in towns that gained Wal-Mart stores versus those that did not and erroneously conclude that Wal-Mart caused an expansion in employment. The authors of this study have devised a persuasive method of accounting for this bias. They also argue that the method developed by Basker (see next item below) to account for this bias is flawed and therefore her conclusion that Wal-Mart has a small positive impact on retail employment is not reliable.
Job Creation or Destruction? Labor-Market Effects of Wal-Mart Expansion By Emek Basker, University of Missouri, Review of Economics & Statistics, February 2005
Often cited and typically misrepresented by Wal-Mart supporters, this study examines the impact of the arrival of a Wal-Mart store on retail and wholesale employment. It looks at 1,749 counties that added a Wal-Mart between 1977 and 1998. It finds that Wal-Marts arrival boosts retail employment by 100 jobs in the first yearfar less than the 200-400 jobs the company says its stores create, because its arrival causes existing retailers to downsize and lay-off employees. Over the next four years, there is a loss of 40-60 additional retail jobs as more competing retailers downsize and close. The study also finds that Wal-Marts arrival leads to a decline of approximately 20 local wholesale jobs in the first five years, and an additional 10 wholesale jobs over the long run (six or more years after Wal-Marts arrival). (Wal-Mart handles its own distribution and does not rely on wholesalers). This works out to a net gain of just 10-30 retail and wholesale jobs, and the study does not examine whether these jobs are part-time or whether they pay more or less than the jobs eliminated by Wal-Mart. The study also found that, within five years of Wal- Marts arrival, the counties had lost an average of four small retail businesses, one midsized store, and one large store. It does not estimate declines in revenue to retailers that survive. Basker looked at the effect of Wal-Mart on retail employment in neighboring communities, but found that the confidence intervals were too large (meaning the results showed wide variation) to draw any conclusion about Wal-Marts impact. (Her initial working paper, published in 2002, reported an average decline of 30 retail jobs in surrounding communities, but, after correcting an error, she determined the confidence intervals were too large to produce a precise result.)
3. WAGES & BENEFITS These studies examine the effect of big-box chains, particularly Wal-Mart, on wages and benefits for retail employees.
Does Local Firm Ownership Matter? by Stephan Goetz and David Fleming, Economic Development Quarterly, April 2011.
Goetz and Fleming analyze 2,953 counties, including both rural and urban places, and find that, after controlling for other factors that influence growth, those with a larger density of small, locally owned businesses experienced greater per capita income growth between 2000 and 2007. The presence of large, non-local businesses, meanwhile, had a negative effect on incomes.
Living Wage Policies and Big-box Retail: How a Higher Wage Standard Would Impact Wal-Mart Workers and Shoppers UC Berkeley Center for Labor Research and Education, April 2011.
About 900,000 Wal-Mart workers, or 65 percent of its U. S. workforce, are paid less than $12 an hour. More than one-fifth earn less than $9 an hour. Overall, Wal-Marts hourly workers earn 12.4 percent less than retail workers as a whole. This study finds that raising their pay to a minimum of $12 an hour would lift many out of poverty, reduce their reliance on public assistance, and cost the average consumer, at most, $12.49 a year.
A Downward Push: The Impact of Wal-Mart Stores on Retail Wages and Benefits By Arindrajit Dube, T. William Lester, and Barry Eidlin, UC Berkeley Center for Labor Research and Education, December 2007
This study analyzes the impact of the opening of Wal-Mart stores on the earnings of retail workers. (It uses a similar technique to account for possible biases in Wal-Marts store location decisions as the study described in the RETAIL EMPLOYMENT section above, The Effects of Wal-Mart on Local Labor Markets.) This study focuses on stores that opened between 1992 and 2000 and concludes, Opening a single Wal-Mart store lowers the average retail wage in the surrounding county between 0.5 and 0.9 percent. Not only did Wal-Mart lower average wage rates, but every new Wal-Mart in a county reduced the combined or aggregate earnings of retail workers by around 1.5 percent. Because this number is higher than the reduction in average wages, it indicates that Wal-Mart not only lowered pay rates, but also reduced the total number of retail jobs. The study goes on to look at the cumulative impact of Wal-Mart store openings on retail earnings at the state level and nationwide. At the national level, our study concludes that in 2000, total earnings of retail workers nationwide were reduced by $4.5 billion due to Wal-Marts presence, the researchers find. Most of these losses were concentrated in metropolitan areas. Although Wal-Mart is often associated with rural areas, three-quarters of the stores it built in the 1990s were in metropolitan counties.
What Do We Know About Wal-Mart? By Annette Bernhardt, Anmol Chaddha, and Siobhán McGrath, Brennan Center for Justice, August 2005
This scrupulously fact-checked and footnoted report outlines what we know about Wal-Mart, in terms of its wages, health insurance benefits, compliance with labor laws, and cost to states. It details average starting wages for various job classifications. It reports that Wal-Mart employees earn 20 percent less than retail workers on average. It outlines the out-of-pocket costs, coverage limitations, and eligibility requirements for the retailers health insurance plan, and compiles information on what various states are spending to provide Medicaid to uninsured Wal-Mart employees and their children. The report also summarizes Wal-Marts record of labor law violations.
Reviewing and Revising Wal-Marts Benefits Strategy Memo to the Wal-Mart Board of Directors from Susan Chambers, Wal-Marts executive vice president for benefits, Oct. 2005
This internal memo leaked to Wal-Mart Watch assesses Wal-Marts current health care benefits and offers strategies to both reduce the companys health insurance costs and neutralize criticism of its employment practices. The memo reports that only 48 percent of the companys employees are enrolled in its insurance plan, compared to an average of 68 percent for national employers. Excessive out-of-pocket costs, including expensive premiums and high deductibles, are to blame. Our coverage is expensive for low-income families, and Wal-Mart has a significant percentage of Associates and their children on public assistance, the memo notes. Employees enrolled in Wal-Marts insurance plan spend an average of 8 percent of their income on health care, nearly twice the national average. Almost 40 percent spend more than 16 percent of their income, a crippling cost for workers who earn less than $20,000 a year on average. The memo also reports that Wal-Mart has a larger share of its employees and their children enrolled in Medicaid compared to other companies. In total, 46 percent of Associates children are either on Medicaid or are uninsured, it notes. The memo offers strategies for reducing Wal-Marts health care costs, including increasing the percentage of part-time employees and design[ing] all jobs to include some physical activity (e.g., all cashiers do some cart gathering). The latter recommendation aims to dissuade unhealthy people from coming to work at Wal-Mart.