Study Examines Wal-Mart's Positive Impact, to Critics' Chagrin

WALTHAM, Mass. -- A study released on Friday by Global Insight, an economic analysis firm based here, suggests that some claims from Wal-Mart's growing number of critics may be unfounded. The study, which analyzes the national and regional impact of the nation's largest retailer on the U.S. economy, was presented at a Wal-Mart-sponsored conference in Washington, D.C., along with papers written on this same topic from other sources.

The study, called "The Economic Impact of Wal-Mart," was conducted using the Wal-Mart data, other publicly available data, and Global Insight's models of the U.S. national and regional economies. Global Insight also reviewed a wide range of previous studies that have examined how Wal-Mart has been able to offer lower prices to its customers and how this impact has spread to the prices of other retailers.

Global Insight's research suggested that the efficiencies that Wal-Mart has fostered in the retail sector have led to lower prices for the U.S. consumer. These results were supported by statistical analysis which found that the expansion of Wal-Mart over the 1985 to 2004 period can be associated with a cumulative decline of 9.1 percent in food-at-home prices, a 4.2 percent decline in commodities (goods) prices, and a 3.1 percent decline in overall consumer prices as measured by the Consumer Price Index-All Items, which includes both goods and services.

The main driver of this impact was a 0.75 percent improvement in the overall efficiency of the economy, according to the study. Increased capital intensity and lower import prices were secondary drivers. The 3.1 percent decline in the price level was partially offset by a 2.2 percent decline in nominal wages, so that the net effect was to increase real disposable income by 0.9 percent by 2004.

Consumer savings for Wal-Mart shoppers were generated through Wal-Mart's higher levels of capital investment in distribution and inventory control, lower import prices, and greater efficiency of the overall economy through the application of improved technology and processes, Global Insight found. With the estimated 3.1 percent CPI impact, total cumulative savings to consumers amounted to $263 billion by 2004, or $895 per person. The study also includes an analysis of the sensitivity of the results to changes in the CPI and wage impact estimates on which the study findings are based.

According to the study, Wal-Mart had a positive impact on employment nationwide, generating 210,000 jobs by 2004, a 0.15 percent increase relative to the number of jobs that would have existed without Wal-Mart.

Labor market dynamics, embodied in Global Insight's Model of the U.S. Economy, resulted in nominal wages across the whole economy declining 2.2 percent by 2004. This decline was more than offset by the fall in consumer prices, creating an increase in real disposable income of 0.9 percent by 2004. "Consumers earned less in nominal dollars, but their income bought them more in the economy with Wal-Mart because of real disposable income gains," the study concluded.

Global Insight's analysis of employee wage data provided by Wal-Mart shows its wages are comparable to the retail industry average for positions in the same area, leading the study to conclude that Wal-Mart pays a market wage that fairly reflects the skills, experience, and education it requires of its workers.

In other news, the company released a lengthy statement on Friday in response to an anti-Wal-Mart documentary being released this weekend in select theaters.

"The 138 million people who shop at our stores every week speak volumes more about Wal-Mart than any special interest video," the company said. "In fact, last month, our loyal customers spoke very loudly. Wal-Mart just enjoyed its best October ever -- and our best Halloween ever. No matter how much Robert Greenwald talks to the special interests, he just won't change the personal experiences that our customers, our associates, and the American people have with our company."

"Mr. Greenwald ... continues to anchor his case against Wal-Mart to the story of H&H Hardware in Middlefield, Ohio, which closed before Wal-Mart opened, and recently reopened under new ownership. We now know Mr. Greenwald even rejected the wishes of the store's original owner who, according to the Cleveland Plain Dealer, 'told movie producers not to tie H&H's closing to Wal-Mart's opening. Mr. Greenwald has done a disservice to his audience. With his refusal to correct previous errors and by perpetuating even more, he has managed to fully discredit his video," Wal-Mart said in the lengthy statement.
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