God Bless Wal*Mart

[wiegie]

Research faults campaign that lays guilt trip on Wal-Mart shoppers

By David Nicklaus

ST. LOUIS POST-DISPATCH

12/09/2005

 

Labor unions and their allies have stepped up their anti-Wal-Mart rhetoric this holiday season. Their television commercials try to cast the world's largest retailer as an enemy of the poor and downtrodden, and to lay a guilt trip on anyone who shops there.

 

Most Americans know intuitively that there's another side to the story. And a couple of recent papers by academic researchers point out what should be obvious to everyone: By driving down the prices of everyday necessities, Wal-Mart helps poor people a great deal.

 

Jerry Hausman, a professor of economics at the Massachusetts Institute of Technology, co-authored one of the papers. He found that when a Wal-Mart Supercenter opens in a new market, it drives down the cost of food by 25 percent. Even people who don't shop at Wal-Mart benefit as traditional grocers drop their prices to compete.

 

Poor people spend a greater-than-average portion of their income on food, and as a group they're more likely to shop at Wal-Mart. The conclusion is hard to escape, Hausman says: "Wal-Mart has done as much as anyone, perhaps even more than the federal government, to help poor people during the last 25 years."Advertisement

 

Jason Furman, an economist in the Clinton administration who's now a visiting scholar at New York University, takes Hausman's reasoning a step further. Even if you assume that Wal-Mart's expansion hurts some retail workers - think of those supermarket clerks whose unions are funding the anti-Wal-Mart ads - any harm they suffer is far outweighed by the benefit to consumers.

 

The figures he uses, $263 billion a year in consumer savings versus $4.7 billion in lower retail wages, sound like a pretty good bargain for most of us. (By the way, some studies find that Wal-Mart doesn't drive down wages in retailing. It may cause some unionized supermarkets to close, but those high-paying union jobs are relatively rare.)

 

Many of the so-called progressive criticisms of Wal-Mart are off base, Furman argues. The company's $10 billion profit for last year amounts to $6,000 per employee, which is about average in retailing. Its health care coverage ratio - 48 percent of its employees have company insurance - actually is slightly above average for the retail industry.

 

It's ludicrous, Furman says, to criticize Wal-Mart for getting "corporate welfare" because its employees qualify for Medicaid, food stamps and other benefits.

 

Such "welfare" was made possible by Clinton-era policies, which expanded the earned income tax credit and allowed children to keep Medicaid coverage when a parent took a low-paying job. The beneficiaries are the working poor, not the corporations that hire them.

 

If Wal-Mart is such a lifeline for the poor, then why is it so vilified?

 

"There's a zero-sum mentality among some segments of the left," Furman says. "If someone is doing well, then someone else must be doing poorly."

 

In fact, Wal-Mart's use of productivity-enhancing technology has created a positive-sum game, benefiting both shareholders and consumers. Its low prices help keep a lid on inflation, and they increase real wages for workers throughout the economy.

 

If you consider yourself a progressive, then by all means encourage Congress to improve the frayed social safety net. But there's no need to feel guilty about where you shop.

[wiegie]

VII. Conclusion

Over the past 15 years the largest development in food retailing has been the introduction of Wal-Mart supercenters that compete most closely with traditional supermarkets. Wal-Mart has expanded greatly, mostly in the South and Southwest, and become the largest supermarket chain in the U.S. Wal-Mart is now expanding into additional geographic markets in California and the upper Midwest, so its effects will become even more important.38 Wal-Mart offers many identical food items at an average price about 15%-25% lower than traditional supermarkets. Wal-Mart’s entry into a new geographic market creates a direct price effect by offering a lower price option to consumers and an indirect price effect by causing traditional supermarkets to lower their prices because of the increased competition. This paper estimates the effect on consumer welfare of the entry and expansion of Wal-Mart and other supercenters into geographic markets.

 

We find that an appropriate approach to the analysis is to let the choice to shop at Wal-Mart be considered as a “new good” to consumers when Wal-Mart enters a geographic market. Some consumers continue to shop at traditional supermarkets while other consumers choose to shop at Wal-Mart. Many consumers shop at both types of stores. Thus, we specify a utility consistent two level model of choice among types of shopping destinations. We then estimate a fixed effects binomial logit choice model to estimate the parameters of the utility model that differs across households. We use the estimated parameters to calculate the exact compensating variation that arises from the direct variety effect of the entry and expansion of supercenters and find the average estimate to be 20.2% of average food expenditure. We similarly estimate the exact compensating variation from the indirect price effect that arises from the increased competition that supercenters create. We find this average effect to be 4.8%. Thus, we estimate the average effect of the total the compensating variation to be 25% of food expenditure, a sizeable estimate.

 

Since we find that lower income households tend to shop more at these low priced outlets and their compensating variation is higher from supercenters than higher income households, a significant decrease in consumer surplus arises from zoning regulations and pressure group tactics that restrict the entry and expansion of supercenters into particular geographic markets.

http://econ-www.mit.edu/faculty/download_pdf.php?id=1243

Edited December 10, 2005 by wiegie

[wiegie]

About two weeks ago some student sent out the following e-mail:

 

 

Please publicize this event and encourage your students to attend:

 

Wal-Mart: The High Cost of Low Price

Special Film Screening

Thursday Dec. 1, 2005

8:00 p.m.

Loutit Lecture Hall - Room 101

 

WAL-MART: The High Cost of Low Price takes you behind the glitz and into the real lives of workers and their families, business owners and their communities, in an extraordinary journey that will challenge

the way you think, feel and shop.

 

www.walmartmovie.com

 

* A flyer is attached.

 

So, I just sent him the following reply:

 

Hi student,

 

You might be interested in this recent research paper:

 

http://econ-www.mit.edu/faculty/download_pdf.php?id=1243

 

Best regards,

 

wiegie

 

I'm all about making friends.

[H8tank]

It really is stupid and amazing the way the kommunist left tries to defile Walmart.

 

Thanks for pointing out this research, the left has nothing to add to this except insults and attempt to degrade walmart shoppers, the party for the little man? Right.

 

Don't forget, Walmart is owned and operated by Republicans.

[Ursa Majoris]

It really is stupid and amazing the way the kommunist left tries to defile Walmart.

 

Thanks for pointing out this research, the left has nothing to add to this except insults and attempt to degrade walmart shoppers, the party for the little man? Right.

 

Don't forget, Walmart is owned and operated by Republicans.

 

1205666[/snapback]

 

 

 

Nobody has ever questioned Walmart's prices (though the quality is extremely questionable). What is in question is the way Walmart achieves those prices:

 

a. Dumping health insurance on to the state

b. Making workers work longer than 40 hours without pay

c. Reducing or removing benefits

d. Squeezing suppliers to the point of insolvency

e. Running "Buy American" campaigns that are nothing more than lies

 

You get the picture (even if you say you don't).

[polksalet]

a. Dumping health insurance on to the state

 

Lie, they can buy shoonce if they wish

 

b. Making workers work longer than 40 hours without pay

 

Lie, this is a fireable offense for the worker and their supervisor

 

c. Reducing or removing benefits

 

True to some extent but you are pulling this out of your hindquarter. Wal-Mart's profit sharing is tied to stock price which is a little down and therefore has reduced benefits.

 

d. Squeezing suppliers to the point of insolvency

 

Is it Wal-Mart's jobs to support overpaid union mongoloids?

 

e. Running "Buy American" campaigns that are nothing more than lies

 

When was Wal-Mart's last "buy american" campaign? I would really like to know.

[Randall]

It really is stupid and amazing the way the kommunist left tries to defile Walmart.

 

Thanks for pointing out this research, the left has nothing to add to this except insults and attempt to degrade walmart shoppers, the party for the little man? Right.

 

Don't forget, Walmart is owned and operated by Republicans.

 

1205666[/snapback]

 

 

 

 

 

That's just plain wrong. Your view of the world is pretty sad.

[Beaumont]

a. Dumping health insurance on to the state

 

Lie, they can buy shoonce if they wish

 

 

1205736[/snapback]

 

 

 

 

Huh?

[Ursa Majoris]

Huh?

 

1206586[/snapback]

 

 

 

Shoonce = Arkansan for insurance

[Beaumont]

So Polk's comment is that the people who are barely being paid minimum wage, who's salaries are so low so that Wal-Mart can sell cheaper goods to the other poor people ... who's salaries are so low that Wal-Mart actively encourages them to apply for Medicaid due to their low incomes ...

 

... its all okay because they can buy insurance if they wish?

 

And with what disposible income are they supposed to purchase their health insurance?

 

Is it me or is this the equivolent of saying let them eat cake?

[Ursa Majoris]

So Polk's comment is that the people who are barely being paid minimum wage, who's salaries are so low so that Wal-Mart can sell cheaper goods to the other poor people ... who's salaries are so low that Wal-Mart actively encourages them to apply for Medicaid due to their low incomes ...

 

... its all okay because they can buy insurance if they wish?

 

And with what disposible income are they supposed to purchase their health insurance?

 

Is it me or is this the equivolent of saying let them eat cake?

 

1206695[/snapback]

 

 

 

Polks other half is a Walmart Sturmbahnfuhrer, er, I mean she's a Walmart manager. He just bangs the Walmart drum.

[polksalet]

So Polk's comment is that the people who are barely being paid minimum wage, who's salaries are so low so that Wal-Mart can sell cheaper goods to the other poor people ... who's salaries are so low that Wal-Mart actively encourages them to apply for Medicaid due to their low incomes ...

 

... its all okay because they can buy insurance if they wish?

 

And with what disposible income are they supposed to purchase their health insurance?

 

Is it me or is this the equivolent of saying let them eat cake?

 

1206695[/snapback]

 

 

 

 

Wal-Mart offers shoonce for as little as $15 per month. Sorry to interrupt the bra burning with some facts.

[The Holy Roller]

The wife hates Walmart and tries to keep me away as much as possible. I like Walmart. Who doesn't like low, low prices and people dressed in blue vests?

 

Walmart recently (three years ago) built a distribution center (DC) in our small rural community (pop. 3500) and the standard of living for many of the folks around here went markedly higher. The housing market is fantastic for sellers and buyers. And the DC is contributing over 300K a year for the next 25 years to the local school district in lieu of property taxes. I have to admit that Walmart has done our little town some good.

 

Now for the little Chinaman who is making all of the products that Walmart sells us, I'm not so sure. But who cares about them? Screw'em Walmart for as long as you can. darn Communists.

[H8tank]

Nobody has ever questioned Walmart's prices (though the quality is extremely questionable).

 

One main point of the article (which is obvious you didn't read) is how Walmart helps lower food prices, which the poor had to spend a disportionate amount of their income on.

 

So, you opinion is walmart sells inferior potatoes and corn? Interesting...

[Mr. Pennypacker]

One main point of the article (which is obvious you didn't read) is how Walmart helps lower food prices, which the poor had to spend a disportionate amount of their income on.

 

So, you opinion is walmart sells inferior potatoes and corn?  Interesting...

 

1208682[/snapback]

 

 

 

 

Actually many companies have to lessen the quality of their products to get them to the prices Walmart wants. They have also nearly bankrupted 2 companies, Vlassic and Levi's by using their pressure to get them to drive their prices down. While some of these larger corporations that deal with Walmart are not always operating at full efficiency and Walmart helps them become more efficient, Walmart goes over the line with their, "get us this price or else we will find someone else who will." Companies can't say no to Walmart because they need their business but suffer for being in bed with Walmart and their demands. And I guess the small-store businessman benefit when a Super Walmart pops up within 25 miles of their town?

[Ursa Majoris]

One main point of the article (which is obvious you didn't read) is how Walmart helps lower food prices, which the poor had to spend a disportionate amount of their income on.

 

So, you opinion is walmart sells inferior potatoes and corn?  Interesting...

 

1208682[/snapback]

 

 

 

I find it interesting that you can't differentiate between varying qualities of vegetables when you are one yourself.

[Big Country]

So, what is wrong with capitalism?

[Beaumont]

Wal-Mart offers shoonce for as little as $15 per month. Sorry to interrupt the bra burning with some facts.

 

1206784[/snapback]

 

 

 

 

Care to give the specifics of that coverage Polks? From what I have seen:

 

The average worker would have to pay one fifth of his paycheck for health care coverage at Wal-Mart. On a wage of about $8 an hour and 29-32 hours of work a week, many workers must rely on state programs or family members or simply live without health insurance.

 

Employees must pay $218 per month for family health care coverage from Wal-Mart.

 

In Wal-Mart's employee health plan, deductibles range from $350 to as high as $3,000 for family coverage.

[polksalet]

I do not know the specifincs of that plan as it is the cheapest. I can tell you that ours is around $200 monthly with about a $250 annual deductible.

[H8tank]

"get us this price or else we will find someone else who will."

 

This is not the USSR komrad.

 

Employees must pay $218 per month for family health care coverage from Wal-Mart.

 

So? What do you think most people pay? What do you think insurance costs small business people?

 

You want insurance? It is your responsibility, not the gov't, not your employer.

 

Get a clue state from birth to grave boy.

[Ursa Majoris]

This is not the USSR komrad.

So? What do you think most people pay? What do you think insurance costs small business people?

 

You want insurance? It is your responsibility, not the gov't, not your employer.

 

Get a clue state from birth to grave boy.

 

1210828[/snapback]

 

 

 

Ever cross what passes for your mind that with Walmart's economy of scale, their "shoonce" is just a tad expensive?

[Beaumont]

So? What do you think most people pay? What do you think insurance costs small business people?

 

You want insurance? It is your responsibility, not the gov't, not your employer.

 

Get a clue state from birth to grave boy.

 

1210828[/snapback]

 

 

 

 

I pay for my employees' insurance, including my receptionist that makes $10 an hour or so ... Wal-Mart could too I assume, what with having hundreds of billions of dollars more than me and all that ...

 

Sure, it is an employer's right not to offer health insurance that most of its employees can afford, but the flip side of that is the employer is fair game for being accused of being a crappy employer that sucks good jobs from the economy through predatory practices and replaces the good jobs (with health insurance) with substandard ones (without health insurance) ... all while encouraging their underpaid employees to get on the public dole for their health needs.

 

Get a clue Wal-Mart boot-licking boy ...

 

[H8tank]

being a crappy employer that sucks good jobs from the economy through predatory practices and replaces the good jobs (with health insurance) with substandard ones (without health insurance)

 

There is absolultey NO basis in fact for this assumption all you kommunists keep trying to sell. In large part, the exact opposite is true.

[Beaumont]

There is absolultey NO basis in fact for this assumption all you kommunists keep trying to sell.  In large part, the exact opposite is true.

 

1211065[/snapback]

 

 

 

 

Wal-Mart does offer affordable health insurance for someone making $8/hour? You should tell them to stop sending the employees to medicaid then ...

[Beaumont]

Eat this Wal-Mart boy ... their own (own as in sponsored) study shows that as Wal-Mart's share of the market increases, so does the burden on Medicaid ...

 

Wal-Mart = People on Medicaid

 

"Wal-Mart commissioned the independent economic research company Global Insight to manage the conference, conduct a study and solicit research (Joyce, Washington Post, 11/5). In total, nine studies were presented at the conference (Grant, USA Today, 11/7). For the Medicaid study, economist Michael Hicks, a professor at the Air Force Institute of Technology, examined the impact of Wal-Mart on government aid programs. According to the study, Medicaid expenditures increase by 1.5% for every 1% that the market share of Wal-Mart increases in a state. The study also found government cash aid to families decreases by 3.3% for every 1% that the market share of Wal-Mart increases in a state. The studies also indicate that Wal-Mart decreases wages in the communities in which it operates, Bloomberg reports (Bloomberg, 11/4). Wal-Mart does not increase expenditures for welfare or food stamps, the study found (New York Times, 11/5).

Edited December 12, 2005 by Beaumont