Is Walmart a net job creator or job eliminator?

Nancy Anderson
Posted by in Retail



One problem with being the 800-pound gorilla in any industry is that such size draws as many critics as admirers. So it is with Walmart, whose founder I profiled in a recent post on this blog.

As the retailer continues to expand across the country and around the world, critics often hold up a research paper from 2007 to counter its efforts.

The paper, titled "The Effects of Wal-Mart on Local Labor Markets," was written by two economics professors and an economics doctoral student for a conference sponsored by the National Bureau of Economic Research. The paper examined the effects of a Walmart store's opening on retail employment and wages in the county where it opens. The researchers concluded that each worker hired by a new Walmart replaces 1.4 local retail workers and reduces county retail payrolls by 1.3 percent, or $1.2 million.

So this makes Walmart a drain on the local economy, right? The answer may not be as simple as the numbers suggest. For starters, as the authors note, these changes take place against a backdrop of general growth in retail activity in the area around the Walmart, which means that the figures in question are relative to the presumed growth that would have occurred had Walmart not opened. Yet even this leaves some questions unanswered, such as, How much of the retail growth that does occur represents an increase in volume due to the scale of Walmart's operation? Or put another way, Would total sales at the smaller local retailers have risen in the aggregate to the level represented by Walmart's volume? Would more local retailers have opened in order to meet the rising demand for merchandise, or were Walmart's lower prices the main driver of the growth?

I will confess that, not having read the paper beyond its abstract, I do not know whether the researchers may have answered those questions in the course of their research. (Guess I should add this paper to my leisure reading pile.) It just seems to me that, this argument notwithstanding, Walmart contributes a net benefit to the communities where it opens if only because it allows the residents to live better for less. That in turn frees up consumers' money to be spent on other things - which presumably means more employment in those areas down the line.

By Sandy Smith

Sandy Smith is a veteran freelance writer, editor and public relations professional who lives in Philadelphia. Besides blogging for RetailGigs.com, he has written for numerous publications and websites, would be happy to do your resume, and is himself actively seeking career opportunities on Nexxt. Check out his LinkedIn profile and read his other posts on RetailGigsBlog.com.
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