Wal-Mart lowers costs at a price: studies
WASHINGTON (Reuters) - Wal-Mart Stores Inc. (NYSE:WMT - news) lowers consumer costs and adds jobs but has also led to a decline in wages and an increase in the number of people relying on government aid for health care, studies released on Friday show.
At a conference sponsored by Wal-Mart to examine its impact on the U.S. economy, researchers found that the world's biggest retailer accounted for some 210,000 net jobs last year while driving nominal wages down 2.2 percent.
The world's biggest retailer also lowered consumer prices by 3.1 percent, and real disposable income was 0.9 percent higher than it would have been in a world without Wal-Mart, researchers at Global Insight concluded.
The one-day event comes as rapidly expanding Wal-Mart tries to counter increasingly vocal critics who contend that the retailer drives competitors out of business and pays poverty-level wages that push employees to seek government aid.
Wal-Mart, which stressed that it made no attempt to influence the studies, gave Global Insight access to its wage data from October 2004 and sales and employment information dating back to the mid-1980s.
In addition to that study, the research firm also vetted papers from other researchers and accepted nine, some of which were far more critical. One found that Wal-Mart stores increase Medicaid spending, while another showed that the retailer actually reduced employment in the retail sector.
"When Wal-Mart enters a market, we compete with some businesses, which can result in job losses," Tom Schoewe, Wal-Mart's chief financial officer, said in a statement.
"But we expand opportunities for many other businesses, which results in job growth. Overall, Wal-Mart's economic impact on communities is a big net positive," he said.
Schoewe was scheduled to speak at the conference here but had to cancel at the last minute for an undisclosed reason.
OPPONENTS WEIGH IN
The retailer accounts for just under 1 percent of the U.S. work force and has become a lightning rod for those who contend that its devotion to low prices ends up hurting the economy as profit-pinched suppliers shift jobs overseas to meet Wal-Mart's rigorous pricing requirements.
The conference did not examine how Wal-Mart's suppliers affect the economy, however -- an omission that some participants said made the studies less useful.
One of Wal-Mart's most aggressive critics -- Wake-Up Wal-Mart, a union-funded group that has pressured Wal-Mart to improve wages and benefits -- held a news conference at the same hotel as Wal-Mart's event to announce a new national association for Wal-Mart workers.
The group said the association would "help empower Wal-Mart workers to join together in order to improve their working conditions, their lives, and change Wal-Mart into a more responsible and moral corporation."
Wake-Up Wal-Mart was not invited to attend the Wal-Mart event, which was restricted to a few dozen journalists along with academics and economists.
Wal-Mart has stepped up its public relations campaign in the hope of countering such criticism, which has become a bigger issue as the retailer faces increasing opposition to its efforts to expand into major urban areas.
Friday's event offered ammunition both to Wal-Mart and its critics.
Global Insight estimated that Wal-Mart's low prices saved consumers $263 billion in 2004, or about $895 per person. But other studies suggested those savings came at a cost.
Michael Hicks, a professor at the Air Force Institute of Technology and Marshall University, studied Wal-Mart's economic impact in Ohio from 1985 through 2003 and found Medicaid spending grew, amounting to about 16 additional cases per county attributable to a single Wal-Mart store.
A study by researchers at the Public Policy Institute of California found that Wal-Mart stores reduced retail sector employment by 2-4 percent. But they also found that Wal-Mart lowered prices, clouding the politically charged question of whether Wal-Mart is actually good or bad for the economy.
"The evidence is, on balance, more consistent with the claims of critics of Wal-Mart, although questions remain," the researchers concluded.
2006 ML 350 - Black, Appearance Package, Navigation System, Entertainment Package, Sunroof Package, Heated Seats, IPod Integration