WalMart: Helping the Poor, Despised by (some) Urban Liberals

[Crazed Rabbit]

WalMart is a national chain of huge discount stores. Their angle is selling stuff for cheap, and selling cheap stuff for really cheap.

Now, it's common sense cheaper goods allows poorer people to buy more things, increasing their quality of life. WalMart also provides jobs to lots of people.

And yet there's a lot of opposition to WalMart among some urban liberals and democrats.

Will Mayor Tom Menino save Boston’s poorest families from the scourge of  . . . everyday low prices?

Yes, the wolves of Wal-Mart are again at the city’s door. They want to spend millions building a store, hiring construction workers and creating hundreds of permanent jobs. No wonder the mayor hates them.

Is “hate” too strong a word? In 2005, Menino told a cheering Labor Day breakfast crowd “Wal-Mart shouldn’t be in downtown Boston!” A year later, after shooting down a Wal-Mart proposal, he claimed there was no place for them here.

“Wal-Mart does not suit the clientele we have in the city of Boston,” Menino said. “I don’t need employers like that in our city.”

http://www.washingtonpost.com/wp-dyn...020906783.html

When politicians, agency officials and other establishment types discuss the pros and cons of Wal-Mart opening stores in poor, retail-starved neighborhoods in the District, they often talk about pretty high-minded stuff. Fair pay. Job training. Environmental safeguards.

By contrast, in the scruffy blocks around the corner of New York Avenue and Bladensburg Road in Northeast Washington, where the first of four Wal-Marts planned for the District would probably be built, the residents have more immediate, street-level concerns.

First, would a new Wal-Mart there really stock the same quality of food and products as its stores do in better-off, suburban communities?

"I'll believe it when I see it," Mya Harris, 24, said skeptically. "Sure, you can put the store here, but what are they going to put inside it?"

Second, and I was amazed when this anxiety was aired in fully half the interviews, residents worry that the store would suffer severely or even fail because of petty theft.

"There'll probably be a lot of shoplifting going on. They'll need a lot of security," Terriea Sutton, 35, said.

Brenda Speaks, a Ward 4 ANC commissioner, actually urged blocking construction of the planned store in her ward at Georgia and Missouri avenues NW partly because of that risk. Addressing a small, anti-Wal-Mart rally at City Hall on Monday, Speaks said young people would get criminal records when they couldn't resist the temptation to steal.

All the opposition seems to stems from ignorance, or just a general dislike of large companies, since WalMart does a lot to help the poor by its very existence.
The study below is from 2005, but from progressive Jason Furman, now one of Obama's top economic advisors.

Spoiler Alert, click show to read: 

There is little dispute that Wal-Mart’s price reductions have benefited the 120 million American workers employed outside of the retail sector. Plausible estimates of the magnitude of the savings from Wal-Mart are enormous – a total of $263 billion in 2004, or $2,329 per household.

Even if you grant that Wal-Mart hurts workers in the retail sector – and the evidence for this is far from clear – the magnitude of any potential harm is small in comparison. One study, for example, found that the “Wal-Mart effect” lowered retail wages by $4.7 billion in 2000.

But Wal-Mart, like other retailers and employers of less-skilled workers, does not pay enough for a family to live the dignified life Americans have come to expect and demand.
...

Some of the largest price differentials are for groceries, with Wal-Mart’s prices substantially below the prices at unionized chains like Kroger and Safeway.

The most careful economic estimate of the benefits of lower prices and the increased variety of retail establishments is in a paper by MIT economist Jerry Hausman and Ephraim Leibtag (neither researcher received support from Wal-Mart).

They estimated that the direct benefit of lower prices at superstores, mass merchandisers and club stores (including but not limited to Wal-Mart) made consumers better off by the equivalent of 20.2 percent of food spending.

In addition, the indirect benefit of lower prices at competing supermarkets was worth another 4.8 percent of income. In total, the existence of big box stores makes consumers better off by the equivalent of 25 percent of annual food spending. That is the equivalent of an additional $782 per household in 2003.

Because moderate-income families spend a higher percentage of their incomes on food than upper-income families, these benefits are distributed very progressively. As shown in Table 1, the benefits from big box grocery stores are equivalent to a 6.5 percent increase in income for the bottom quintile (average income of $8,201) and a 0.9 percent increase in income for the top quintile (average income $127,146).
...

In the spring of 2004, a new Wal-Mart opened up in Glendale, Arizona. The store received 8,000 applications for 525 jobs with wages starting as low as $6.75 per hour.

A Harvard applicant has a higher chance of being accepted than a person applying for a job at that Wal-Mart. Wal-Mart experiences similarly high application ratios at other jobs. These anecdotes strongly suggest that jobs at Wal-Mart are better than the opportunities these workers would have in the absence of Wal-Mart, either other jobs or unemployment.
...

Implicit in much of the criticism of Wal-Mart is the belief that the company has enormous resources and could easily pay higher wages or more benefits without making a major sacrifice. After all, Wal-Mart’s mind-boggling $10 billion in profits last year make it appear as if the company could wave a wand and do anything it wants. But Wal-Mart also has a staggering 1.3 million American employees, multiplying the costs of even a modest change in compensation.
...

If Microsoft paid each of its employees an additional $5,000 or expanded its health benefits, its profits would be largely unchanged. If Wal-Mart took the same step – and did not pass the cost on to consumers – it would be virtually wiped out.

In the last fiscal year, Wal-Mart had revenues of $288 billion and costs (including taxes and other charges) of $277 billion – a razor-thin profit margin of 3.7 percent of revenues. Even a very small increase in its costs, without a corresponding increase in revenues, would wipe Wal-Mart’s profits out entirely.

CR