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The New York Times, November 5, 2005
WASHINGTON, Nov. 4 - With critics hammering Wal-Mart day after day,
the company sponsored an unusual conference on Friday about its impact
on America's economy, and it got some good - and a few not so good
- grades.
The best news for Wal-Mart was that a respected economic forecasting
firm, Global Insight, found that by keeping its prices low and pressuring
rival retailers over the last 19 years, Wal-Mart has kept the Consumer
Price Index 3.1 percent below what it would have otherwise been.
Chris Holling, executive managing director of Global Insight, told
the 80 economists and journalists at the conference that Wal-Mart
had increased the economy's overall productivity by three-quarters
of a percent through steps like pressuring its suppliers to be more
efficient.
In these ways, Global Insight found, Wal-Mart increased net consumer
purchasing power by $118 billion last year, translating into savings
of $401 a person.
Global Insight, which Wal-Mart hired to conduct the study and organize
Friday's conference, said Wal-Mart's savings to consumers resulted
not from low wages but from numerous efficiencies, including its highly
advanced distribution network. Global Insight found that Wal-Mart
paid wages no lower than the average retail wage in the communities
where it does business.
But other economists, using some different data and assumptions, disputed
that, finding that Wal-Mart wages were lower than the retail average
and had pulled down wages for the nation's retail workers.
Opening the conference, Ray Bracy, Wal-Mart's vice president for corporate
affairs, hailed Global Insight's conclusion that Wal-Mart had lowered
prices for Americans. He said the conference showed a new openness
at Wal-Mart, the world's largest retailer, and an effort to improve
its understanding of its strengths and its effects.
"There is no debate about Wal-Mart in terms of the fact that
we have low prices," Mr. Bracy said. "There are also indirect
savings, if you don't shop at Wal-Mart, because our competitors have
to lower their prices."
Several economists who submitted papers for the conference gave Wal-Mart
bad marks for its effects on wages and Medicaid spending.
In a study of nationwide payroll data, David Neumark, a senior fellow
with the Public Policy Institute of California, and two other economists
found evidence that earnings for a county's retail workers fell by
3.5 percent eight years after Wal-Mart entered the county.
Mr. Neumark said there was even stronger evidence that after Wal-Mart
opened in a county, total earnings per worker, retail and nonretail,
fell 2.5 percent to 4.8 percent. One reason for the decline, he said,
is that Wal-Mart pressures its suppliers to cut their costs and that
may lead to lower wages for the suppliers' workers. Wal-Mart says
its full-time workers earn an average of $9.68 an hour.
Mr. Neumark wrote that his findings showed that "residents of
a local labor market do indeed earn less following the opening of
Wal-Mart stores."
He said that the retailer had the most negative effect in the South
where its stores are most numerous, noting that he had found that
retail employment, total employment and total earnings per person
in many counties fell as a long-term result of Wal-Mart's presence.
Global Insight agreed that Wal-Mart led to a net increase in jobs,
finding that Wal-Mart, by making the economy more productive, led
to the creation of 210,000 jobs than would otherwise have existed.
In a paper released this week that was not submitted for the conference,
Arindrajit Dube, an economist at the University of California, Berkeley,
and two other economists found that the arrival of a Wal-Mart led
to a reduction of 0.5 percent to 0.8 percent in average earnings per
worker in the general merchandising sector. They found that Wal-Mart
reduced take-home pay for retail workers by $4.7 billion annually.
In the same hotel and 15 minutes before the conference began, the
United Food and Commercial Workers Union announced that it was setting
up an advocacy group to inform Wal-Mart workers of their rights. The
move is intended to pressure Wal-Mart to improve pay and working conditions.
The new group, Wal-Mart Workers of America, invited Wal-Mart workers
to join it free by calling a toll-free number.
The group will not be a formal union that seeks to negotiate contracts.
Wal-Mart's critics often say that many Wal-Mart workers earn so little
that they receive food stamps. But Michael Hicks, a professor at the
Air Force Institute of Technology, found that the presence of a Wal-Mart
does not increase welfare or food stamp spending. But Mr. Hicks wrote,
"Wal-Mart does increase Medicaid expenditures by roughly $898
per worker," which he said was consistent with studies of other
low-wage workers nationwide.
Jerry Hausman, an economist at the Massachusetts Institute of Technology,
and another economist found that Wal-Mart's prices average 15 to 25
percent below prices for identical food items at traditional supermarkets.
He also found that Wal-Mart pressured supermarkets to cut their prices
by 4.8 percent more than they would have.
Emek Basker of the University of Missouri found that Wal-Mart had
a major impact in pushing down prices for several products, including
shampoo, toothpaste and laundry detergents. She said the savings ranged
from 1.5 percent to 3 percent in the short run to four times that
long term.
Global Insight largely agreed, finding that Wal-Mart had held down
prices of food by 9.1 percent nationwide and of nonfood goods by 4.2
percent by pressing down its own prices, and those of its competitors
and suppliers, in the last two decades.
Over all, the economics firm found, Wal-Mart saved consumers $263
billion last year. But because Wal-Mart played a role in lowering
inflation and that, in turn had helped hold down wage increases, the
net rise in consumer purchasing power thanks to Wal-Mart was $118
billion.
Some economists questioned some of Global Insight's assumptions, including
an effort to determine how consumer prices would have been different
if Wal-Mart did not exist.
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