Lie #5:  Wal-Mart Saves Consumers $2,500 Annually

In 2007, new research from Global Insight shows the retailer now saves American families $2,500 each year, up 7.3 percent from $2,329 in 2004.” – [Wal-Mart press release, 9/12/07]

The Truth:

A University of California at Berkeley study finds Wal-Mart could raise wages without compromising its low price strategy. While Wal-Mart touts its “average” wage of $10.83, most researchers conclude that the average worker at Wal-Mart makes around eight dollars an hour. A key study from the Center for Labor Research and Education at the University for California at Berkeley concludes that:

• Increasing Wal-Mart’s minimum wage wages to $10 per hour would contribute to a payroll of $2.38 billion a year, a 9.3 percent increase over the retailers’ current payroll.
• Poor and low-income Wal-Mart workers could expect to earn an additional $1,020 to $4,640 a year in pre-tax income, depending on what they earn now and whether they work part-time or full-time.
• If Wal-Mart shoppers were asked to absorb all of the wage increase, the average impact would be a price increase equivalent to 36 cents per shopping trip or $9.70 per year, for the store’s average consumer, who spends $1,088 per year at Wal-Mart.
• High-spending Wal-Mart shoppers, (the 12.5 percent of store customers who account for 54 percent of all Wal-Mart sales and average expenditures of $9,775 per year) would see an additional cost of $1.47 per shopping trip, or up to $87.98 a year. The study estimates that 3.4 percent of Wal-Mart shoppers are both high-spending and low-income. [“Living Wage Policies and Wal-Mart,” UC Berkeley Center For Labor Research And Education, December 2007]

The Council of Better Business Bureaus criticizes Wal-Mart advertising. The National Advertising Division of the Council of Better Business Bureaus found that recent Wal-Mart ads are misleading to consumers. “The group found that the ads — which imply that savings from Wal-Mart allowed the families to take the vacation and buy the car — could lead consumers ‘to quite reasonably take away the message that families that shop at Wal-Mart will save $2,500 per year more than families that shop at other stores.’” [New York Times, 3/31/08]

Wal-Mart is responsible for lower wages.  A robust set of research findings shows that Wal-Mart's entry into local labor markets reduces the pay competing stores. This effect is greatest in the South, where Wal-Mart expansion has been greatest. [EPI, “Wrestling with Wal-Mart”, 6/15/06]

Global Insight study findings are “implausible.”  A widely quoted figure from a study by the consulting firm Global Insight (GI) indicates that Wal-Mart's expansion has resulted in $263 billion in savings to U.S. consumers. We find this to be implausible. The statistical analysis generating this highly influential result fails the most rudimentary sensitivity checks.  [EPI, “Wrestling with Wal-Mart”, 6/15/06]

Global Insight study relies on internal, unverifiable data.  BusinessWeek reported of the Global Insight study, “Wal-Mart hired Global Insight to conduct its own study of the retailer's economic impact. It gave Global what it says is unprecedented access to its internal data about wages, benefits, and other employment issues.” [BusinessWeek, 10/20/05]

Lie #6: Wal-Mart Is Not Interested in Consumer Banking Operations >>