The Wal-Mart Debate: A False Choice Between Prices and Wages

A study from the Economic Policy Institute examining Wal-Mart's low prices, and whether the company could afford to pay its workers better. From the introduction:

The more important question for the future isn’t whether Wal-Mart is a force for good or evil in the American economy, but whether the economic benefi ts provided by Wal-Mart (and other big-box retailers) can be preserved even if their labor compensation is dramatically improved. To this end, our research finds that:

• A study by the consulting fi rm Global Insight, which concludes that Wal-Mart’s expansion has saved U.S. consumers $263 billion, is deeply flawed. The statistical analysis generating this widely quoted figure fails the most rudimentary sensitivity checks used in good economic analysis, rendering its conclusions unreliable.
• A robust set of research findings shows that Wal-Mart’s entry into local labor markets reduces the pay of workers in competing stores. This effect is largest in the South, where Wal-Mart expansion has been greatest.
• Wal-Mart could raise wages and benefi ts significantly without raising prices, yet still earn a healthy profit. For example, while still maintaining a profit margin almost 50% greater than Costco, a key competitor, Wal-Mart could have raised the wages and benefi ts of each of its non-supervisory employees in 2005 by more than $2,000 without raising prices a penny."

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