Wrestling with Wal-Mart: Tradeoffs Between Profits, Prices and Wages

A working paper from the Economic Policy Institute examining the costs and benefits of Wal-Mart stores. From the introduction:
The benefits and costs of Wal-Mart’s expansion across the United States have been hotly debated. Critics of the retailer have documented the extent to which Wal-Mart uses its market power to undermine its workers’ compensation: squeezing suppliers and hurting local economies along the way. Supporters of Wal-Mart counter that price declines offered by the company more than compensate U.S. consumers for any depressing eff ect the company’s expansion has on wages. Two recent opinion pieces, one in the New York Times and the other in the Washington Post, pushed back hard against critics of Wal-Mart, arguing that the retailer’s low prices benefit low-income families more than its labor practices could possibly harm them.

Another aspect of the Wal-Mart debate focuses on the subsidies (implicit and explicit) that Wal-Mart receives from government at various levels. Critics of the company argue that these subsidies essentially allow Wal-Mart to mask the true cost of its business model, and constitute a monetary transfer from taxpayers to the company’s bottom line. Defenders of the company argue that most of the subsidies Wal-Mart and its employees receive from government programs are well-targeted, and perform exactly the task they were meant to. While this is as much a debate about politics and values as economics, there are insights that the latter discipline can provide.

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