Wal-Mart

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Wal-Mart Globalization

• Ralph J. Brown
• Professor of Economics
• Ralph.Brown_at_usd.edu
• www.usd.edu/rbrown

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STATEMENT OF PRINCIPLES

• PEOPLE SHOULD BE
• Free to Choose
• as Consumers
• as Workers
• as Suppliers

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COMPETITION

• Consumers best friend
• Workers best friend
• Not pro-Wal-Mart.
• Not pro-business.
• Pro Consumer.
• I dont care whether it is Wal-Mart, Target,
  K-Mart, or whomever.

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The Economic Impact of Wal-Mart

• Does it lower prices?
• Does it create jobs?
• Does it increase productivity efficiency in the
  economy?

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GLOBAL INSIGHT STUDYhttp//www.globalinsight.com/
publicDownload/genericContent/11-03-05_walmart.pdf

• Largest most prestigious econometric modeling
  firm in the world.
• THE ECONOMIC IMPACT OF WAL-MART
• Wal-Mart opened books on sales, employment, etc.
  1985-2004.
• Studies monitored and reviewed by economists from
  Brookings Instn. and American Enterprise
  Institute.

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GLOBAL INSIGHT

• Wal-Mart has been positive due to
• lower consumer prices,
• due to real efficiency gains,
• not by lower wages.
• more efficiency?lower prices?higher real income

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GLOBAL INSIGHT CONCLUSIONS

• Due to Wal-Mart
• Price Effect-US (Direct Indirect)
• Food prices 9.1 lower,
• Commodity prices 4.2 lower,
• Overall CPI 3.1 lower.

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GLOBAL INSIGHT cont.

• Due to Wal-Mart
• Increased Purchasing Power(2004)
• 118 billion-US
• 402 per person
• 1,046 per family

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GLOBAL INSIGHT cont.

• Due to Wal-Mart
• Employment Effects US (2004)
• 210,000 net jobs nationwide.
• General economic efficiency 0.75,
• (total factor productivity)

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OTHER STUDIES-(PRICES ARE LOWER)

• UBS Warburg 17 - 39 lower.
• Basker (U of Mo) 23 lower.
• Hausman Leibtag (MIT) food stores 25 lower -
  782 per HH.
• Callahan Zimmerman (WSJ) food prices 27
  lower.
• AT Kearney food prices 20-25 lower.
• Aberdeen Study food prices 25 lower, 63 of
  savings to HH lt 50,000, 42 of savings to HH lt
  35,000.

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WAGES

• Global Insight Wal-Mart BLS Avg
• 7 retail positions 9.17 8.46
• SD FT average 10.02
• Global Insight - no evidence of below-market
  wages.
• WM provides health to FT PT who choose to
  participate pays 70 of premium.

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INNOVATION PRODUCTIVITY(Key to Increased
Living Standards)

• The US has observed an upswing in productivity
  since 1995.
• 1973-95 1.4
• 1995-04 2.9
• A quarter of that came from retailing.

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Wal-Mart Effect

• McKinsey Global Institute states
• More than half of the productivity acceleration
  in the retailing of general merchandise can be
  explained by only two syllables Wal-Mart.
• Wal-Mart rivals (Target, K-Mart Sears) emulate
  highly productive processes.
• Competition from Wal-Mart makes its competitors
  better companies.

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Wal-Mart and Vermillion?

• Does it add retail choice?
• Does it lower prices?
• Does it create jobs?
• Does it provide tax revenue?

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Vermillion Retail Sector is Underserved
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Retail Sales Per Capita Inc.Adj.(1.0 avg of 11
largest cities)
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Vermillion Impact (Estimated)

• Retail Sales (Per Year)
• 45 mil. Wal-Mart
• - 15 mil. displacement
• 30 mil. NET
• Employment
• 275 jobs (700 applicants)
• - 100 displacement
• 175 jobs NET

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Vermillion Impact (Estimated)

• Tax Revenue (Per Year)
• 600 thou. City Sales Tax (2)
• 117 thou. Property Tax 164 thou. when
  complete.
• Lower Prices
• -2 mil Grocery prices _at_ 10 lower in V
• More disp income in more spending locally
• Less Travel to Yankton, Sioux City, Sioux
  Falls-Lower travel costs

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CONCLUSION

• If we could eliminate Wal-Mart from the economy
  we would
• pay higher prices,
• be less productive,
• have a lower standard of living,
• poor modest income hurt most.

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THE END
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Progressives Should Read

• Jason Furman, Wal-Mart A Progressive Success
  Story
• Just google it.

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INTERNATIONAL TRADE

• Trade is a good thing.
• It raises standard of living in both countries.
• Trade does not destroy jobs, it changes
  composition of jobs.

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Throwing Rocks at Wal-Mart(Vermillion Community
for Peace and Justice)