The Wal-Mart Effect

As for exploiting employees, Michael J. Hicks study shows that there was in excess of a 40% fall in job turnover in retail trade after a Wal-Mart is constructed. Since job turnover is a direct reflection of employee satisfaction, Hicks study refutes the idea that Wal-Mart suppresses its employees. In actuality, Wal-Mart has long aided in profit-sharing plans and good performance bonuses rewarded to its employees. Recently, Wal-Mart has developed insurance programs aimed at reducing costs for its employees allowing for more employees being insured.

The critics of Wal-Mart seem to have ideas and accusations that are unfounded. The fact is that when a Wal-Mart enters into a community, the community's shoppers are able to purchase goods at a lower price than previously able. This money creates consumer surplus, a welfare gain conferred by the ability to obtain the good for less than the maximum price the consumer was willing to pay (Vedder). With this extra money, more demand is created which has a ripple effect causing the need for more jobs, once again creating more consumer welfare. In estimating consumer welfare in a dollar amount, Jerry Hausman and Ephriam Leibtag measured the gains to be in the billions of dollars annually. In the end, it is proven that the so-called economic losses, job costs, increase welfare, and so forth portrayed by the critics are deemed to be greatly over exaggerated. The United States needs Wal-Mart, and so does the rest of the world.

Continuing, critics do not mention the fact that Wal-Mart must pay property taxes and sales taxes. Michael J. Hicks estimates that “Wal-Mart increases local (Ohio) commercial property tax assessments resulting in collection increases of between $350,000 and $1.3 million” (Hicks). Obviously, these tax payments help generate revenue, relieving some of the burden on the government to assist low-income employees. In 2007, Wal-Mart contributed $296 million to over 4,000 communities in the United States and donated $41 million abroad.

The largest corporation in America with $378,799 million in revenues and employing 2,055,000 employees, Wal-Mart has become one of the greatest success stories in American history, but also one of the most controversial stories since Standard Oil (Fortune). But with all big business comes critics. Today's critics suggest Wal-Mart unfairly uses it power of size, which is goliath, to exploit employees and impoverish nations, ruin competition, and place undue pressure on the government. However, one item most critics fail to mention is that Wal-Mart creates consumer welfare. Throughout this paper, I will analyze each criticism of Wal-Mart and sufficiently cite evidence proving the greater good that is realized with the existence of Wal-Marts worldwide.

Critics of Wal-Mart and other big-box discount stores argue that jobs are lost due to two reasons: First, local retailers and other local businesses are forced to close as a result of the inability to compete with the lower prices. Second, the selling of foreign goods by Wal-Mart cuts revenues for domestic nonretail industries which in turn causes layoffs. Contradicting evidence, however, shows that “employment rose nearly ...