Although Wal-Mart claims its stores benefit communities
and grow local economies, a new study shows that Wal-Mart
retail stores contribute to higher local poverty rates.
The study, published in the June 2006 issue of Social
Science Quarterly (subscription required), the journal of the
Southwestern Social Science Association, finds “unequivocally” that
counties with the most Wal-Mart stores and counties that added stores
between 1987 and 1998 had higher poverty rates during the 1990s economic
boom.
Wal-Mart stores increase the poverty rate in several ways,
the report says. First, Wal-Mart’s business practices drive
independent retailers out of business. The workers who once
worked for these “mom-and-pop” stores often end up working part-time
at Wal-Mart for lower wages. In addition, other local retailers
reduce their wages to remain competitive with Wal-Mart, the study
shows. As a result, even though Wal-Mart may move into a depressed
neighborhood, the poverty rate rises after the new stores are built
because the chain forces down wages for everyone. This contradicts
Wal-Mart’s claims that its stores benefit low-income communities by
lowering prices for consumers.
The businesses that had supplied local stores, such as
wholesalers, transporters, accountants and lawyers, also lose income when
local stores close because Wal-Mart handles nearly all of those services
through its headquarters in Bentonville, Ark., the study says. With
fewer business opportunities, better-educated service providers often move
to other areas, reducing the number of “nonpoor” households in an area
and leaving more workers jobless, according to the study.
“The public costs that the chain imposes by raising the
poverty rate suggest that public infrastructure subsidies may not be
warranted or, as a minimum, that these two types of costs need to be added
together to assess the overall cost of the chain to a community,” say
the study’s authors, Stephan J. Goetz, professor of agricultural
economics and rural sociology at Pennsylvania State University, and Hema
Swaminathan, an economist with the International Center for Research on
Women.
Counties in which the number of Wal-Mart stores increased
during the 1990s had higher average usage of food stamps or smaller
reductions in use of food stamps, according to the study.
Other studies have noted a large number of Wal-Mart
workers are paid
poverty-level wages and the retail giant’s
lack of affordable health care coverage forces many of its workers to
apply for public health care assistance, which adds considerably to the
tax burdens of communities in which stores are located.
By reducing the number of local entrepreneurs, the
presence of Wal-Mart also decreases local leadership capacity, according
to the report, which called this the single, most far-reaching effect of
the chain’s impact on communities.