Study Finds Wal-Mart Contributes to PovertyMay 17, 2006
From the St. Louis Business Journal:
A study focused on the effects of Wal-Mart stores on poverty rates found that an estimated 20,000 families nationwide have fallen below the official poverty line as a result of the chain's expansion.
Wal-Mart Stores Inc., based in Bentonville, Ark., ranked No. 5 on the St. Louis Business Journal's most recent list of the area's largest employers. As of Dec. 31, Wal-Mart employed 13,005 people in the St. Louis metro area.
The study -- Wal-Mart and County-Wide Poverty -- written by Stephan Goetz, a professor of agricultural and regional economics at Pennsylvania State University, and Hema Swaminathan for the International Center for Research on Women, was published in the latest issue of Social Science Quarterly.
Authors, Goetz and Swaminathan write that the presence of Wal-Mart was "unequivocally associated" with smaller reductions in family-poverty rates in counties nationwide during the 1990s relative to places that had no stores.
During the last decade, dependence on the food stamp program nationwide increased by 8 percent, while in counties with Wal-Mart stores the increase was almost twice as large at 15.3 percent, according to the study. Although Wal-Mart employs many people living in its communities, for most, the hours worked and the wages paid do not help these families transition out of poverty, the study said.
The study, which sought to identify the independent effect of Wal-Mart stores on changes in U.S. family-poverty rates at the county level, found that one of the greatest effects of a Wal-Mart opening is the closing of mom-and-pop-type operations.
The authors state in the study that "by displacing the local class of entrepreneurs, the Wal-Mart chain also destroys local leadership capacity."
Poverty rates will rise if retail workers displaced from existing mom-and pop-type operations work for Wal-Mart at lower wages because they have no alternatives, all else equal, according to the study.
The demise of mom-and-pop stores leads to the closing of local businesses that supplied those stores, such as wholesalers, transporters, logistics providers, accountants, lawyers and others. Many of these are higher-paying jobs. The study concludes that it is likely that these more highly-educated individuals depart from the rural community in pursuit of better opportunities elsewhere, contributing to the rural-to-urban exodus over the last decade, leaving behind those with fewer opportunities and raising the poverty rate by reducing the number of nonpoor households in the denominator.
Wal-Mart is estimated to employ no more than 2 percent of the average county's work force. The share of Wal-Mart's employment in total county retail jobs is substantially greater than only 2 percent. In addition, the Wal-Mart jobs may be part time as opposed to full time, leading to lower family incomes, all else equal, the study said.
