HAYS, Kan. - In 2010, the world's biggest corporation and largest retailer, Wal-Mart Stores, Inc. (NYSE: WMT), expects to add approximately 38 million square feet of retail space through remodels of existing stores and by accelerating growth of new stores. In the last decade, many U.S. cities have sweetened these deals for Wal-Mart in hopes that the retailer will move into their neighborhoods and boost local economic development.
If Wal-Mart seeks to expand operations in your area, its developers may approach your city leaders looking for tax advantages and tax exemptions. Even in this economy, some city or county governments may be enticed by the sales pitch, willing to accept Wal-Mart's assurances that its new stores can stimulate local employment and improve its local business climate.
Before giving Wal-Mart any new taxpayer gifts, municipalities might wish to read a new study by researchers at the University of Illinois at Chicago and Loyola University Chicago.
The study's results suggest that communities shouldn't see Wal-Mart or other big-box retailers as panacea for local economic problems.
The findings support the contention that Wal-Mart stores absorb sales from other local stores without significantly expanding the market, said study co-author David Merriman, head of the UIC department of economics and professor of public administration.
According to the study, the opening of a Wal-Mart store in Chicago's Austin neighborhood in 2006 has not increased retail activity or employment opportunities in the years since.
Researchers found that stores near Wal-Mart were more likely to go out of business, eliminating the equivalent of about 300 full-time jobs - about as many as Wal-Mart initially added to the area.
"What we're seeing here is that placing a Wal-Mart in an urban setting is basically a wash in terms of sales revenue for the city and jobs for local residents," Merriman said.
Walmart's expansion into cities across the country has stirred debate about its potentially negative impact on local jobs, wages and consumer prices, but such impacts had not been rigorously evaluated until this study was conducted.
The researchers collected data once before, and twice after, Wal-Mart's opening.
Telephone surveys from March to August 2006 -- before the opening -- yielded baseline information on hours worked, salary ranges, and employee benefits of workers in 306 nearby discount stores, drugstores, apparel stores, toy stores, shoe stores and hardware stores.
Six months after Wal-Mart opened, from March through November 2007, the researchers surveyed the same stores to find out whether any had closed or adjusted wages, employment or prices due to the opening of Wal-Mart. The group was able to re-survey about 56 percent of the original stores. The study found that those businesses that competed with Wal-Mart and remained in business showed little change in prices, wages or employment.
A third survey, from March to November 2008, found that of the 306 businesses originally surveyed, 82 had gone out of business during the study period.
The researchers also assessed sales tax data from the Illinois Department of Revenue and employment data from the Illinois Department of Employment Security.
Even the goods that Wal-Mart sells may not create jobs in the U.S. manufacturing sector.
Economic indicators are linking Wal-Mart's success with the creation of off-shore jobs, not jobs in our country. Statistics increasingly suggest that the more successful that Wal-Mart's sales are is in the U.S., the more Chinese are put to work, and not Americans.
Wal-Mart gets many of its products from low-cost Chinese suppliers. The pressure group China Labour Watch estimates that if it were a country, Wal-Mart would rank as China's seventh largest trading partner, just ahead of the UK, spending more than $18 billion annually on good manufactured in China.
"Our hope is that this evaluation aids policy makers, scholars, and community activists as they consider the full range of economic development strategies, and not just big-box developments, in their respective neighborhoods," said Phil Nyden, director of Loyola's Center for Urban Research and Learning.
According to the U.K.'s Guardian, Wal-Mart is taking over the world by stealth:
"Four of America's 10 richest individuals are from Wal-Mart's low-profile Walton family, which still owns a 40% controlling stake. The company's portfolio ranges from superstores in the US to neighborhood markets in Brazil, bodegas in Mexico, the Asda supermarket chain in Britain and Japan's nationwide network of Seiyu shops."
The same Guardian article points out that Wal-Mart is often accused of unfair treatment of older employees and others. "It is facing one of America's largest class-action lawsuits alleging wage discrimination against women and its hypermarkets are routinely blamed for squeezing small shops out of business."
Many community leaders may still press ahead, forging relationships with Wal-Mart's developers, perhaps believing their own local economies are unique and therefore will perform differently from the one studied by the Chicago researchers.
Still, municipalities are encountering growing scrutiny from taxpayers as they increasingly question the logic of cash-strapped cities giving away tax abatements, writeoffs and other tax-payer supported gifts to the world's richest corporation.
The largest multinational corporation in the world, Wal-Mart Stores, Inc. serves customers more than 200 million times per week at more than 8,000 retail units under 53 different banners and store brand names in 15 countries.
Its total sales for fiscal year 2009 exceeded $401 billion.
I hate Wal-Mart. I avoid it as much as possible.
Great article Pam!