by James Parks, May 31, 2006

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.

Print This Article | E-Mail This Article | Comments (0)