Wal-Mart’s negative impact?

There is a very good article over the HBS Working Knowledge site, titled “The Real Wal-Mart Effect”. Over the years Wal-Mart’s dominance of the US retail sector attracted many criticisms both from the general public and from economists. The Bentonville based giant was blamed of having a negative economic impact on the US.

The reasoning behind that argument states that Wal-Mart would be paying low wages to its employees, destroying jobs in competitor retailers, and concentrating its wealth in the hands of few people.

Now, while the argument could seem plausible at a first sight, a modest economic analysis proves it to be dead wrong. If we consider all the savings Wal-Mart’s low prices proportionate to consumers across the country we discover that the value of this social surplus far out weights the negative impact of low wages and some job losses.

Quoting the article: “juxtaposing these customer savings against the estimate cited by Fishman and others that Wal-Mart destroyed 2,500 jobs (on a net basis) in 2005 yields customer savings of more than $7 million per year for each job lost.”

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