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Wal-Mart Globalization

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Wal-Mart Globalization

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    1. Wal-Mart & Globalization Ralph J. Brown Professor of Economics Ralph.Brown@usd.edu www.usd.edu/~rbrown

    2. STATEMENT OF PRINCIPLES PEOPLE SHOULD BE: Free to Choose as Consumers as Workers as Suppliers

    3. COMPETITION Consumers best friend Workers best friend Not pro-Wal-Mart. Not pro-business. Pro Consumer. I dont care whether it is Wal-Mart, Target, K-Mart, or whomever.

    4. The Economic Impact of Wal-Mart Does it lower prices? Does it create jobs? Does it increase productivity & efficiency in the economy?

    5. GLOBAL INSIGHT STUDY http://www.globalinsight.com/publicDownload/genericContent/11-03-05_walmart.pdf Largest most prestigious econometric modeling firm in the world. THE ECONOMIC IMPACT OF WAL-MART Wal-Mart opened books on sales, employment, etc. 1985-2004. Studies monitored and reviewed by economists from Brookings Instn. and American Enterprise Institute.

    6. GLOBAL INSIGHT Wal-Mart has been positive due to: lower consumer prices, due to real efficiency gains, not by lower wages. more efficiency?lower prices?higher real income

    7. GLOBAL INSIGHT CONCLUSIONS Due to Wal-Mart: Price Effect-US (Direct & Indirect) Food prices 9.1% lower, Commodity prices 4.2% lower, Overall CPI 3.1% lower.

    8. GLOBAL INSIGHT cont. Due to Wal-Mart: Increased Purchasing Power(2004) $118 billion-US $402 per person $1,046 per family

    9. GLOBAL INSIGHT cont. Due to Wal-Mart: Employment Effects US (2004) +210,000 net jobs nationwide. General economic efficiency +0.75%, (total factor productivity)

    10. OTHER STUDIES- (PRICES ARE LOWER) UBS Warburg 17% - 39% lower. Basker (U of Mo) 23% lower. Hausman & Leibtag (MIT) food stores 25% lower - $782 per HH. Callahan & Zimmerman (WSJ) food prices 27% lower. AT Kearney food prices 20-25% lower. Aberdeen Study food prices 25% lower, 63% of savings to HH < $50,000, 42% of savings to HH < $35,000.

    11. WAGES Global Insight Wal-Mart BLS Avg 7 retail positions $9.17 $8.46 SD FT average $10.02 Global Insight - no evidence of below-market wages. WM provides health to FT & PT who choose to participate & pays 70% of premium.

    12. INNOVATION & PRODUCTIVITY (Key to Increased Living Standards) The US has observed an upswing in productivity since 1995. 1973-95 1.4% 1995-04 2.9% A quarter of that came from retailing.

    13. Wal-Mart Effect McKinsey Global Institute states: More than half of the productivity acceleration in the retailing of general merchandise can be explained by only two syllables: Wal-Mart. Wal-Mart rivals (Target, K-Mart Sears) emulate highly productive processes. Competition from Wal-Mart makes its competitors better companies.

    14. Wal-Mart and Vermillion? Does it add retail choice? Does it lower prices? Does it create jobs? Does it provide tax revenue?

    15. Vermillion Retail Sector is Underserved

    16. Retail Sales Per Capita Inc.Adj. (1.0 = avg of 11 largest cities)

    17. Vermillion Impact (Estimated) Retail Sales (Per Year) +$45 mil. Wal-Mart - $15 mil. displacement +$30 mil. NET Employment +275 jobs (700+ applicants) - 100 displacement +175 jobs NET

    18. Vermillion Impact (Estimated) Tax Revenue (Per Year) +$600 thou. City Sales Tax (2%) +$117 thou. Property Tax $164 thou. when complete. Lower Prices -$2 mil Grocery prices @ 10% lower in V More disp income in & more spending locally Less Travel to Yankton, Sioux City, & Sioux Falls-Lower travel costs

    19. CONCLUSION If we could eliminate Wal-Mart from the economy we would: pay higher prices, be less productive, have a lower standard of living, poor & modest income hurt most.

    20. THE END

    21. Progressives Should Read Jason Furman, Wal-Mart: A Progressive Success Story Just google it.

    22. INTERNATIONAL TRADE Trade is a good thing. It raises standard of living in both countries. Trade does not destroy jobs, it changes composition of jobs.

    26. Throwing Rocks at Wal-Mart (Vermillion Community for Peace and Justice)

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