The good goliath – Wal-Mart – low-income family grocer

Wal-Mart has been one of the most successful anti-poverty programmes in America. It provides entry-level jobs that unskilled workers badly want – there are often 5 or 10 applicants for each position, says John Tierney of the New York Times.

Critics say Wal-Mart's pay – $9.68 per hour on average – is too low and depresses local retail wages when a new store opens. That effect is debatable, but even if wages do go down slightly, these workers still end up with more disposable income, says Jason Furman, a visiting professor at New York University.

Furman notes that the possible decline in wages is miniscule compared with what the typical family saves by shopping at Wal-Mart: nearly $800 per year on groceries alone, a savings that's especially valuable to the many low-income shoppers at Wal-Mart.

The average income of shoppers at Wal-Mart is $35,000, compared with $50,000 at Target and $74,000 at Costco.

Costco is touted as the virtuous alternative to Wal-Mart because it pays better wages, but it needs to because it requires higher-skilled workers to sell higher-end products to its more affluent customers.

Wal-Mart is often denounced for getting "corporate welfare" because some of its employees rely on Medicaid for health care and on other government aid. But so do some employees at other companies or at government institutions like public schools. Wal-Mart offers health benefits that are generally comparable to what other retailers offer, says Tierney.

It's easy to understand the motives of some of Wal-Mart's enemies. Local merchants don't want to match its prices. Labour leaders know that they'll lose members and dues if unionised stores suffer. But why would anyone who claims to be fighting for social justice be so determined to take money out of the pockets of the poor?

Source: John Tierney, The Good Goliath, New York Times, November 28, 2005.

For text (subscription required): http://select.nytimes.com/2005/11/28/opinion/29tierney.html

For more on Economy: http://www.ncpa.org/iss/eco/

FMF Policy Bulletin/ 13 December 2005