Felix Salmon says
it’s only Ledbetter himself — and CNBC — who is saying that Wal-Mart is claiming to save the average American family $3,100 a year. If you look closely at the report, it never actually says that. Instead, Global Insight talks about measuring the “cumulative price impact” of Wal-Mart since 1985. If the average American family has saved $3,100 over that time, that’s about $129 a year, not $3,100. Big difference.
But my reading of the report is a little different. The latest 2006 version seems to say
The updated study concludes that the reduction in the price level due to the presence of Wal-Mart translates directly into savings for consumers amounting to $287 billion in 2006. This corresponds to savings of $957 per person and $2,500 per household.
Emphasis mine.
That’s not $3100. Indeed, I don’t immediately see the 3,100 figure in the report. However, its a lot bigger than $129.
You might also wonder, if Wal-Mart is big enough to depress the price level is it big enough to depress wages? The report answers, Yes. And it seeks to quantify that. The full quote is a little (deliberately?) opaque
. . . nominal wage inflation is also lower (but not by as much) as a result of lower consumer price inflation. Partially offsetting the decline in wage inflation are higher productivity gains and lower unemployment rates that are also attributed to Wal-Mart. As a result, wage rate inflation is not reduced by as much as consumer price inflation. Wal-Mart’s presence in the economy, therefore, has led to an increase in the inflation-adjusted or real wage rate. The higher real wage rate, combined with higher employment levels, increased consumers’ real purchasing power by $118 billion in 2004 dollars and an estimated $129 billion in 2006.
Its sounds like a string of positives but its really a negative, lower wages contrasted against two positives, lower prices and lower unemployment. The net result is 129 Billion in savings or $1112 per household.
It should be noted, however, that the savings accrue to all Wal-Mart shoppers while the decrease in wages likely accrues to the lowest skilled portion of the labor market. The extent to which these overlap is questionable and it is possible that Wal-Mart could be a net negative for low skilled workers. However, it is clearly a positive for the economy as whole, which is what one would expect.
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Tuesday ~ November 10th, 2009 at 9:40 pm
ao
Actually the effect upon the lowest skilled portion of the labor market is potentially positive. Many studies like this find that retail wages fall, but they don’t estimate what happens to the composition of retail workers. Wal-Mart may be hiring lower skilled workers than the existing retail workers, which seems likely given that they are argued to be offering wages lower than the previous retail wage rate. Then they are helping the lowest skilled workers by offering them a wage that is higher than their next best opportunity, at the expense of lost jobs for existing retail workers, who are probably more skilled than currently unemployed retail workers.
Wednesday ~ November 11th, 2009 at 2:45 am
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