Wednesday, November 16, 2005

Global Insight Research Report: Wal-Mart's effect on the economy

Global Insight Releases New Study on the Impact of Wal-Mart on the U.S. Economy:

...Major National Findings
Consumer savings for Wal-Mart shoppers were generated through Wal-Mart's higher levels of capital investment in distribution and inventory control, lower import prices, and greater efficiency of the overall economy through the application of improved technology and processes. With the estimated 3.1% CPI impact, total cumulative savings to consumers amounted to $263 billion by 2004, or $895 per person. The study also includes an analysis of the sensitivity of the results to changes in the CPI and wage impact estimates on which the study findings are based.

According to the study, Wal-Mart had a positive impact on employment nationwide, generating 210,000 jobs by 2004, a 0.15% increase relative to the number of jobs that would have existed without Wal-Mart. Labor market dynamics, embodied in Global Insight's Model of the U.S. Economy, resulted in nominal wages across the whole economy declining 2.2% by 2004. This decline was more than offset by the fall in consumer prices, creating an increase in real disposable income of 0.9% by 2004. "Consumers earned less in nominal dollars, but their income bought them more in the economy with Wal-Mart because of real disposable income gains," the study concluded.

Global Insight's analysis of employee wage data provided by Wal-Mart shows its wages are comparable to the retail industry average for positions in the same area, leading the study to conclude that Wal-Mart pays a market wage that fairly reflects the skills, experience and education it requires of its workers.

To address concerns raised by Wal-Mart's critics who argue that the company contributes to wage compression in the U.S. economy, the study provides an analysis testing how sensitive the results are to the study's wage findings. This analysis concludes that if a portion of the consumer cost savings generated by Wal-Mart were caused by compression of wages, the overall improvement in the efficiency of the economy and the increase in real income would have been lower, while the level of employment would be higher...
Hat Tip: buckeyepundit


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