Wal Mart and the economy

I'm not really a fan of Wal-Mart. I know they sell things on the cheap and as such allow people to afford to buy things tehy otherwise couldn't. However, I believe Wal-Mart and its ilk are bad for the economy in the long run.

And apparently, I'm not alone. Last night while I was up for 4 hours with my insomniac toddler son, we caught a program on PBS that discussed Wal-Mart's effect on the economy. While I can't remember much in detail (it was 2 in the morning), I can go over the gist of it here.

First - Wal-Mart attracts itself to municipalities by advertising new jobs and lower prices. This comes at a cost, though. According to the program, in many of the places where Wal-Mart markets itself, Wal-Mart won't open unless they have considerable help from the community. They claim they need the community to help by subsidizing the cost and providing tax breaks to the company in order for the community (who banks on the future returns) to have the store. In more than one location, once the subsidies that Wal-Mart gets (in one instance, a ten year break) ends, Wal-Mart will leave the store and move somewhere else, leaving an empty shell that nobody else can fill.

Second - New Jobs - Wal Mart advertises that it creates new jobs with many benefits for the community. What they don't mention is that in order to keep the prices as low as they do, they have to pay at or near minimum wage for the jobs they create. They do offer medical benefits, but they come at a price that most of the employees can't afford. The program noted that in one community, 68% of the people who worked retail were covered by insurance, but when Wal-Mart came in, that number dropped to somewhere around 35% (I think, but it was low). One man who worked for Wal-Mart stated that he worked full time for $1200/month, and the insurance that Wal-Mart offered cost $210/month, about 20% of his total pay. He couldn't afford that, and neither can many of the working poor, who end up eschewing insurance for free clinics, a cost that is passed on to the taxpayers in the community not to mention a drain on the medical community, taking away the customers that the doctors need to stay in business.

Third - revenues. Wal-Mart advertises that it creates much in terms of revenue for the community - one of the major selling points. However, market research shows that instead of the gain in revenues, there is an average loss of 10% in community revenues in a city where a Wal-Mart opens. This is due to a couple things. First, the money comes from the same people. Just because a new store opens doesn't mean that people will start spending more money. Combine this with the fact that Wal-Mart charges less than local businesses, and you end up with less revenue for the same amount spent.

Fourth - Impact on the community. Wal-Mart is headquartered in Arkansas. Their businesses are all over the country. The money that Wal-Mart makes goes back to Arkansas, as opposed to local businesses, especially mom and pop businesses, who keep the money in the locality. This ends up being a drain on the local economy. Since they're taking businesses away from the local stores, those stores go out of business. This results in a dearth of jobs in the community, and a drop in average income because now the workers are at Wal-Mart making minimum wage. This gives the consumer less money to spend and thus less money goes toward revenue, which hurts the community.

It's time to start looking beyond the few dollars and cents that you save by shopping at Wal-Mart and think about what's better for the economy. More money in fewer hands is good for the few who are getting the money, but bad for the nation as a whole. Spend that extra couple of dollars and make sure that people keep working.