November 28, 2005
Productivity is the principal driver of economic progress. It is the only force that can
make everyone better off: workers, consumers, and owners of capital. Wal-Mart has
indisputably made a tremendous contribution to productivity. From its sophisticated inventory
systems to its pricing innovations, Wal-Mart has blazed a path that numerous other retailers are
now following, many of them vigorously competing with Wal-Mart. Today, Wal-Mart is the
largest private employer in the country, the largest grocery store in the country, and the third
largest pharmacy. Eight in ten Americans shop at Wal-Mart.
There is little dispute that Wal-Mart’s price reductions have benefited the 120 million
American workers employed outside of the retail sector. Plausible estimates of the magnitude of
the savings from Wal-Mart are enormous – a total of $263 billion in 2004, or $2,329 per
household.2 Even if you grant that Wal-Mart hurts workers in the retail sector – and the evidence
for this is far from clear – the magnitude of any potential harm is small in comparison. One
study, for example, found that the “Wal-Mart effect” lowered retail wages by $4.7 billion in
But Wal-Mart, like other retailers and employers of less-skilled workers, does not pay
enough for a family to live the dignified life Americans have come to expect and demand. That
is where a second progressive success story comes in: the transformation of our social safety net
from a support for the indigent to a system to that makes work pay. In the 1990s, President
Clinton fought for expansions in support for low-income workers, including a more generous
Earned Income Tax Credit (EITC) and efforts to ensure that children did not lose their Medicaid
if their parents took a low-paid job. The bulk of the benefits of these expansions go to the
workers that receive them, not to the corporations that employ them.
Attempts to limit the spread of... [continues]
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