The largest corporation in America with $378,799 million in revenues and employing 2,055,000 employees, Wal-Mart has become one of the greatest success stories in American history, but also one of the most controversial stories since Standard Oil (Fortune). But with all big business comes critics. Today’s critics suggest Wal-Mart unfairly uses it power of size, which is goliath, to exploit employees and impoverish nations, ruin competition, and place undue pressure on the government. However, one item most critics fail to mention is that Wal-Mart creates consumer welfare. Throughout this paper, I will analyze each criticism of Wal-Mart and sufficiently cite evidence proving the greater good that is realized with the existence of Wal-Marts worldwide.
Wal-Mart Costs Jobs
Critics of Wal-Mart and other big-box discount stores argue that jobs are lost due to two reasons: First, local retailers and other local businesses are forced to close as a result of the inability to compete with the lower prices. Second, the selling of foreign goods by Wal-Mart cuts revenues for domestic nonretail industries which in turn causes layoffs. Contradicting evidence, however, shows that “employment rose nearly 3 percent in the general merchandise store category” during the 2000 to 2004 time period; a period in which national employment was slowing declining (Vedder). In addition, Vedder and Cox performed a study involving sixteen different statistical tests measuring the relationship between job growth and the presence of Wal-Mart. The study concluded with only five tests showing a negative relationship and eleven with a positive relationship. If true, than how can Wal-Mart be responsible for the loss of jobs? Furthermore, critics would have the public believe that the greater number of Wal-Marts means the greater percent of unemployment. But as Vedder and Cox found, the unemployment rate declined throughout the transformation of Wal-Mart’s presence in the United States from a relatively small presence in 1984 to a large presence in 2004 (Vedder). Of course, other factors could be the reason behind the coincidence, but for as strongly as the critics contend, the evidence seems to at least prove that Wal-Mart does not hurt job employment. Emek Basker, an assistant professor at the University of Missouri, concluded from his study that between 1977 and 1999 that for every Wal-Mart store established, the net gain in job employment was approximately fifty jobs (Job-Creation). In conclusion, the evidence sufficiently proves the mere opposite of what critics would have one believe.
Wal-Mart Pays Low Wages and Exploits Employees
Labor unions and critics continue to portray Wal-Mart as an exploiter of employees. However, when asked, employees showed no disdain towards Wal-Mart and recently voted against, in a lopsided fashion, the unionization of Wal-Mart, according to Vedder and Cox. Still, the labor unions continue to publish criticizing material on the internet, in movies, and through media television. One of the contentions made by critics is Wal-Mart’s $9.68 average full-time hourly wage nationally (as of 2005) being well below the national average. However, when including certain factors such as the local labor market conditions and the respective business sector, Wal-Mart’s wage exceeds the $9.14 national average for the United States given by the Bureau of Labor ( Vedder). As for exploiting employees, Michael J. Hicks study shows that there was in excess of a 40% fall in job turnover in retail trade after a Wal-Mart is constructed. Since job turnover is a direct reflection of employee satisfaction, Hicks study refutes the idea that Wal-Mart suppresses its employees. In actuality, Wal-Mart has long aided in profit-sharing plans and good performance bonuses rewarded to its employees. Recently, Wal-Mart has developed insurance programs aimed at reducing costs for its employees allowing for more...