Watching Wal-Mart

Posted at 2:48 PM on January 9, 2008 by Bob Collins (0 Comments)

Given the number of news stories over the years about how Wal-Mart has destroyed small town America, it was interesting that a new study on the subject was buried in the business section of my local paper today. Even APM's Marketplace -- that's us -- gave it thin treatment, considering the rather startling conclusion.

Writing in Fedgazette, the newsletter of the Federal Reserve Bank of Minneapolis senior economist Terry Fitzgerald found that Wal-Mart is no different from any other business that comes to town.

For example, Wal-Mart is widely believed to destroy local firms and jobs and to have a dampening effect on wages. But fedgazette findings suggest the opposite: Firm growth, employment and total earnings were somewhat stronger in Wal-Mart counties and, in some cases, even in the retail sector. The research does suggest that retail earnings per job fell in virtually all counties studied. But they actually fell by less in Wal-Mart counties.

But neither has Wal-Mart been a boon for local communities. Poverty rates, for example, declined in most counties during the period studied, but they declined by less (poverty rates didn’t improve as much) in Wal-Mart counties. By other measures, Wal-Mart had no noticeable effect. Overall, counties with and without Wal-Mart had similar growth in population and income per person.

End of discussion, right? Not so much.

Writes one commenter on the Wal-Mart Watch, Web site...

The Fed? That bastion of support for lowly capitalists? It’s the Fed, and other legal and governmental manipulators, that prevent this market from being free.

Over on the blog, The Economist's View, the devil has been found in the details... err, methodology.

Most important, none of the findings can be considered causal in nature. In other words, the findings don't tell us whether Wal-Mart's presence (or lack thereof) is responsible for either positive or negative outcomes over the period studied. Proving a causal relationship between Wal-Mart and local economic trends is beyond the scope of this analysis.

(Photo: Tim Boyle/Getty Images)

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