Walmart’s Economic Role

What role does Walmart play, economically speaking, in the community? How many jobs does it create? Lose? What about the prices of goods? Do they rise or fall? And what about the community’s overall well being? Are we healthier when Walmart enters the market?

Art Carden, associate professor of economics at Samford University, answered these questions and more as a part of the Capitalism and Society Lecture Series, which is hosted by the North Dakota State Center for the Study of Public Choice and Private Enterprise, Friday in the Ag Country Auditorium at Barry Hall.

Carden’s presentation focused on three aspects that Walmart potentially influences in a local market: health and nutrition, employment and wages and prices and savings.

Health and nutrition

The retailer implemented a $4 prescription drug refill that changed the law of demand for applicable drugs, and the effects were substantial, Carden said. People who filled their prescriptions at Walmart, specifically those who filled blood pressure medication, have a reduced likelihood of hospitalization because they are more likely to take the medication and refill it because of the lowered cost.

Also, Walmart makes relatively high-quality food more available, providing food security primarily for the poor and children, Carden said.

Not all of Walmart’s contribution to a community’s health and nutrition is positive, however. Walmart, according to a study cited by Carden, played a key role in raising obesity rates in the United States from the late 1980s and early 2000s.

“If I remember the data correctly,” Carden said, “about 10.5 percent of the increase in obesity… can be attributed to Walmart SuperCenters.” This attribution comes in the form of consuming more sweets and unhealthy foods due to lowered prices. “Reductions in food prices, because of Walmart SuperCenter entries, mean that I eat more Twinkies,” Carden said.

Employment and wages

One new Walmart job displaces 1.4 retail jobs elsewhere in the community. According to Carden, this is not necessarily a bad thing.

Although jobs are displaced, “Walmart does not appear to have an effect on small business activity,” Carden said. This is because retail is a relatively small portion of a region’s employment.

Another study estimates that Walmart reduces net wages because of the aforementioned effects on employment.  Premium prices set for wages at large retailers, however, counteract this reduction and benefit employees. “It turns out, Mom and Pop may not pay as well as Sam Walton, which seems to run counter to the perceived political narrative about Walmart,” Carden said.

Prices and savings

Prices of goods fall by about 1 to 1.2 percent because of the entry of a Walmart SuperCenter, Carden said, and result in impressive savings.

“Imagine what you spend on food per year. Take a quarter of that and add it to your income,” Carden said. According to economists affiliated with the National Bureau of Economic Research, that is the estimated savings Walmart gives an average household because of their, ‘Every Day Low Prices.’

Carden also mentioned the change in social capital — political ideals and social utility — and quality of shopping experience that the retailer can bring.

His studies have found that there is essentially no change in political ideals. “They’re not going to go red. They’re not going to go blue. They’re just going to go to Walmart to get some bacon.” The quality of the shopping experience improved because Walmart reduces “minor inconveniences in a relatively wealthy world” because of their fully-loaded shelves, stocked with a variety of options.

Carden graduated from the University of Alabama and has been published in the Journal of Urban Economics, Southern Economic Journal, Public Choice and Contemporary Economic Policy, Forbes and USA Today among others.

Peter Klein, professor of entrepreneurship at Baylor University, delivers the next lecture in the series at 5:30 p.m. Oct. 16 in the Ag Country Auditorium in Barry Hall. Klein will speak about how entrepreneurship fosters economic growth.

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