Wal-Mart and Middle-Class America

by Don Boudreaux on August 27, 2006

in Myths and Fallacies, Wal-Mart

Richard Vedder, one of the outstanding economists at Ohio University and now visiting at the American Enterprise Institute, is co-author (with Bryan O’Keefe) of this op-ed in today’s Washington Times.  Vedder and O’Keefe argue, sensibly, that Wal-Mart is no enemy of middle-class America; they point out that

there is enormous economic evidence that Wal-Mart’s has helped poor and
middle class consumers — in fact, more than anybody else. Our own data
analysis shows Wal-Mart is concentrated primarily in smaller, rural
counties with a per capita income far lower than other retailers, like
Costco. And, unlike the picture painted by labor activists, when the
Wal-Mart moves in, good things happen. Looking at 25 small towns where
Wal-Mart opened stores in 2002, we found employment growth was much
stronger in "Wal-Mart communities" than in other areas.

Other academics have reached similar conclusions about
Wal-Mart’s positive effects for the poor and middle class. University
of Missouri economist Emek Basker shows Wal-Mart’s presence tends to
lower prices by varying amounts, perhaps nearly 10 percent in the long

Respected Massachusetts Institute of Technology economist
Jerry Hausman argues that consumer welfare gains are even larger than
those estimated by Mr. Basker, probably in excess of 20 percent of
sales. Jason Furman, former director of economic policy for John
Kerry’s presidential campaign, claims Wal-Mart’s discounting on food
alone boosts the welfare of American shoppers by at least $50 billion a
year. These savings help poor and middle-class consumers
disproportionately since they spend a greater percentage of their
disposable income on food products. Wal-Mart’s ability to help poor and
middle-class consumers led Mr. Furman to dub the retailer a
"progressive success story."


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