About 6 months ago, Wal-Mart announced plans to open up 4 stores in my current place of residence, the District of Columbia. My immediate inclination was that this was problematic- Wal-Mart would certainly create jobs, but it would also destroy others. Absent good data on whether the creation would exceed the destruction, I surmised, it was necessary that the city impose some conditions on this big box store’s entry, such as a living wage and project labor agreements for store construction. This concept is not novel- Chicago activists fought for a living wage 5 years ago when Wal-Mart was coming to town, and the mayor vetoing it under the rationale that he would rather have low-paying jobs than no jobs at all. Activists in DC are seeking these conditions and many others now, and the debate will undoubtedly ramp up in the coming weeks and months.
It is essential that as the DC political leadership considers Wal-Mart’s entry, they look to examples like Chicago for the economic ripple effects that Wal-Mart will bring. A recent op-ed in the Washington Post summarized research done by several academics in Chicago. Their findings are stark:
In our initial survey, we identified 306 businesses within four miles of Wal-Mart that sold competing goods. Two years later, 82 of those businesses had closed. We found that businesses closer to Wal-Mart were significantly more likely to close than similar businesses farther away. Although we won’t go so far as to blame the closures on Wal-Mart, our evidence suggests that the new store hastened the decline of some of its competitors…
Based on the disproportionate number of business closures close to Wal-Mart, we concluded that, after two years, the number of jobs lost by Wal-Mart’s nearby retail competitors essentially offset the number of jobs created at the new Wal-Mart. With this data, we were not able to directly study Wal-Mart’s impact on new businesses, but Wal-Mart may also have influenced new business openings. The affected competitors had offered relatively limited benefits and offered wages only slightly above the minimum wage. Thus, the wages and benefits of the lost jobs were probably quite similar to the wages and benefits at the new Wal-Mart. From the point of view of workers, Wal-Mart’s opening was close to a wash…
In considering whether to encourage or oppose Wal-Mart’s entry into the District, our results suggest that job creation should not be an overriding factor. Consumers who shop at Wal-Mart certainly feel they benefit from its availability. However, others may feel that a highly profitable national retailer could adopt more generous labor standards and make a serious effort to preserve neighborhood identity. An open and vigorous debate about these trade-offs is worth having.
Inevitably, pro-business politicians will cite the job benefits of Wal-Mart as far outweighing the costs, most of which are borne outside the jurisdiction. However, if there are no job benefits, then why not make a large and profitable employer like Wal-Mart provide good wages and benefits? In that scenario, at very least both workers and consumers can benefit from Wal-Mart’s arrival. Otherwise, it’s just a race to the bottom, as Chicago has learned.
[...] Paul Krugman debunks the “Doctrine of Immaculate Crowding Out.” The Center for Urban Research and Learning at Loyola University Chicago has documented [pdf] the real crowding-out effect of Wal-Mart [ht: nk].* [...]