FLORIDA, November 2, 2012 — To understand how our society has changed over the last few decades, one should consider becoming acquainted with the rise of big box stores.
Today, people look back favorably on the days when mom-and-pop establishments formed the core of local economies. Prices for everything from foodstuffs to backgammon sets might have been a bit higher than they are now — keeping inflation in mind, of course. Nonetheless, it does seem that the overall quality of life was better.
Shopkeepers, cashiers, and customers knew one another on not only a professional, but a personal basis. Consequently, the sense of cohesion in many communities was remarkably strong. Going shopping was often no less a social endeavor than it was a financial one.
Nelson N. Lichtenstein is a noted academic and scholar of American labor history. In his recent book The Retail Revolution: How Walmart Created a Brave New World of Business, he detailed the story of our time’s foremost big box institution.
Why does Walmart often build stores in smaller, impoverished communities? Does it actually drive locally owned businesses out of existence? Economics aside, what is Walmart’s social impact on the areas that it expands to?
In this first part of a candid interview, Dr. Lichtenstein explains about all of the above and much more.
Joseph F. Cotto: Why does Walmart often build stores in smaller, impoverished communities? What is the economic appeal of these places?
Dr. Nelson N. Lichtenstein: It used to do so, but today it is seeking to move somewhat upscale, to compete in more affluent suburbs and cities, which is why it is pushing so hard to win zoning and other approvals for supercenters in Queens, Washington, D.C. Chicago, and Los Angeles. I might add that it does usually put its first store in what are sometimes called “Food Deserts,” ie impoverished, minority neighborhoods, but this is a kind of “loss leader” strategy. If one looks at a map of Walmart stores in Houston or Memphis or Atlanta, one will note that most are not in the poorest neighborhoods.
Cotto: Does Walmart actually drive locally owned businesses out of existence? Or, is this an urban legend of sorts?
Dr. Lichtenstein: It is a rural legend more likely. Actually not a legend at all. Thirty years ago when Walmart was still building most stores in small-town America, excellent studies were conducted of competitive conditions in Iowa and other states with many locally-owned stores. These studies found that after about five years, Walmart did put many shoe stores, hardware stores, dress shops, etc, out of business. The real issue then and now was less that of rival stores closing as it was the extent to which Walmart reduced the total number of jobs in retail and the extent to which it degraded wage and benefit levels of all such retail workers, those it employed directly and those who work for rivals.
The answer is this: in large metropolitan areas, the employment numbers come out a wash. For every worker Walmart hires, another loses his or her job at a competitive store. As for wage and benefit levels, studies out of the Labor Center at UC Berkeley make the case that Walmart does in fact lower by a few percentage points the prevailing wage in retail.
Cotto: It has been noted that taxpayers essentially foot the bill for Walmart. This is because its employees receive lean medical benefits, and consequently apply for public assistance. How serious of a problem would you say that this is?
Dr. Lichtenstein: This is true and Walmart has not been shy in urging its employees to apply for what credits and assistance is made available to them by various levels of government. For example in more than a dozen states, Walmart is by far the company with the largest number of employees whose children qualify for the Children’s Health Insurance Program, meaning Walmart pays wages so low that the families of those wage earners qualify for this program. This is also true of the EITC and even food stamps on occasion. Indeed, should Obamacare go into effect as planned, Walmart employees - and the company - will be a huge beneficiary in terms of government health care provision through an enhanced Medicaid or through the subsidized insurance exchanges.
Cotto: Why, generally speaking, does Walmart have such a high employee turnover rate?
Dr. Lichtenstein: Because wages are low at Walmart and hours kept well below 40 for most “associates,” most workers find that they cannot make a career at Walmart, which is just fine with the company which wants to churn the workforce so as to keep average wages low and employee expectations minimal as well.
Cotto: Economics aside, what is the social impact of Walmart on the areas which it expands to?
Dr. Lichtenstein: In many small and medium sized towns Walmart becomes a new social center where teenagers go to hand out and where friends meet friends. Of course, since the store is almost never on the old main street, but is more often on a greenfield site on the outskirts of town, this can devastate the old downtown. So in many Southern and Midwestern towns, one can find the Walmarts booming and the city center deserted. Of course, Walmart is not alone responsible for this, since shopping centers and other big box stores also pull people to the edges of these cities.
In larger metropolitan regions, Walmart is part of the sprawl phenomenon. I might add that it is very hard for local government to resist the coming of a new Walmart, whatever the views of local shopkeepers and citizens. Since so many towns are dependent on sales tax revenue, the fear that Walmart will put its store just over the city line, in another tax jurisdiction, makes city councils anxious to secure the Walmart for themselves.
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