Richard Vedder, economics professor at Ohio University and visiting scholar at the American Enterprise Institute, detailed his research about Wal-Mart during a recent speech to the John Locke Foundation in Raleigh. He also discussed the book, The Wal-Mart Revolution: How Big Box Stores Benefit Consumers, Workers, and the Economy, with Mitch Kokai for Carolina Journal Radio. (Click here to find a station near you or to learn about the weekly CJ Radio podcast.)
Kokai: Why is there such a fuss about Wal-Mart?
Vedder: Well, there [are] a couple of things. One, of course, it is by far the largest retail store. It is several times larger than its nearest competitors in the United States, say Target or Best Buy or Home Depot even. And you could add all of those — the sales of all those companies up, and they are still less than that of Wal-Mart, so it’s conspicuous. The second thing is Wal-Mart has — employees have always felt it was a nice place to work, and they’ve had — unions have had a hard time organizing the company. And because of that, they have mounted attacks on Wal-Mart—others have joined in, to be sure—and have made this a target in terms of criticism.
Kokai: Most of us have probably heard some of the criticism about Wal-Mart. Your book, by the title, we can tell, says that the criticism is largely unwarranted.
Vedder: That’s right. Incidentally, I didn’t start out necessarily feeling that. I was skeptical from the beginning that the criticism was probably overstated, but until I looked at the facts and the evidence at some length, I wasn’t certain. But after investigating the company for the better part of a year, I concluded that the criticism was almost entirely unwarranted. To be sure, a company as large as Wal-Mart, with 1 million-and-a-half employees and thousands of stores, there will be an occasional practice that occurs that is inappropriate or wrong, maybe even illegal in some cases. But on the whole, it’s a company that is — has done more good than bad for the American people. In fact, it’s done a lot of good for the American people. And it is a company that we should be commending, not necessarily praising to the skies, but it certainly doesn’t warrant the criticism that it’s receiving.
Kokai: The subtitle of the book tells us that big box stores, such as Wal-Mart, benefit consumers, workers, and the economy. So, let’s go ahead and hit some of those. First of all, I would imagine that folks, when they think about how it helps consumers, look first at the big smiley face and the low prices. Is that the main thing there?
Vedder: Yeah, that’s the main thing. And you say, well, what’s a nickel here and a dime there on a $5 item that is maybe a quarter less at Wal-Mart than it would be at a competing store? But those nickels and dimes and quarters add up if there are literally, as there are, billions of transactions every year that occur at Wal-Mart. So it’s hard to say with precision, but most people would estimate those gains to consumers to be worth tens of billions of dollars a year. Some people said as much as $1,000 or $2,000 per American household. That may be a little on the high side, but the gains are real. I often say that Wal-Mart is the most effective anti-poverty device in America today, better than any other government bureaucracy or any other institution, a church even, in our society.
Kokai: How is Wal-Mart good for workers?
Vedder: Well, this is perhaps the most controversial area of the book because this is the area where Wal-Mart has probably been criticized the most. It is alleged that Wal-Mart pays relatively low wages, that they do not provide health benefits, care benefits for their workers, and so on. Those criticisms, by the way, are largely unfounded, in my opinion. Wal-Mart workers make actually pretty average or above average wages for people with the kind of skill levels and experience levels that most Wal-Mart workers [have]. Wal-Mart increases employment. I think the evidence is pretty clear. There have been a number of scholarly studies that show that when Wal-Mart comes to town, there are more jobs after they come to town than before they come to town. Workers are making more income after they come to town than before they come to town. Unemployment rates are a little bit lower, not a lot lower, but a little bit lower. So Wal-Mart has, in general, widened job opportunities, including for a lot of people, such as older Americans, for those fellows at the — and gals — at the door who greet you when you come in. Many of them would simply not be working at all. So I think Wal-Mart has a positive effect on workers.
Kokai: One of the criticisms I’ve heard about Wal-Mart that we haven’t touched on yet is the impact on other stores, other businesses. They are in small communities. You hear that the Mom-and-Pop store has to shut down because of Wal-Mart. But you argue that Wal-Mart is good for the entire economy as well. Why is that true?
Vedder: Well, it is true that any time you have change in a society, there are some possibilities — it is possible that you’ll have winners and losers. When the automobile came in, there were a lot of manufacturers of buggies who lost out and lost income and employment and so on. And that’s true here as well. And there is what Joseph Schumpeter once called some creative destruction at work. And so there are some firms, some small Mom-and-Pop stores that go out of business on occasion. But it isn’t that Wal-Mart put them out of business, it’s the consumers that put them out of business. It’s the consumers who voted with their feet and went to Wal-Mart and shopped. And when you look at things in the totality, there are more workers working today than before.