In theory, Walmart works. In theory.

Posting has been slow (well, nonexistent) as Jeannie and I move into our new place in New Haven. For odd reasons, AT&T takes 10 days to set up an Internet line, so I’m squelching off of the faint signal of the Italian eatery down the street.

New Haven life already holds its differences. Two weeks ago I was half time in the East Village, halftime in DC. This week I pulled into a sub-suburban Walmart in my rented pickup truck.

Jeannie had reservations about the Walmart trip. Isn’t this the union-busting, small business-destroying, employee-squeezing, no-health-care-providing terror of the suburban sprawl?

Being a good economist, I immediately thought that the employees have other options if they don’t like Walmart wages. And extending employee health care would effectively give every person a 30 percent wage increase overnight, raising prices for largely low and middle class families.

Those low prices (they are ridiculously low, especially after two years of paying six dollars for a quart of milk in Manhattan) arguably help fight poverty, not increase it. I got a fresh roasted chicken for five bucks. That would feed a family of four or five.

As for the small business owners, I’ve never felt more gouged than walking into a small hardware shop and paying eight dollars for a nail.

All the same, I’m reminded of my favorite Homer Simpson line: “In theory, communism works. In theory.”

Does Walmart work only in theory? Are they exploitative or merely efficient? There must be a huge amount of work on the topic. Any directions from readers? I’m more interested in the facts than the ideology (from either side).

Your answers will determine whether Jeannie lets me enjoy everyday low prices. In my pickup.

21 thoughts on “In theory, Walmart works. In theory.

  1. Enjoy Walmart’s low low prices for those few things they stock which are high quality enough to be worth buying.

    More importantly, to understand New Havne, eat these pizzas in order: Sally’s white clam pizza, anything from Modern, and mashed potato pizza from Bar.

    I miss the food in New Haven tremendously.

  2. There is a fair amount of work out there, though it’s not clear how conclusively anyone’s answered the questions you pose.

    Here’s a paper by Neumark, Zhang, and Ciccarella on Walmart and wages. I think it was presented (at a session on Walmart) at the AEA meetings a couple years back.

    For other (earlier) work, see Emek Basker, who collected some important data on Walmart store openings. Here’s a paper of hers on job creation:

  3. Far more interesting is explaining NH’s economic decline – the place is a dump, its full of crime, racial relations are terrible and the homeless are everywhere.

    That this should be the case in a bastion of liberal intellectuals is rather telling…

    Enjoy Wal Mart, is the best they’ve got…

  4. Have a look at Barbara Ehrenreich’s book _Nickled and Dimed_, where she tries to survive on minimum wage jobs across the US. There is a whole chapter devoted to Walmart there, including a vivid description of how poorly they treat their workers (which is why they can charge so little).

  5. Don’t worry about the workers– while they may not be happy, we can definitely say that this is the best job they can get. Wal-Mart regularly gets far more job applications than it has slots for, and some stores are more selective than ivy league schools.

    Wal-Mart is one of the top philanthropic organizations in the world, and the most philanthropic company.

    I think, far from being ashamed of purchases at wal-mart, we should award it the Nobel peace prize.

  6. anonymous coward said:

    > Far more interesting is explaining NH’s economic decline – the place is a dump, its full of crime, racial relations are terrible and the homeless are everywhere.

    I just want to set the record straight; this person probably last visited New Haven 15 years ago. As a person who moved to Baltimore from NH, let me confirm to you that NH is indeed on the upswing, has very little racial tension, and is quite a nice residential town in many parts. Except for the schools.

    (My brother lives there with his girlfriend, and I just moved out of there 3 years ago. I love New Haven; great city, great food.)

  7. Inequality is a feature of a good system, not a bug, isn’t it? Should every professional athlete or celebrity artist receive the exact same compensation?

    That said, discriminatory practices create unfairness and opportunity constraints, which is something WalMart does NOT do. It takes job applications from people who have not graduated high school (and suffer a 9% unemployment rate). And anyone with $10 (and that’s anyone who files income tax returns or unemployment benefits, and at a minimum, receives negative income taxes) is welcome WalMart. They don’t even check my legal status or whether I am insured! My disabled mom can shop there, because they have a few electric carts for her to ride in.

    Is there a more accessible institution than WalMart? Jeannie? Jeannie?

  8. Oops. Hit enter too soon. Also, given your interest in development, you might want to check out Emek and Van Pham’s paper, Putting a Smiley Face on the Dragon: Wal-Mart as Catalyst to U.S.-China Trade. Abstract reads:

    Retail chains and imports from developing countries have grown sharply over the past 25 years. Wal-Mart’s chain, which currently accounts for 10% of U.S. imports from China, grew 10-fold and its sales 90-fold over this period, while U.S. imports from China increased 30-fold. We relate these trends using a model in which scale economies in retail interact with scale economies in the import process. Combined, these scale economies amplify the effects of technological change and trade liberalization. Falling trade barriers increase imports not only through direct reduction of input costs but also through an expanded chain and higher investment in technology. This mechanism can explain why a surge in U.S. imports followed relatively modest tariff declines and why Wal-Mart abandoned its Buy American campaign in the 1990s. Also consistent with these facts, we show that tariff reductions have a greater effect the more advanced the retailer’s technology. The model has implications for the pace of the product cycle and sheds light on the recent apparent acceleration in foreign outsourcing.

  9. Hi. I like your blog. I also like Walmart. There is everything there. Everything I need. The prices are moderate. The customer service is also perfect. Personally I consider it to be one of the greatest. People on express their dissatisfactions with the company and if you have something in common to say then rush there and do that!!!!!!

  10. Hello. I find your blog very interesting. Since you have mentioned Walmart here I would like to tell that I do not find it that great as the others may. The thing is that the customer service is far from being perfect. I was going to return the purchase in two days after I bought it and the manager told me I could not do that. What is worse he did not give me the serious grounds for that. I was disappointed and went to this great site to post a complaint.

  11. I would be interested in what you find. My observation is that too many people have what appear to be personal axes to grind against Wal-Mart or other big box retailers to be truly rational or circumspect in their analysis. Unfortunately, this often creeps into the work of some academics … you can tell by the frothy language they use to talk about Wal-mart. It is very hard to take someone’s writing seriously when they describe a firm in these sorts of terms without serious evidence to back it up – which I find is often lacking. I say this as a PhD economist who who works in international development and spent more than a decade in the private sector ex ante. I would like to see an honest analysis of the company and its effects (newspapers do not count because they simply regurgitate and magnify the beliefs of the ill informed), one devoid of invective and political posturing based, it seems, largely on perception or general disgust for people who might be described as freshwater/sweetwater economists.