JOBS These studies show that locally owned businesses employ more people per unit of sales, and retain more employees during economic downturns, while big-box retailers decrease the number of retail jobs in a region.
“The Contribution of Large and Small Employers to Job Creation in Times of High and Low Unemployment” [PDF]. Giuseppe Moscarini and Fabien Postel-Vinay, American Economic Review, October 2012.
This study, by economists at Yale University and University of Bristol, finds that in times of high unemployment, small businesses both retain and create more jobs than large firms do. During the recession of March 2008 to March 2009, for instance, the employment growth rate of large employers fell 1.65 percent more than the growth rate of small employers, compared with the previous year. In every other recession and recovery in the study’s sample, large firms took years to recover relative to small firms. The authors use data on U.S. businesses spanning 1979-2009, and find that this correlation remains consistent across a variety of measures, including age of the firm, excluding entering and exiting firms, and within broad industries. They also examine Denmark, France, the U.K, and Canada, and find that their conclusion holds in other countries of different sizes. “Large employers on net destroy proportionally more jobs relative to small employers when unemployment is above trend, late in and right after a typical recession” the authors write. “Overall, this picture corroborates in part the common wisdom that small businesses are the engine of job creation: small firms appear to create more jobs as a fraction of their employment only when unemployment is high (which is, arguably, when jobs are most needed).”
“The Effects of Walmart on Local Labor Markets” [PDF]. David Neumark (University of California-Irvine), Junfu Zhang (Clark University), and Stephen Ciccarella (Cornell University), Journal of Urban Economics, March 2008.
This study presents the most sophisticated analysis to date of Walmart’s impact on retail employment and wages. Analyzing national data, the study found that the opening of a Walmart store reduces county-level retail employment by 150 jobs. Because Walmart stores employ an average of 360 workers, this suggests that for every new retail job created by Walmart, 1.4 jobs are lost as existing businesses downsize or close. The study also found that the arrival of a Walmart store reduces total county-wide retail payroll by an average of about $1.2 million. This study improves substantially on previous studies by convincingly accounting for the endogeneity of the location and timing of Walmart’s entry into a particular local market. That is, Walmart presumably does not locate stores randomly. When expanding into a particular region, it may, for example, opt to build in towns experiencing greater job growth. Unless this location selection bias is accounted for, one might compare job growth in towns that gained Walmart stores versus those that did not and erroneously conclude that Walmart caused an expansion in employment. The authors of this study have devised a persuasive method of accounting for this bias. They also argue that the method developed by Basker (see next item below) to account for this bias is flawed and therefore her conclusion that Walmart has a small positive impact on retail employment is not reliable.
“Job Creation or Destruction? Labor-Market Effects of Walmart Expansion.” Emek Basker (University of Missouri), Review of Economics & Statistics, Feb. 2005.
Often cited and typically misrepresented by Walmart supporters, this study examines the impact of the arrival of a Walmart store on retail and wholesale employment. It looks at 1,749 counties that added a Walmart between 1977 and 1998. It finds that Walmart’s arrival boosts retail employment by 100 jobs in the first year—far less than the 200-400 jobs the company says its stores create, because its arrival causes existing retailers to downsize and lay-off employees. Over the next four years, there is a loss of 40-60 additional retail jobs as more competing retailers downsize and close. The study also finds that Walmart’s arrival leads to a decline of approximately 20 local wholesale jobs in the first five years, and an additional 10 wholesale jobs over the long run (six or more years after Walmart’s arrival). (Walmart handles its own distribution and does not rely on wholesalers). This works out to a net gain of just 10-30 retail and wholesale jobs, and the study does not examine whether these jobs are part-time or whether they pay more or less than the jobs eliminated by Walmart. The study also found that, within five years of Walmart’s arrival, the counties had lost an average of four small retail businesses, one mid-sized store, and one large store. It does not estimate declines in revenue to retailers that survive. Basker looked at the effect of Walmart on retail employment in neighboring communities, but found that the confidence intervals were too large (meaning the results showed wide variation) to draw any conclusion about Walmart’s impact. (Her initial working paper, published in 2002, reported an average decline of 30 retail jobs in surrounding communities, but, after correcting an error, she determined the confidence intervals were too large to produce a precise result.)