WAGES AND BENEFITS These studies show that locally owned businesses are linked to higher income growth and lower levels of poverty, while big-box retailers, particularly Walmart, depresses wages and benefits for retail employees. Studies in this section also quantify the costs of these big companies’ low wages to state healthcare programs and other forms of public assistance. In addition to the following studies, see this resource from Good Jobs First detailing states that have disclosed how much they spend providing health insurance for employees of Walmart, Home Depot, Target, and other big-box retailers.
“Locally owned: Do local business ownership and size matter for local economic well-being?” [PDF]. Anil Rupasingha, Federal Reserve Bank of Atlanta, Aug. 2013.
In this analysis, an economist with the Federal Reserve Bank of Atlanta examines the relationship between locally owned businesses and economic performance, and finds that counties with higher percentages of employment in locally based, small businesses have stronger local economies. Using data on every U.S. county in the period between 2000 and 2008, Rupasingha finds that local entrepreneurship has a positive effect on county per capita income growth and employment growth and a negative effect on poverty rates. He also finds that this effect of local ownership is more pronounced in the case of businesses that are also small, defined as those with fewer than 100 employees. Rupasingha’s dataset also reveals that locally owned, or “resident,” businesses employ a far greater number of people than non-resident establishments across every size category of business.
“Employers Who Had Fifty or More Employees Using MassHealth, Commonwealth Care, or the Health Safety Net in State Fiscal Year 2010” [PDF]. Commonwealth of Massachusetts, February 2013.
This report from the state of Massachusetts discloses the 50 companies that have the most employees enrolled in the state’s Medicaid and other publicly funded health insurance programs for low-income people. About half of the 50 companies identified are retail and restaurant chains. Walmart ranks third overall, with 4,327 employees, approximately one-fifth of its Massachusetts workforce, relying on state health care assistance at a cost to taxpayers of $14.6 million per year. Target ranks fourth with 2,610 employees enrolled, approximately 36 percent of its Massachusetts workforce, at a cost of $8.3 million per year. Other retailers on the list include CVS, Shaw’s, Home Depot, May Department Stores, Sears, Kohl’s, Walgreen, Lowe’s, Best Buy, and Whole Foods.
Also see similar reports released in 2013 from Wisconsin and Missouri [PDF].
“Walmart’s Low Wages and Their Effect on Taxpayers and Economic Growth” [PDF]. Democratic Staff, U.S. House Committee on Education and the Workforce, May 2013.
Extrapolating from data released by the state of Wisconsin on the number of Walmart employees and their dependents enrolled in the state’s Medicaid program, this analysis estimates that Walmart employees require an average of about $3,000 per year in public assistance, such as Medicaid, food stamps, and housing assistance. That works out to a taxpayer cost of about $4.2 billion per year for all of Walmart’s U.S. stores. Covering that cost would require Walmart to forgo about one-quarter of its profits or raise prices at its U.S. stores by 1-2 percent.
“Does Local Firm Ownership Matter?” Stephan Goetz and David Fleming, Economic Development Quarterly, April 2011.
Goetz and Fleming analyze 2,953 counties, including both rural and urban places, and find that, after controlling for other factors that influence growth, those with a larger density of small, locally owned businesses experienced greater per capita income growth between 2000 and 2007. The presence of large, non-local businesses, meanwhile, had a negative effect on incomes.
“A Downward Push: The Impact of Walmart Stores on Retail Wages and Benefits” [PDF]. Arindrajit Dube, T. William Lester, and Barry Eidlin, UC Berkeley Center for Labor Research and Education, Dec. 2007.
This study analyzes the impact of the opening of Walmart stores on the earnings of retail workers. (It uses a similar technique to account for possible biases in Walmart’s store location decisions as the study described in the “Jobs” section above, “The Effects of Walmart on Local Labor Markets.”) This study focuses on stores that opened between 1992 and 2000 and concludes, “Opening a single Walmart store lowers the average retail wage in the surrounding county between 0.5 and 0.9 percent.” Not only did Walmart lower average wage rates, but “every new Walmart in a county reduced the combined or aggregate earnings of retail workers by around 1.5 percent.” Because this number is higher than the reduction in average wages, it indicates that Walmart not only lowered pay rates, but also reduced the total number of retail jobs. The study goes on to look at the cumulative impact of Walmart store openings on retail earnings at the state level and nationwide. “At the national level, our study concludes that in 2000, total earnings of retail workers nationwide were reduced by $4.5 billion due to Walmart’s presence,” the researchers find. Most of these losses were concentrated in metropolitan areas. Although Walmart is often associated with rural areas, three-quarters of the stores it built in the 1990s were in metropolitan counties.
“Walmart and County-Wide Poverty.” Stephan Goetz and Hema Swaminathan, Social Science Quarterly, June 2006.
The presence of a Walmart store hinders a community’s ability to move families out of poverty, according to this study. After controlling for other factors that influence poverty rates, the study found that U.S. counties that had more Walmart stores in 1987 had a higher poverty rate in 1999 than did counties that started the period with fewer or no Walmart stores. The study also found that counties that added Walmart stores between 1987 and 1998 experienced higher poverty rates and greater usage of food stamps than counties where Walmart did not build, all other things being equal. Although the study does not attempt to draw a conclusion about why Walmart expands poverty, the study’s authors suggest several possible factors, including a loss of social capital that occurs when locally owned businesses close and the shift from comparatively better paying jobs at independent retailers to lower paying jobs at Walmart.
“Hidden Cost of Walmart Jobs” [PDF]. UC Berkeley’s Institute for Industrial Relations, August 2004.
California taxpayers are spending $86 million a year providing healthcare and other public assistance to the state’s 44,000 Walmart employees, according to this study. The average Walmart worker requires $730 in taxpayer-funded healthcare and $1,222 in other forms of assistance, such as food stamps and subsidized housing. Even compared to other retailers, Walmart imposes an especially large burden on taxpayers. Walmart workers earn 31 percent less than the average for workers at large retail companies and require 39 percent more in public assistance. The study estimates that if competing supermarkets and other large retailers adopt Walmart’s wage and benefit levels, it will cost California’s taxpayers an additional $410 million a year in public assistance.