Economic Impact of Wal-Mart

The firm ‘Global Insight’ conducted a study of how the introduction of Wal-Mart into the community of Dallas-Fort Worth, Texas, affected the community. Wal-Mart is a well-liked and well-frequented store that has grown in popularity across the United States. Wal-Mart has a reputation for providing goods and services at low prices as compared to their competitors. The goal of the study was to measure Wal-Mart’s economic impact on the U.S. economy. The period of the Global Insights study was from 1985 to 2004.

Wal-Mart supplied Global Insight with data such as employment information, sales figures, and purchases from suppliers. Wal-Mart commissioned the study and provided Global Insight with whatever data they requested. Global Insight used this data to help determine Wal-Mart’s economic impact on the county, metropolitan, and national levels.

As stated earlier, the Dallas-Fort Worth metropolitan statistical area (MSA) was chosen as the study area. The economy was significantly affected by the introduction and expansion of Wal-Mart. Although Wal-Mart is known for bringing jobs to communities, it is also known for eliminating jobs in communities where they have built stores. This holds true for the Dallas-Fort Worth MSA. Wal-Mart is credited with bringing 6,300 jobs to the Dallas-Fort Worth MSA. The cost of goods sold has dropped by 4%. This, in effect, has given more buying power to the customers. They can choose to buy more at Wal-Mart or spend money at other local businesses. This creates a positive economic impact on the community as a whole. But Wal-Mart also eliminated jobs in the community. Estimates of jobs lost in a typical county with a new Walmart are 40 retail jobs. This is countered by the creation of 137 retail positions. New retail positions minus retail positions lost in the community equals 97 jobs created. That is also an economic plus if it is assumed that the 97 jobs created are equal or higher, paying than the jobs lost. There is no evidence to support that Wal-Mart pays below-market wages.

It is important to note that Wal-Mart has had a significant impact on the U.S. economy. Wal-Mart’s efficiency in production has improved suppliers’ efficiency. This efficiency has raised the purchasing power of its customers. Wal-Mart makes capital investments that also help improve the overall efficiency of suppliers.

The numbers show that Wal-Mart has made a significant impact on the U.S. economy. There has been a 9.5% decline in food prices, a 4.2% decline in commodities prices, and a 3.1% in overall consumer prices since Wal-Mart began expanding in 1985.

Although many would argue that the introduction of a Wal-Mart store in a community has an overall negative effect, statistics show that Wal-Mart has a positive, measurable impact on a community. Wal-Mart stores offer communities lower food prices, lower commodities prices, and higher employment rates. The lower prices offered by Wal-Mart give customers more buying power in their community. Jobs are lost, but more jobs are created. The jobless rate in a community falls with the introduction of a Wal-Mart store.

Global Insight’s report concluded that Wal-Mart’s impact on the economy resulted in between.1 and.2% reduction in inflation and raised the economy’s potential to produce.

Overall, Wal-Mart has had a more positive influence than a negative one in the U.S.

References

Business Planning Solutions. Global Insight Advisory Services Division. The Economic Impact of Wal-Mart. 2005. Web.