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Wal-Mart Increases Poverty

Paying terrible wages was never likely to be a route to economic growth, so it's hardly surprising that research continues to show that Wal-Mart's growth undermines local economies. The most recent study is in the June 2006 issue of Social Science Quarterly (subscription). The core finding of the study is that, even after controlling for a host of other factors, poverty increased more in communities that added Wal-Marts than those that did not. During the last decade, dependence on the food stamp program nationwide increased by 8 percent, while in counties with Wal-Mart stores the increase was almost twice as large at 15.3 percent. Part of the problem is that Wal-Mart doesn't just pay bad wages; according to the study, "by displacing the local class of entrepreneurs, the Wal-Mart chain also destroys local leadership capacity." The closing of those local stores often leads to the elimination of local wholesalers, transporters, logistics providers, accountants, lawyers and other higher-paid jobs as well. Obviously, if Wal-Mart was replacing local jobs with better-paid alternatives, this displacement of local job markets wouldn't lead to increased poverty. But Wal-Mart's low wage model means that communities are in many cases trading their economic future for a discount goods that many residents can't even afford as poverty increases.