The Walmart Effect on the Labor Market

Abstract

The author reviews the literature on how the local economy and businesses areeffected when Walmart builds a store in small towns in the United States. While a store may hire 325 employees unon its initial store opening, 262 of those jobs are actually taken away from other retail businesses in the area. "The Walmart Effect" is actually only a net increase of 63 new jobs. Other issues include the use of tax-payer funded public assistance programs by Wal-Mart employees and their respective families is a commonly cited cost of the stores. Congressman George Miller of the Democratic Staff of the Committee on Education and the Workforce reports that when a Wal-Mart comes to town, the hidden cost to federal taxpayers is $2,1 03 per employee. 4 Other quantifiable costs include the changing demographic of downtowns, and in particular, small-town America. Individual business owners and local competitors seem to be the hardest hit when the retail giant enters the area, as observed from the number and variety of store closings.