New Report: Wal-Mart Destroys Local Economy

Public Advocate Bill de Blasio and the Hunter College Center for Community Planning and Development today released “Wal-Mart’s Economic Footprint” a comprehensive review of over fifty studies on Wal-Mart’s economic impact across the country.

The joint review of key research papers from the past seven years indicates that the opening of a Wal-Mart in New York City would likely eliminate more jobs than it creates, result in the loss of independently owned small businesses, and create an increased burden on taxpayers.

“The history of the last decade tells us that Wal-Mart stands to be our City’s Trojan Horse,” said Public Advocate Bill de Blasio. “Wal-Mart’s record of driving small businesses out of town and paying below-poverty line wages to its employees will only exacerbate the current decline of New York City’s middle class. We must do everything we can to spur job creation in New York City, but that does not include opening our doors to a proven job-killer.”

“Studies from all across the country show that Wal-Mart’s arrival does not bring the increase in jobs and retail spending that the company promises,” said Brian Paul, Center Fellow and Masters of Urban Planning Candidate at Hunter College. “Instead, Wal-Mart captures spending from existing stores, driving them out of business and replacing existing retail jobs with lower-paying Wal-Mart jobs. This is not only about one store in East New York. Wal-Mart is planning a massive expansion into urban markets. Allowing one Wal-Mart to enter New York may open the floodgates and devastate small businesses in neighborhood retail districts throughout the city.”

The findings from this review include the following:

1.    Wal-Mart’s Economic Impacts: Net Loss of Jobs, Fewer Small Businesses

• Wal-Mart store openings kill three local jobs for every two they create by reducing retail employment by an average of 2.7 percent in every county they enter.

• Wal-Mart’s entry into a new market does not increase overall retail activity or employment opportunities. Research from Chicago shows retail employment did not increase in Wal-Mart’s zip code, and fell significantly in those adjacent.

• Wal-Mart’s entry into a new market has a strongly negative effect on existing retailers. Supermarkets and discount variety stores are the most adversely effected sectors, suffering sales declines of 10 to 40% after Wal-Mart moves in.
• Stores near a new Wal-Mart are at increased risk of going out of business. After a single Wal-Mart opened in Chicago in September 2006, 82 of the 306 small businesses in the surrounding neighborhood had gone out of business by March 2008.
• The value of Wal-Mart to the economy will likely be less than the value of the jobs and businesses it replaces. A study looking at the estimating the future impact of Wal-Mart on the grocery industry in California found that, “the full economic impact of those lost wages and benefits throughout southern California could approach $2.8 billion per year.”
• Chain stores, like Wal-Mart send most of their revenues out of the community, while local businesses keep more consumer dollars in local economy: for every $100 spent in locally owned businesses, $68 stayed in the local economy while chain stores only left $43 to re-circulate locally.

2.    Wal-Mart’s Costs to Taxpayers

• Wal-Mart has thousands of associates who qualify for Medicaid and other publicly subsidized care, leaving taxpayers to foot the bill. For instance in Ohio Wal-Mart has more associates and associate dependents on Medicaid than any other employer, costing taxpayers $44.8 million in 2009.

• According to estimates, Wal-Mart likely avoided paying $245 million in taxes 2008 by paying rent to itself and then deducting that rent from its taxable income.

• Wal-Mart has admitted a failure to pay $2.95 billion in taxes for fiscal year 2009.

3.    Wal-Mart’s low paying jobs contribute to the decline of the Middle Class

• Median household income declined by 1.8% nationally and 4.1% in New York City in 2009. This decline will be exacerbated by low paying Wal-Mart jobs.

• Wal-Mart’s average annual pay of $20,774 is below the Federal Poverty Level for a family of four.

• A Wal-Mart spokesperson publicly acknowledged in 2004 that, “More than two thirds of our people… are not trying to support a family. That’s who our jobs are designed for.”

• Wal-Mart’s 2010 health care offerings have a high annual deductible of $4,400 which means a family would have to spend $5,102 of their own money on health care before Wal-Mart’s insurance pays anything. Based on the average salary of a Wal-Mart employee this payment represents almost 25% of their annual income.

The full report is available at: http://advocate.nyc.gov/files/Walmart.pdf