February 01, 2005

Purple Ocean of Deception

Via Injoke, we find PurpleOcean.org's Wal-Mart fact checker.

I hate deception; this list made me angry. Very, very angry.

Like almost all anti-WM factoid lists I've seen, this one doesn't really care to give you the whole truth; it provides carefully selected information in a misleading manner. Their points might very well be valid in themselves, but devoid of context and discussion, they are worthless.

Here's a point by point analysis, PO's text in italics, my reply in blue.

Low Prices — At What Cost?

Doesn't this seem to imply that low prices are the only benefit of WM? I guess if you don't live in a rural area that had NO stores nearby before Wal-Mart opened up, this would be a simple deduction. And I guess if you believe that nobody ever manages to make it up the corporate ladder, that would be a good assumption.

Wal-Mart sales clerks made an average of $8.23 an hour—or $13,861 a year—in 2001. That's nearly $800 below the federal poverty line for a family of three. (Source: Business Week)

Ah, yes, the Bianco and Zellner article. I had to email them to find out what the hell was going on, since their statement conflicted with other published data; Wendy Zellner responded very politely. B and Z were right. If you read the article carefully, you'll find that, indeed, Wal-Mart sales clerks made $8.23 an hour in 2001.

But that figure includes part-timers and excludes all other jobs--like cashiers and department heads! They are the lowest-paid workers at WM. If you look at all full-time workers who've worked at WM one year -- the one's that are likely to be supporting families and will be measured against federal poverty lines -- the average wage in the largest jobs was $9.26 an hour in 2001 and average annual earnings of $17.5K for women and $18.6K for men.

Folks, what is so hard about being honest with the data? Btw, the figures are from the statistical consultant (Drogin) hired by the sex discrimination class lawyers.

In Georgia, Wal-Mart employees are six times more likely to rely on state-provided health care for their children than are employees of any other large company. (Source: Atlanta Journal-Constitution)

Probably true, but don't most other "large companies" require labor that is much more trained and experienced. So what's the point here, exactly?

Reliance on public assistance programs in California by Wal-Mart workers costs the state's taxpayers an estimated $86 million annually. (Source: UC Berkeley Study)

Arguably true, but definitely misleading if you don't compare this $86 million to what the taxpayers would have paid supporting workers if Wal-Mart did not exist.

In the first decade after Wal-Mart arrived in Iowa, the state lost 555 grocery stores, 298 hardware stores, 293 building supply stores, 161 variety stores, 158 women's apparel stores, 153 shoe stores, 116 drugstores, and 111 men's and boys' apparel stores. (Source: Iowa State University Study)

Wal-Mart drives competitors out of business. YAWN. My family owned small mens' clothing stores that didn't fare well against Today's Man and the like. Other companies doing better than you. That's tough.

Every year Wal-Mart purchases $15 billion worth of products from China. (Source: Washington Post)

And it will purchase more than a billion from India. Here's a shocking opinion: international trade makes us better off, not worse off. But it's not just Wal-Mart buying from China; WM's consumers purchase those $15 billion worth of products from China. This fact is not a "cost". You might object that WM has caused the decline of American manufacturing. It has certainly speeded up the process of industrialization in China and manufacturing job loss in the US, but protecting these American manufacturing jobs by restricting imports from China will cost far more than the jobs are worth to the U.S. as a whole. Individual workers are definitely hurt in the short run, but consumers are immediately better off. Manufacturing jobs are in decline; we cannot, and indeed, should not stop this process by artificial controls on production or consumption.

Today Wal-Mart uses over 3,000 Chinese factories to produce its goods—almost as many factories as it has stores in the U.S. (3,600). (Source: L.A. Times)

People want Wal-Mart to change this... how? Would people be happier if these factories were in Chile or Brazil or Russia? No, people want them in the U.S., which is NOT GOING TO HAPPEN without severe restrictions that would drastically harm the Chinese economy -- and ours. Listing the number of factories seems to imply some form of major tradeoff between an American factory and a Chinese factory, and an American job with a Chinese job. , which isn't so. These factories won't be coming back.

Anyway, carping about owning factories in foreign countries seems petty. Should Toyota stop assembling cars in the U.S. to help the Japanese?

All else being equal, U.S. counties where new Wal-Mart stores were built between 1987 and 1998 experienced higher poverty rates than other U.S. counties. (Source: Pennsylvania State University Study)

This is probably the worst item for a list about the cost of low prices, since the study did not include a regional effect for Wal-Mart's low prices!!! In the opinion of price index researchers, this Supercenter effect is considerable; and in my opinion, this could really adjust poverty rates downward in WM areas. Much more research needs to be done before any of this is a "fact". Also, what about the past 7 years?

Posted by Kevin on February, 1 2005 at 03:23 PM | TrackBack

Comments & Trackbacks
The Eclectic Econoclast wrote:

Among all those stores that closed in Iowa, how many would have closed had Walmart not been there? Would other stores (e.g. Sears? K-Mart?) have driven them out of business anyway? What's the counter-factual?
As an economist from Iowa State, I can only presume that study was done by someone from the socionomology department.

-- February 2, 2005 07:34 PM

spenwah wrote:

Excellent work! A near-comprehensive rebuttal to the points that I hear most regularly in arguments with the anti-WM crowd. It helps also that your site is one of the most "unbiased" I know of. (Objectivity, to them, means simply "showing both sides," as if an unbiased argument can never be made.) I refer others to this site often, and will now definitely start referring them to this particular post as well.

-- February 4, 2005 06:40 PM

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