New York Times columnist Timothy Egan is perturbed that Congress—and Walmart—are not doing more to help lower- and middle-class Americans. But Walmart’s focus on low costs has disproportionately helped low-income Americans, especially when it comes
to making it more affordable for them to feed their families.
According to a study by MIT professor Jerry Hausman and Ephraim Leibtag of the U.S. Department of Agriculture that has been cited by Jason Furman, chairman of President Obama’s Council of Economic Advisers, the direct benefit in terms of lower prices from superstores such as Walmart is a 20 percent decrease in the cost of buying food eaten at home. Additionally, another five percent indirect benefit comes from competition on low prices between superstores. The presence of other superstores, such as Costco, Super Target and Walmart’s own Sam’s Club, lowers costs and provides consumers with additional options.
The average American consumer unit spent $3,921 on food eaten at home in 2012, the latest data available. Without the benefit of superstores, spending would have been an additional $980 higher, a 25 percent increase. In total, at home food savings added up to $122 billion. These dollars are free to be spent or invested elsewhere, providing further growth to the economy. Proportionally, these savings are not equally distributed across the income scale, with benefits skewed towards those with low incomes.
Those in the lowest fifth of income earners gained the equivalent of six percent of their pre-tax income from these savings on food. As food expenses are 35 percent of the pre-tax incomes of the lowest fifth of income earners, savings on groceries and restaurant bills are a welcome relief. In contrast, savings for those in the top fifth of the income distribution were less than one percent of their average pre-tax income.
In a humorous response to Egan’s article, Walmart pointed out that it has paid over $7 billion in taxes each of the last 6 fiscal years. The average hourly wage it pays to full-timers is $12.91—78 percent above the federal minimum wage. Walmart also promoted 170,000 associates last year, and current CEO Doug McMillion got his start at the company unloading trucks.
Millions of Americans choose to shop at Walmart, and millions more want to work for the retailer. In December, Walmart opened its first two stores in Washington, D.C. For the 800 new jobs the stores created, 23,000 people applied—an acceptance rate of less than 3.5 percent. For the sake of comparison, Ivy League schools such as Princeton (7.9 percent), Yale (6.8 percent), and Harvard (5.9 percent) have acceptance rates about twice as high.
The number of applications for the D.C. Walmarts was not unique. Last year, 5 million Americans applied for 500,000 Walmart jobs, an acceptance rate of 10 percent—Ivy League status.
Those who apply to work for Walmart include everyone from young people looking for their first professional experience, to retired individuals wishing to keep busy, to parents looking for part-time work, to other motivated individuals looking for career opportunities.
Successful companies such as Walmart should not be vilified by the Gray Lady. Not only do they create jobs, they also offer consumers low prices on everyday goods. Not everyone can afford to shop at Whole Foods or drive a Prius, yet elitist animosity towards Walmart continues.
This animosity does not come from a care for poor Americans. People need jobs, and even entry-level jobs that pay above the minimum wage are appealing to many for a variety of reasons. Low food prices are not only desirable; they are essential for many Americans. While railing against Walmart out of personal disdain is protected by the First Amendment, enacting policies based on elitist misconceptions is economically destructive and lowers the effective take-home pay of many Americans.
Jared Meyer is a policy analyst at Economics21 at the Manhattan Institute for Policy Research. You can follow him on Twitter here.
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