What Impact Does Walmart Have On The Economy Essay

Introduction
The juggernaut retailer Walmart has been in the limelight many times for its dominance in the retail market. While critics of the firm are quick to attack the business for its deep discount prices and market pressure, Walmart continues to be a driving force for the American economy . The question that opponents and proponents often revert back to is what kind of impact is Walmart having upon the economy of the United States. Opponents often attack Walmart about the job loss that has arisen through its lifetime, while propoents of the retailer focus on the stimulating effect that Walmart has upon the nation. Though there are arguments to be made from both sides, this paper will assert that Walmart provides the nation with economic
benefits that trickle beyond the scope of the business and the consumer.
Deep Discounts and Volume Walmart’s business model is what has helped generate its seemingly endless success.
This business model was redefined by Sam Walton during his initial Walmart launch in 1962, in which Walton would reduce his prices significantly and buy more goods in high volume . This enabled Walton to be more competitive in the retail market, and helped fuel the success of Walmart. When China and the United States struck a trade agreement in the late 1990s, Walmart was able to increase its margin’s further by buying lower costs good. As Chinese suppliers became the main source of goods for Walmart, American suppliers suffered from the transitions. Many of the current critiques of Walmart are targeted at the jobs lost to Chinese competition. Critics states that the losses have impacted the United States economy and manufacturing industry; as well say implying that Walmart has favored its profits over keeping American’s in work . The following analysis will demonstrate how Walmart has actually benefited the economy; and how the losses that have occurred have been offset by the gains Walmart has given to the
nation.
Walmart’s Claims Before focusing on the revenue and profits made by Walmart, the retailer defends its practices with an statement about how much it invests into the nation. Walmart’s website, Walmart.com, makes several assertions about the many different fundraiser and charities that it contributes to. Walmart also counters any arguments about job loss with the amount it contributes towards future entrepreneurship. In terms of the economic growth and investment in human labor, Walmart chooses to help women gain job-training, experience, and opportunities through the Women’s Economic Empowerment program. This program has benefited 540,000 women, and this type of training enables women to advance in their careers and build their growth . It is in this first program where one can begin to see the future impact of Walmart’s investment of others. These women, beyond just getting job training, have the potential to be the next “Sam Walton” of society. The cost of the 100 million dollars is a small price when it comes to the possible future profits and opportunities. If Walmart is able to generate the same amount income from another source due to investment of that program, then it will have done enough to break even. Unfortunately, one cannot measure the returns to this program at this time, but the future possibilities can be endless. This is just one of many charities and funds that Walmart regularly creates.
Jobs Created and Jobs Loss
Many debates that arise about Walmart relate to the impact that the retailer has had on jobs of Americans. With the open trade agreement that President Clinton set with China, Walmart was ago to foreign manufactures and purchase mass volumes of product for cheaper prices than American retailers were selling . This transition enabled Walmart to cut costs and raise margins of products, however, it came with a price to domestic suppliers. Suppliers were forced to explore the business frontiers of China, or try to make it without Walmart as their biggest customer. The biggest critics of Walmart state that the losses of jobs in Walmart outweigh the benefit to consumers. Yet, further research and analysis constructs a much different picture. An independent source cites that about 133,000 jobs have been lost to Chinese competition, but Walmart employs over 1.4 million people in the United States alone . That accounts for over 1% of the population of America . Though a detailed analysis of all wages and revenues loss are not given, profits and wages given by those 1 million employees are expected to exceed losses. This alone quiets the claim that the losses outweigh the many benefits that come alone from the employment of many of the population of the United States. This can be viewed with the Labor model . Walmart has increased labor demand, shifting it to the right, and the labor supply has been able to remain constant. As more and more stores are opened across the nation, labor demand will continue to shift right. While this pushes wages down, employment is increased. The argument of low wages will be addressed later in the paper.
Consumer Spending A main component of determining the strength of an economy is a county’s Gross Domestic Product, or GDP.
GDP is constructed of consumer spending, investment of capital by business, government spending, and net exports. The largest component of GDP is consumer spending. This is where Walmart contributes heavily to the United States GDP. Walmart brought in over 421 million dollars alone in 2010, and if that revenue was a GDP in itself, Walmart would have the 23rd highest GDP in the world . The strength of Walmart’s market comes from over 100 million consumers who spend upwards of $4000 a year in Walmart alone. This alone offsets the other argument that Walmart decrease the net exports of the country. True, Walmart’s exports have increase to 27 billion dollars annually, but the revenue that Walmart generates easily pushes GDP forward instead becoming a
drag.
Low Wages vs. Employment Looking again at the Labor Model, one can see how the increasing the employment decreases wages. Walmart been has been under fire by the media for its employees low wages when compared to the huge profits it receives . The majority of the workers were making less than $10 an hour in 2015. This made Walmart a target for unions as workers demanded higher wages. To accommodate these negative spotlights, Walmart decided to increase it’s full-time wage to $13.35 an hour. It would be expected that most firms in this situation would have to lower employment or cut costs in order to maintain profits, but it is in this that Walmart is unique. Walmart is ever expanding, and referencing the earlier Labor model, the demand for workers in constantly being shifted to the right. Not only is does this mean that more employment opportunities are being presented, but higher wages company wide lead to an increase in the standard of living. A higher standard of living enables workers to have a higher disposable income. Consumers will spend more and their standard of living increases, and this pushes overall GDP forward. So on top of the revenues that Walmart is contributing to GDP, the increased wages has permitted its employees further stimulate the economy as well.
Conclusion
There are many benefits to having a strong retailer such as Walmart in an economy. However, Walmart is more than just a strong retailer; Walmart is the main retailer. Walmart’s business structure and distributions of revenue has enabled the firm to see success and progression beyond that of any other retailer previous. Though there are arguments for the losses of jobs and wages that have been the result of the firm’s success, one must remember that there will always be winners and losers in capitalism. In the case of Walmart, the retailer’s gains have benefited the economy in more ways than just employment, but also with investment in human entrepreneurship and it’s worker. This has resulted in the United State’s GDP, the most recognized factor of a nation’s economic well-being, increasing. The strength of Walmart results in the strength and success of the American economy.