Global Insight found that the reduction in the price level, with Wal-Mart present in the economy, translated into savings for consumer in the form of $263 billion for the period studied. As any good economist, Global Insight had to evaluate how these savings were created. They also looked at the employment structure of Wal-Mart. Samples of employees’ wage data indicated that Wal-Mart does not pay lower wages than what the retail industry pays when measured against the Bureau of Labor Statistics data, but pays the market wage.
Furthermore, the company is more capital intensive than its competitors; some of their savings is derived from the corporation’s investment in capital relating to increasing their distribution and inventory management capacities. Wal-Mart has impacted the national market when measured in this type of an economic scale. With the success of Wal-Mart and its higher output levels among the economy, increases the demand for labor and creating more jobs that would not have even been there without the chain.
All of this also affects the unemployment rate, which Global Insight attributed a percentage lower because of Wal-Mart. In a more recent study conducted by the Economic Policy Institute (EPI) in 2006, the group focuses on Wal-Mart’s employee wages in relation to its profits and analyses the macro methods that the GI study employed. The study determined that the chain is able to offer higher salaries to its staff members and keep profits half a percentage higher than its primary competitors. The EPI report also sets out to debunk the Global Insight study forecast that U.
S. consumers have saved $263 billion because of growth and innovation by Wal-Mart. The EPI Wal-Mart study explores research that claims the GI report is incorrect and hampered with inaccuracies. One such debate is that Global Insight geared its outcomes according to the Consumer Price Index based on how families normally shell out their earnings. EPI says that 60 percent of the items included in the Consumer Price Index category include spending on things such as families’ cost of living expenses which cannot be purchased at Wal-Mart.
In addition as cited in the EPI study: “Global Insights findings of substantial reductions in grocery prices were highly questionable and likely driven by a combination of specification and selection biases (Wrestling with Wal-Mart, 2006). ” EPI’s breakdown of Wal-Mart’s earnings reveals that the retailer might restructure its wage distribution. The study shows that Wal-Mart could give its staff members a larger percentage of wages and benefits without hurting its pricing strategy.
According to the analysis, they could do this if the store agreed to the same profit margins as some of its competitors (such as Costco) or accepted the same profit margins that it had in the past. “Wal-Mart would seem to have room to raise worker pay without raising prices inordinately (Wrestling With Wal-Mart, 2006). ”
Global Insight, Inc. , The Economic Impact of Wal-Mart, 2005 Bernstein Jared, Bivens Josh, L. , Dube Arindrajit, Economic Policy Institute, Wrestling With Wal-Mart, 2006 <http://www. epi. org/workingpapers/wp276. pdf>