Is Wal-Mart Good for the American Working Class?

Is Wal-Mart Good for the American Working Class? – Class war as a solution. By Barbara Ehrenreich and Jason Furman

The short answer is yes – it is largely the “working class” that benefit from Wal-Mart’s low prices.

A range of studies has found that Wal-Mart’s prices are 8 percent to 39 percent below the prices of its competitors. The single most careful economic study ($5), co-authored by the well-respected MIT economist Jerry Hausman, found that grocery sales by Wal-Mart and other big-box stores made consumers better off to the tune of 25 percent of food consumption. That doesn’t mean much for those of us in the top fifth of the income distribution—we spend only about 3.5 percent of our income on food at home and, at least in my case, most of that shopping is done at high-priced supermarkets like Whole Foods. But that’s a huge savings for households in the bottom quintile, which, on average, spend 26 percent of their income on food…

I don’t think the supply-chain revolution that was largely led by Wal-Mart is widely understood. A big part of US productivity gains since 1990 are a consequence of this revolution:

…Many economists didn’t expect the service sector to contribute much to productivity. Many non-economists still have a hard time believing it has. But Harvard economist Ken Rogoff has the numbers, and they are mind boggling:

[T]ogether with a few sister “big box” stores (Target, Best Buy, and Home Depot), Wal-Mart accounts for roughly 50% of America’s much vaunted productivity growth edge over Europe during the last decade. Fifty percent! Similar advances in wholesaling supply chains account for another 25%! The notion that Americans have gotten better at everything while other rich countries have stood still is thus wildly misleading. The US productivity miracle and the emergence of Wal-Mart-style retailing are virtually synonymous.