Walmart and Jobs: Stop

Salon has an article today about Walmart. At one point, it drops into the very rote and boring line that Walmart kills 1.4 retail jobs for every 1 retail job it creates. This line comes from a Neumark et al study called “The Effects of Wal-Mart on Local Labor Markets.”

Technically, this is not an incorrect line; it is just misleading. People who see the statistic will likely conclude from it that opening a Walmart leads to less people being employed. The statistic and the study it comes from does not say that at all.

First, it should be emphasized that the study focuses on retail jobs. Obviously Walmart reduces the number of retail jobs nearby. It basically replaces other retail stores, and is run more efficiently along labor lines: less employed workers per dollar of sales. So shifting a marginal unit of retail consumption from a non-Walmart store to a Walmart store should mean less labor is used to deliver that unit of retail consumption. But this does not mean that there are less overall jobs, just less retail jobs. That is, the local sectoral composition of the labor force changes.

Second, and more importantly, this study only focuses on the short-term effects within the local economy. Were you to read the study beyond the abstract, you’d see that it actually addresses this:

The lower retail employment associated with Wal-Mart does not necessarily imply that Wal-Mart stores worsen the economic fortunes of residents of the markets that these stores enter. Our results apply only to the retail sector, and we suspect that there are not aggregate employment effects, at least in the longer run, as labor shifts to other uses.

As a general matter, aggregate employment levels in the economy are a function of macroeconomic policy, monetary policy especially. The money saved (e.g. by the consumer) by Walmart employing less people gets spent elsewhere, which should cause new employment opportunities elsewhere for those laid off. Hypothetically, if a Walmart expansion had some massive macroeconomic effect causing the unemployment rate to spike (which is not likely), the Federal Reserve would hypothetically cut interest rates to stimulate the economy, bringing those unemployed workers into new employment opportunities (ignoring zero lower bound problems in this hypothetical).

You’d expect that, in aggregate, Walmart neither adds nor creates jobs. When Walmart claims it is going to add jobs in aggregate, it is wrong. When opponents claim it will kill jobs in aggregate, they are wrong. More than that, the whole jobs argument is the weakest, most boring argument there is. Of all the complaints available to hurl at Walmart, the kills-job line is easily at the bottom, even if it were well-founded, which it is not.