Wal-Mart sure sounds like a good idea when it first rolls into town. That much is clear.
The thousands of U.S. cities that have said yes to the "always low prices" pioneer since 1962 did so for good reason. Many were so enthusiastic they even threw in cash incentives ($1.2 billion in taxpayer subsidies and counting).
And Wal-Mart came through. The disciplined Bentonville, Ark., discounter didn't become the world's largest (non-oil) company and history's most influential retailer, after all, by not following through on its promises:
- Jobs: Check. More than 1.4 million Americans draw a Wal-Mart paycheck.
- Low prices: Check. It's generally agreed that consumers in an economy without Wal-Mart in it would spend considerably more -- by some estimates as much as $2,500 per household more.
- Tax boosts: Check. The cities where Wal-Mart builds do see an upswing in sales tax receipts.
Wal-Mart promised to add 22,000 jobs in the U.S. this year by opening or expanding some 150 new supercenters, those 187,000-square-foot giants that include grocers. In today's job-hungry economy, many well-meaning, practical citizens have rolled out the welcome mat, little expecting that the move could backfire on their communities.
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A Trojan horse?
A glance at Wal-Mart's store openings page, or any news story that follows (they're eerily similar), reveals the reason: "an increase in tax revenue" and "150 new jobs" for Wilkesboro, N.C., or "450 new jobs" for Albuquerque, N.M.The numbers may change, but this key point does not: The promised benefits are not something a city can easily ignore.
Yet each of Wal-Mart's promises has a flip side.
- Jobs: Check. But, after an initial boost, studies show a net loss of jobs.
- Low prices: Check. So low that wages and benefits are reduced as well. Then the neighbors follow suit.
- Tax boosts: Check. But that boost comes at the expense of communities nearby, which tend to lose any businesses that compete. And don't forget to factor in the cost to taxpayers of subsidies for Wal-Mart and public aid to low-wage workers.
When Wal-Mart comes to town, "it's a switcheroo," said Nelson Lichtenstein, a professor of history at the University of California, Santa Barbara, and the author of "The Retail Revolution: How Wal-Mart Created a Brave New World of Business."
"They create jobs now, immediately," he said. "Over time . . . they erode better jobs."
For its part, Wal-Mart says its stores continue to serve local economies for years after they go up.
"Wal-Mart is a solution for many communities across the country, offering quality jobs, career advancement, stimulating local economies with new business opportunities and generating tax revenue for cities," said Michelle Bradford, a Wal-Mart spokeswoman.
Certainly, Wal-Mart doesn't set out to undermine local economies. Nor do the city fathers who approve the stores or the consumers who shop at them. Each of them is serving constituents -- stockholders, taxpayers or households -- as best they can.
How can such good intentions go so wrong?
The promise
Take Ventura, Calif., a coastal town north of Los Angeles now divided over a proposed Wal-Mart. The biggest selling point for proponents: an estimated $350,000 to $500,000 net jolt to the city's coffers from the supercenter's added sales taxes.California, which led the movement to cap property taxes in the 1970s, desperately needs sales taxes to pay its schoolteachers and police officers.
"It's not a bonanza, but it's a fiscal positive," said Rick Cole, the city manager. "That pays for three full-time firefighters."
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Market-opportunity studies show that one-fifth of 500,000 weekly shoppers at the Wal-Mart in Oxnard, a town just south, live in Ventura.
"We already have some proportion of our population slipping out in the night to shop over there," said Ventura City Councilman Carl E. Morehouse. "Why should Oxnard get the benefits?"
It's this grim reality that puts folks like Morehouse in a bind. He doesn't like Wal-Mart, and he won't shop there, ever. A pro-labor Democrat, he opposes the company's business practices and their impact on the environment and working conditions, both here and abroad.
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But he can't in good conscience deny his city's residents the opportunity to build a Wal-Mart if they want to (voters will decide in November).
"I am torn between two things: the fiscal demands to keep the city whole and a dislike of Wal-Mart," he said. "I have to look at the big picture for our financial needs."
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