Wal-Mart Does Not Save Families $3,100 a Year

Jim Ledbetter, it’s very easy to avoid getting into idiotic arguments with Dennis Kneale on CNBC: just stop going on CNBC. But at the same time, it’s worth pushing back much more on the ludicrous claim that Wal-Mart (WMT) saves the average American family $3,100 a year:

Beginning in 2005, Wal-Mart commissioned the research firm Global Insight to produce a report measuring the impact of Wal-Mart on the overall American economy. Its methodology is, of course, open to debate, but the study tested 26 markets and measured the impact of a variety of economic factors on prices, going back to 1985. Not surprisingly, the study found that the widespread existence of Wal-Mart dating back to 1985 has resulted in about a 3 percent reduction of prices (3.6 percent in the most recent study, which is where the $3,100 figure comes from).

Ledbetter responds:

I don’t reject that finding. But it doesn’t mean that Wal-Mart is the only, or even the largest, economic force responsible for lower prices. As you would guess, the study also measured the impact on prices of many things that have little to do with Wal-Mart: energy costs, population growth, and unemployment. As I read the study, those factors combined are responsible for 89 percent of price variation. Wal-Mart and other factors are crumbs by comparison.

He should reject the finding. Because it’s only Ledbetter himself — and CNBC — who is saying that Wal-Mart is claiming to save the average American family $3,100 a year. If you look closely at the report, it never actually says that. Instead, Global Insight talks about measuring the “cumulative price impact” of Wal-Mart since 1985. If the average American family has saved $3,100 over that time, that’s about $129 a year, not $3,100. Big difference.

Here’s the CNBC screengrab:

If Wal-Mart were honest, they would have phoned up CNBC and said that the bit about $3,100 a year was completely untrue, by a factor of 24 (the number of years since 1985, which is the base year from which the cumulative savings are being calculated). But of course they didn’t. Which is just another reason not to give them the Nobel peace prize.

Comments

[Mike from NYC:]

And at what cost to the American worker was saved by shopping at WalMart?

NOTHING sold by WalMart except for food and groceries are made in the USA.

How many jobs were lost as a result of the rise of WalMart, not only in manufacturing but all the neighborhood stores, the Mom & Pop places, that were driven out of business?

Nov 10 11:48 AM

[richjoy403:]

I shop at Walmart (and Costco), and am proud to do so. It is strange that you acknowledge that it is CNBC, and not Walmart, that got the facts wrong; and even stranger that you assume it is Walmart's responsibility to correct any error made by any media source. Do you dare to suggest the same standard applies to the thousands of other businesses? I think your bias is showing.

Of course I don't know exactly how much I have saved, but I do know it is substantial. Furthermore, if not for Walmart (and Costco and the like) other retailers would have much higher prices, and that savings has to be factored in also.

So, I am quite sure I have saved at least $3100 at Walmart (and the like) since 1985 when including the assumption of higher prices if not for Walmart.

If YOU don't like Walmart and other discount retailers, don't shop there!

p.s. I also object to this nonsense about putting mom/pop stores out of business. Those stores pay employees less than Walmart, they provide no insurance, and they offer very limited choice at higher prices. I yet to see a Walmart that was not surrounded by independent stores offering items not available at Walmart...Get over it!

Nov 10 12:00 PM

[Andrew Butter:]

Interesting that in Holland which is one of the countries that largely escaped the current debacle, they don't allow WalMart type operations, and in France which was hit worse than most they restrict them.

The economic cost needs to cover (a) the cost of petrol by individuals driving to WalMart (b) the cost of peoples time being forced to shop there (c) the cost to communities of not having local shops (i.e. (c) the loss of jobs providing that service.

Nov 10 02:38 PM

[Tony Petroski:]

Wouldn't it be more accurate to say that the Chinese peasant, now an industrial worker, is responsible for most of the savings with Walmart as the importer?

Nov 10 05:26 PM

[baji kimran:]

I don't know the real numbers in this argument, I suspect that one must accurately pin down what is being measured and being compared. (I always cringe when I read or hear anything with a percentage without being told what is being changed and compared, which after all, is what a percentage measures. All news organizations should be rigorous in this). Incomplete information sadly is standard fare in advertising and PR battles.

At a 33,000 foot level, I don't think it can be argued that more efficiency (which I think Walmart embodies) does not benefit the entire society. If Walmart has had an significant impact on consumer prices over the years, one must consider all the implications from that. Just think, a smaller CPI means that interest rates can be lower because inflation is lower and lower interest rates have a huge impact on the whole economy.

Yes some jobs are dislocated and lost, but other jobs are created and gained. A manufacturing job is lost in the U.S., but it is gained elsewhere and plus it increases jobs in shipping and transportation. It really is amazing that imports from China are able to compete here in the U.S. given the transportation costs (which are also driven by efficiency).

When considering all this, one is reminded of the saying "You can't stop progress" and this leads to technological determinism, Tom Friedman, etc, which is probably a debate best saved for another day.

Nov 10 07:20 PM

[Greame H:]

In general the "mom&pops" were an abomination of poor selection, high prices, poor choice, dated product etc . If they were good and had redeeming attributes, they would still be in business!! Not everyone shops just for the lowest price. How come all the high end stores thrive? Debate about Walmart tends to be 90% ideology and only 10% economics.
Btw, I very rarely shop Walmart but for other reasons . I appreciate their role and importance to the overall economy however

Nov 11 09:05 AM

[Windsun33:]

People tend to forget that those (often mythical) mom and pop shops were exactly what you say, and sometimes worse. I also find it odd that there were tons of lousy hardware stores around in the "good old days" that were also "mom & pop", but the idealogues don't seem to be going after Lowes and Home Depot.


On Nov 11 09:05 AM Greame H wrote:

> In general the "mom&pops" were an abomination of poor selection,
> high prices, poor choice, dated product etc . If they were good and
> had redeeming attributes, they would still be in business!! Not everyone
> shops just for the lowest price. How come all the high end stores
> thrive? Debate about Walmart tends to be 90% ideology and only 10%
> economics.

Nov 11 10:26 AM

[LTDA:]

Holland? Great! Let's be like Holland. Lovely people, beautiful flowers. Nice country. But really...? Holland? Not so interesting after all.

On Nov 10 02:38 PM Andrew Butter wrote:

> Interesting that in Holland which is one of the countries that largely
> escaped the current debacle, they don't allow WalMart type operations,
> and in France which was hit worse than most they restrict them.<br/>
>
> The economic cost needs to cover (a) the cost of petrol by individuals
> driving to WalMart (b) the cost of peoples time being forced to shop
> there (c) the cost to communities of not having local shops (i.e.
> (c) the loss of jobs providing that service.

Nov 11 10:54 AM

[Windsun33:]

I don't think that Holland is big enough for a Walmart store. And don't forget, those are the same people that started the first mega-bubble, the infamous Tulip Craze of the 1640's. en.wikipedia.org/wiki/...


On Nov 11 10:54 AM LTDA wrote:

> Holland? Great! Let's be like Holland. Lovely people, beautiful flowers.
> Nice country. But really...? Holland? Not so interesting after all.
>
>
> On Nov 10 02:38 PM Andrew Butter wrote:

Nov 11 11:19 AM