Does Wal-Mart Matter?

Wal-Mart is either a county's savior or the source of its destruction, depending on one's point of view. Or, a study finds, maybe Wal-Mart doesn't mean much either way.

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Our measure of a town’s viability is whether you can buy a pair of underwear on Main Street. By that calculation, the town where my wife and I bought a weekly newspaper — Smithville, Texas — was thriving when we moved there in the 1980s. There were four stores on Main Street where you could buy underwear — and added to those clothing shops were two banks, a pair of drug stores, a jewelry shop, a barbecue joint and a grocery where the owner (Babe Shirocky) sold meat from his ranch. 

That was before the town was surrounded by Wal-Marts. In the last part of that decade, the big blue store from Bentonville put up centers in three towns within 15 miles of Smithville, close enough to drain shoppers off Main Street. We thought. And today the grocery is gone, so are one of the drug stores, Charlie’s (the BBQ spot) and Babe’s homegrown beef. 

Other stores opened when the clothing shops closed, mostly “antique” spots that sprout like dandelions in abandoned Main Street storefronts in too many small towns. We always blamed Wal-Mart for the decline of Smithville’s downtown, for the fact that now you have to get outside of town to find a pair of underwear. Wal-Mart’s easy to blame. It’s big and it’s everywhere. Nearly 90 percent of the population lives within 15 miles of a Wal-Mart. Most people shop there at some time during the year.

“Wal-Mart is a death knell to some, a blessing to others,” write Terry Fitzgerald and Ronald Wirtz in an article for the Federal Reserve Bank of Minneapolis. “There is likely no other enterprise that engenders such strong and conflicting opinions and actions among individuals and the general public.” Every Democratic candidate for president in 2007 attended an anti-Wal-Mart rally. Indeed, a quarter of the people in the country think the company is “bad” for America.

True to its roots: the states nearest Bentonville, Arkansas, still have the most Wal-Mart square footage.

But how bad is it for towns like Smithville? 

The Minneapolis Fed set out to discover if the Arkansas company deserved its reputation as a killer of local economies. The researchers compared 40 small counties (populations of 10,000 to 40,000) in the Fed’s district where a Wal-Mart came to town between 1986 and 2003 with 49 counties of similar size that are without a Wal-Mart. (The Minneapolis Fed covers Minnesota, Montana, North and South Dakota, the northwestern portion of Wisconsin and Michigan’s Upper Peninsula.) 

Which group grew faster, richer, bigger? The counties where Wal-Mart opened a store after 1986 or the counties Wal-Mart avoided?

The results? “Despite its kill-them-all reputation, Wal-Mart is not the threat that many fear, at least in terms of economic benchmarks commonly associated with healthy, growing communities,” wrote Fitzgerald and Wirtz.

In communities with new Wal-Marts, employment, earnings and new businesses grew slightly more than in counties without the big blue retailer from Arkansas. Then again, it’s not exactly like having a Wal-Mart was a boon for counties. “Poverty rates, for example, declined in most counties during the period studied, but they declined by less (poverty rates didn’t improve as much) in Wal-Mart counties,” wrote Fitzgerald and Wirtz. “By other measures, Wal-Mart had no noticeable effect. Overall, counties with and without Wal-Mart had similar growth in population and income per person.”

It is true that Wal-Mart set up shop in larger rural counties. None of the counties with populations under 10,000 in 1985 had a Wal-Mart by 2005. Generally, the larger the population in the upper rural midwest, the more likely a Wal-Mart would come to town. Those larger counties with Wal-Marts did tend to grow a little bit faster than counties that were without Wal-Marts, but not by much. Similarly, Wal-Mart counties tended to show faster growth in earnings per job and employment.

On the other hand, non-Wal-Mart counties saw a greater increase in total compensation (wages plus benefits). Again, however, the differences between Wal-Mart and non-Wal-Mart rural counties was small.

There wasn’t even that much difference from county to county in the growth of general merchandising establishments. Counties with and without Wal-Marts saw a decline in the number of general merchandise stores. “The presence or absence of Wal-Mart is neither an obvious anchor nor a hot air balloon for business growth in a county,” according to the authors.

Poverty rates in non-Wal-Mart rural counties did decline more than in counties with the retailer. “Counties with supercenters fared better, but poverty in those counties still did not improve as much as in those counties without a Wal-Mart,” according to Firtzgerald and Wirtz.

So…. after studying rural counties over two decades, the Minneapolis Fed researchers conclude that Wal-Mart doesn’t really matter that much to the overall economy of a rural county. Stores open and close — with our without a Wal-Mart around. Some measures of economic success go up with a Wal-Mart while others go down, leading the authors to conclude that “it’s probably safest to say that Wal-Mart’s net imprint on a county’s health appears to be smaller than most perceive.”

Fitzgerald and Wirtz wrote that there are several other factors — education levels, an entrepreneurial culture, good infrastructure — that are far more important to a county’s success than a Wal-Mart. “If that’s surprising,” they conclude, “maybe it shouldn’t be.”

Dystopos
It turns out that counties with Wal-Mart have grown a lot like those without Wal-Mart.

 

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