Counties With Wal-Marts See Slower Growth in Standard of Living

Released: 19-Sep-2006 5:15 PM EDT
Source Newsroom: University of Nebraska-Lincoln
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Newswise — Nebraska counties where a Wal-Mart is located have experienced on average a slower growth in standard of living than counties without the world's largest retailer, a preliminary University of Nebraska-Lincoln study shows.

The UNL study compared how growth in household income from 1979 to 2002 differed between 19 counties with Wal-Marts and 74 without, after controlling for other economic variables that determine household income. Of the 74 counties without Wal-Marts, 47 were adjacent to a county with a Wal-Mart.

Although the preliminary results find a correlation between Wal-Mart locations and slower economic growth, Azzeddine Azzam, the agricultural economist who led the UNL research, cautioned against drawing overly simplistic conclusions.

"There is a Wal-Mart effect, but we don't completely understand it," he said. Wal-Mart didn't create the economic conditions that have led to its success, but it has learned to take advantage of them, Azzam added.

Azzam presented his preliminary findings to the 2006 Nebraska Rural Institute in Ainsworth Tuesday (Sept. 19). He's still compiling statistics about the "Wal-Mart effect" on employment and wages, which also will be included in the yet-to-be-published study.

A variety of studies in recent years have explored a number of angles of Wal-Mart's impact on local economies, with mixed findings. Azzam said the UNL study may be the first to examine Wal-Mart's effect on the standard of living of communities it has entered. The UNL study also sought to account for the effects other economic variables would have on household income in an attempt to hone in on the Wal-Mart effect alone.

"Most of the studies attribute all changes in sales, tax revenues or other measures of economic activity to the presence of Wal-Mart, which could potentially bias conclusions in favor of or against the store," Azzam said.

After accounting for the other variables, the preliminary UNL study found that the average annual growth in median household income, adjusted for inflation, in the 19 counties with a Wal-Mart was $142.62 below the average annual growth in median household income in the 74 counties without a Wal-Mart from 1979 to 2002.

The UNL study uses 1979 as its beginning point to track household income trends. The state's first Wal-Mart opened in 1982 in Jefferson County. Nine more followed from 1984-86, seven more from 1989-93 and four from 1998-2001. The preliminary study includes 21 stores that had opened in the 19 counties by 2002. Five more have opened since then and are not included in this study.

The study found that the magnitude of the Wal-Mart effect differed depending on factors such as whether counties are urban or rural; located along Interstate 80 or not; and how dependent their economies are on agriculture.

The counties whose standards of living seem to benefit most from Wal-Mart, according to the study, are those that do not have a store themselves, but are adjacent to counties that do -- if they're located along I-80.

On the other hand, the counties that seemed on average to see the biggest negative impact in their standard of living, according to the research, are urban counties that have Wal-Marts -- and the older the Wal-Mart, the bigger the impact. For example, urban counties in which Wal-Marts have opened since 1985 have seen annual drops in inflation-adjusted household income of $89 and $143 for those along I-80 and not along the interstate, respectively. The declines were $65 and $118 for urban counties in which Wal-Marts opened since 1995.

In the study, urban counties are defined as those with an urban population of at least 2,500.

"This isn't necessarily cause and effect," Azzam said. "Wal-Mart is a manifestation of the restructuring going on in the U.S. economy ... It's a symptom of the economy, not necessarily a cause."

Other studies have found that the economic gains from Wal-Mart's lower prices are more than offset by the effect of its relatively low wages. It's possible, too, that Wal-Mart's relatively low wages drive wages down elsewhere in the local job market, Azzam said.

According to Wal-Mart's Web site, which Azzam used to collect information on the store's presence in Nebraska, Wal-Mart's 10,300 employees in the state are paid an average of $10.04 an hour.

The 19 counties with Wal-Marts as of 2002 were: Adams, Buffalo, Dakota, Dawes, Dawson, Dodge, Douglas, Gage, Hall, Jefferson, Lancaster, Lincoln, Madison, Platte, Red Willow, Sarpy, Scotts Bluff, Seward and York.

Funding for the study was provided by the university's Agricultural Research Division, a part of the Institute of Agriculture and Natural Resources, and the Nebraska Rural Initiative.


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