Walmart's Negative Impacts on the Economy

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Walmart has been the focus of multiple labor violation lawsuits.
Walmart has been the focus of multiple labor violation lawsuits. (Image: Spencer Platt/Getty Images News/Getty Images)

Walmart’s negative impact on the economy centers around not only crushing small local businesses but American manufacturing of goods. Cheaply made goods from foreign companies reduce orders for American businesses and the number of workers employed in the manufacture and delivery of products. In an attempt to battle against a negative image, the Walmart corporation began offering health insurance to employees while instituting environmentally friendly practices in 2005.

Quality of Goods

The quality of some goods sold at one of the world’s largest retailers was called into question by economist Patrick Jackson. He argues that a cheap t-shirt purchased from the retail giant is only worth the ticket price while a shirt purchased from other less discounted retailers is better made and worth double the sticker price. The theory that poor consumers benefit from inexpensive items at Walmart may be flawed if the items need replaced in a short amount of time.

Low Wages

According to a report by the National Bureau of Economic Research, the low wages paid to Walmart employees drives down the salaries in other local retail outlets by as much as 5 percent. Although the opening of a Walmart in a community creates jobs, the small paychecks all but ensure the workers remain in poverty and can only afford to purchase inexpensive items for their households. Images of coal-mining days spring to mind, where workers spent their hard-earned paychecks at company-owned stores.

Local Economy Impact

Local small business owners of “Mom and Pop” style stores are also adversely impacted by Walmart. A study conducted by Iowa State University reported a 28 percent drop in sales of apparel from non-chain businesses and a 20 percent decrease in hardware store purchases after Walmart opens in a rural area. Although purchasing opportunities increase, businesses owned by rural residents are often forced to close when competing against the large corporation. A Walmart is not likely to locate in rural counties with small populations, so residents spend their money on a regional rather than a local basis. When the tax base in rural municipalities shrinks, funds which would have gone to support social and safety services as well as public schools also diminishes.

Labor Law Violations

Labor law violations have plagued the Walmart corporation. A California court mandated the company pay $172 million in damages for not allowing employees to take meal breaks. According to a New York Times report, employees were threatened with termination if they attempted to exit the building through a fire escape when a workplace “lock in" was in affect at Sam’s Club and Walmart stores. Wage and promotion discrimination cases initiated by female workers against the super-store retailer in 2004 resulted in the largest class-action lawsuit in American history.

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