I’ve written before about Walmart-as-an-object lesson. The last time I looked, the company was averaging profits of $15.5 billion dollars annually, the Walton family’s net worth was over $129 billion dollars, and the company was still declining to pay employees a living wage. Instead, it relies on taxpayer dollars to make up the difference between its workers’ paychecks and workers’ cost of living.
After all, when an employee must rely on food stamps or other safety-net benefits, taxpayers are paying a portion of that employee’s wages.
Walmart (including Sam’s Club) is the largest private employer in the country–and one of the largest recipients of corporate welfare. (Walmart employees receive an estimated $6.2 billion dollars in taxpayer-funded subsidies each year.)
Money not paid out in salary, of course, goes directly to the bottom line, so we taxpayers are also funding shareholders’ profits.
All this is, as they say, old news–along with the recognition that Walmarts located on the outskirts of small towns have emptied out the retail centers of those communities.
Recently, however, research has added another layer to what I’ve come to see as the Walmart scam.
No corporation looms as large over the American economy as Walmart. It is both the country’s biggest private employer, known for low pay, and its biggest retailer, known for low prices. In that sense, its dominance represents the triumph of an idea that has guided much of American policy making over the past half century: that cheap consumer prices are the paramount metric of economic health, more important even than low unemployment and high wages. Indeed, Walmart’s many defenders argue that the company is a boon to poor and middle-class families, who save thousands of dollars every year shopping there.
Two new research papers challenge that view. Using creative new methods, they find that the costs Walmart imposes in the form of not only lower earnings but also higher unemployment in the wider community outweigh the savings it provides for shoppers. On net, they conclude, Walmart makes the places it operates in poorer than they would be if it had never shown up at all. Sometimes consumer prices are an incomplete, even misleading, signal of economic well-being.
As the article notes, it’s relatively simply to calculate cost savings for consumers, but those cost savings don’t represent a company’s total effect on a community. When a new Walmart opens, consumers change their shopping habits, workers switch jobs, and competitors shift their strategies–or often, close.
One research project found that In the 10 years after a Walmart Supercenter opened in a community, “the average household in that community experienced a 6 percent decline in yearly income—equivalent to about $5,000 a year in 2024 dollars—compared with households that didn’t have a Walmart open near them. Low-income, young, and less-educated workers suffered the largest losses.”
In theory, however, those people could still be better off if the money that they saved by shopping at Walmart was greater than the hit to their incomes. According to a 2005 study commissioned by Walmart itself, for example, the store saves households an average of $3,100 a year in 2024 dollars. Many economists think that estimate is generous (which isn’t surprising, given who funded the study), but even if it were accurate, Parolin and his co-authors find that the savings would be dwarfed by the lost income. They calculate that poverty increases by about 8 percent in places where a Walmart opens relative to places without one even when factoring in the most optimistic cost-savings scenarios.
A second study found that the losses weren’t limited to workers in the retail sector. They affected every sector from manufacturing to agriculture. But why would this be?
When Walmart comes to town, it uses its low prices to undercut competitors and become the dominant player in a given area, forcing local mom-and-pop grocers and regional chains to slash their costs or go out of business altogether. As a result, the local farmers, bakers, and manufacturers that once sold their goods to those now-vanished retailers are gradually replaced by Walmart’s array of national and international suppliers. (By some estimates, the company has historically sourced 60 to 80 percent of its goods from China alone.) As a result, Wiltshire finds, five years after Walmart enters a given county, total employment falls by about 3 percent, with most of the decline concentrated in “goods-producing establishments.”
I wonder what will happen when Trump’s China tariffs force Walmart to raise prices…
For now, Walmart is a monopsony— a company that can pay low wages because workers have few alternatives. This helps explain why Walmart pays lower wages than competitors like Target and Costco.
In a properly functioning capitalist system, we taxpayers wouldn’t be subsidizing monopsonies.
We can thank Republican congresses and presidents for this scam. Why on earth would any logic support subsidizing a highly profitable business through taxpayer money? Why do the billion dollar oil companies receive billions in “depletion allowance” paybacks?
Republicans, at the behest of their big business donors, have created this perverse capitalistic environment while they ignore universal health care and the abuses and price gouging of big pharmaceuticals. The low-information voter is the driving force behind Republican politics and Democrats continue to wander in the wilderness.
We get what we voted for.
Another factor I find is that the quality of items sold at Walmart are not always the same as from other stores. An example is that I get denim jeans of heavier weight on line or even at other stores. These are of the same brands but last much longer. I’m sure there are other examples.
Walmart can be also recognized for bringing the world into the bar code environment. Their engineers and cost accountants/warehouse experts discovered ways to control their inventory and shipping strategies between central and satellite locations. I think this happened back in the 60s.
EVERY item in their stores is calculated to the penny for maximum profit. Those “lesser” fabric jeans with the same brand names are in Walmart stores for the increased profit of a few pennies per pair. That is just one example of how they got so rich and “successful”.
But taking government subsidies is an immoral kickback from bribing Republican (mostly) politicians like Tim Cotton of their home state of Arkansas. Brilliant, huh?
Until this government raises the minimum wage level and stops price gouging by corporations, this fight will go on and people will continue buying from Walmart and other big box stores. Trump’s cutting taxes for the wealthy and raising taxes on the working class plus his tariff scam will force people who were “managing” on middle-income by shopping at Walmart with those low income workers will be forced to lower themselves to shopping at Family Dollar, Dollar General and Dollar Tree because Walmart and all big box stores will be too expensive due to prices while workers continue their struggle on minimum wage salaries. A cruel way to punish American workers to bring Walmart down from their lofty Billions level. Today, an amount mentioned in the millions doesn’t even rate raised eyebrows.
Wanna talk about poverty level, low income and Social Security economic level survivors now?
People typically consider economics to be an esoteric total of static ledgers.
It’s really about flow, rates, sources, and sinks. This is the concept of integral and differential calculus in mathematics, with time as a variable.
Of course, AI knows and can process all that is required to model national economies. Every corporation has been doing it for internal economics for decades and at a significant cost. It’s just a matter of publicizing the models (because they are the most impacted humans). As that happens, integrating upwards to each level of governance is an easy, though computing-intensive task.
When will national communes take on the tasks? When will politicians be informed enough to understand the tools available to them?
In the U.S. and most clearly in a reactionary state like Indiana – similar to the parents of Central High School in 1957 in Little Rock – the lower middle and working class white parents reacted with fury- their. Enemy- a poor Black Girl. “Welfare” in a broad way needs to become “Human Welfare” – education + healthcare + food + housing- for all of our children, parents- not for “Thise People “- othering by race, gender, country of origin- helping All will give us Opportunity and Justice- but Bezos and the Waltons will only listen if we organize, build coalitions and recognize it will take as long time for Victory- Success- In 2025 we can look for community in building small successes- not letting our fears disempower us.
The economic strain caused by corporations like Walmart definitely isn’t limited to low wages and taxpayer-funded subsidies for their workers. It also extends to individuals who lose employment opportunities there due to age, disability, or reduced abilities, forcing more reliance on public assistance and healthcare systems. These low wages further erode workers’ ability to save for retirement, transferring the financial burden of care and support to taxpayers—effectively another hidden subsidy for these corporations.
Meanwhile, wealthy corporations have successfully pushed narratives that undermine public support for policies like basic income, universal healthcare, and robust labor protections—despite these being critical for addressing systemic inequalities. They profit immensely while convincing voters that “We the People” don’t deserve these safety nets. This manipulation ignores the unpaid labor individuals contribute to society, including caregiving, community assistance, and volunteer work for non-profits that fill gaps left by corporate indifference.
IT is right that the solution isn’t as simple as driving low-wage businesses out of communities, as this would harm the very people already struggling to make ends meet. Instead, a comprehensive approach is needed: introducing basic income to stabilize households, universal healthcare to reduce individual and public costs, and stronger regulatory frameworks to curb corporate overreach. Public education must be prioritized over diverting resources to private institutions, ensuring equitable access and opportunities.
Finally, the corporate-driven “take advantage of people” economy must be addressed. From deceptive pricing and subpar product quality to exploitative service practices, individuals are constantly at the mercy of systems designed to extract as much as possible while providing as little as they can. Government inaction—particularly in regulating elections and holding officials accountable—only exacerbates this, allowing wealth and corporate interests to dominate public policy and the economy.
A properly functioning society balances the power of corporations with the needs of its people. It’s time to reclaim that balance by demanding policies that prioritize human dignity, equitable wealth distribution, and accountability at every level. Strengthen law and order venues to be hard on these corporate “crimes” against people, elections, and most of all poverty.
This is the result of something I call inheriter’s greed. Sam Walton may have paid minimum wage, but he also offered bonuses consisting of stock in his company. For a time in the sixties and seventies, his company was producing more millionaires than any other company in the United States.
That’s what they were doing until he passed the torch to the next generation. Those who inherited his estate changed the bonus policy and just paid what was required of them. They are also responsible for the site selection and the lower quality of goods sold. I’ve seen it occur in countless cases.
As of October 31, 2024, Walmart’s profit margin was 2.92%. As of November 30, 2024, COSTCO’s profit margin was 2.93%.
BTW … the citation for source of data of my brief (you are welcome) is Forbes.com. Generally, big box retail’s objective for profit margin is 2-3%.
In popular culture, capitalism and market economy are viewed as the same thing.
They’re not.
A market economy is about where economic decisions are made. It’s not about ownership.
Businesses could be owned by customers, workers, suppliers, or “bankers” (money).
In capitalism, businesses are owned by rent-seeking “bankers”.
Their sole value to a business is their initial money.
The problem is using their control to extract a return on their initial money which exceeds (often massively) a typical risk-appropriate return.
Under Chicago School / Welch(GE) revisionism, capitalists have turned virtue on its head — not seeking a vibrant, competitive, rising tide lifting all boats economy, but seeking neo-feudalism.
Under that view, every capital-owned corporation’s sole obligation is to maximize the flow of its blood to its capital parasites.
Shareholder capitalism is parasitic rentierism (extracting control-based rents instead of earning value-generated income). The plain brutal truth is that capital shareholder ownership inevitably devolves into third parties using their control of their corporate host to strip all value in excess of anything barely necessary to its host’s subsistence.
Corporate shareholders’ capital is highly mobile — few serious restrictions on the transfer of capital. They’re can earn ROI anywhere. They’re not wedded to any community or country.
So since extractable money is their sole virtue, they will cut local/domestic jobs and outsource to impoverished 2nd and 3rd world countries with lower costs: fewer or no benefits, fewer or weaker or non-existent safety and environmental regulations, no overtime or holiday or sick time, no age restrictions, no ethical sourcing, no recycling, no fair use obligations, even indentured or coerced labor.
So, Walmart’s capital shareholders hire management which will prioritize operations which most fully parasitize their host communities’ well-being in excess of 2nd or 3rd world standards. It treats workforce and community impoverishment as “profit”.
And let’s change the laws that allow lower prices to large-quantity buyers. That should go a long way toward giving local merchants a level playing field.
Everybody has pretty much nailed the issue of corporate greed in all its facets, along with Sheila’s comment, “In a properly functioning capitalist system, we taxpayers wouldn’t be subsidizing monopsonies.”
I think it’s safe to say we do not have a properly functioning capitalist system. Don’t forget, all the household and electronic manufacturers that provided excellent paying jobs in communities across the country sold out to Sam Walton and their families. Once Sam told them what they would pay for their products, the owner had to move his manufacturing plant to China to use low wages and almost no environmental controls so he could sell at that price to Sam. Getting your product on Walmart’s shelves was both a blessing and a curse.
If our officials weren’t all captives of the billionaire class, our capitalist system may have worked properly, but greed begets greed. I still laugh at the ignorance of Muncie’s duly elected from both parties who needed a second Walmart in South Muncie and then bragged over their achievements. This occurred while other communities nationwide would protest, adding even a Walmart grocery market because they knew what it would do to the local economy.
Between the two Walmart big-box retail stores, the community is filled with Dollar Generals, which exploit the poor who think they are getting a deep discount. DG barely has enough employees to keep the doors open since they pay even less than Walmart.
This fragility and exploitation are why corporations must buy politicians at all levels of government, especially state and federal. If monopolies were prevented, the minimum wage would be raised, corporate greed would be flushed out, etc., the whole fragile profit scheme would topple.
It’s the same with the obvious solution called universal healthcare. We are paying the highest costs (unsustainable) for the least services of any industrialized nation. Why has this persisted and been tolerated in a “democracy?”
#corruption
Thank you Sheila. A most interesting, more than just “the HEADlines” Report. There is always so much more than what we initially see, and know.
That
Walmart create more poverty than would otherwise exist, is eye-opening!
In this “exceptional” country, Democracy, capitalism and religion have all been twisted, and bastardized.
Now that we philanthropoids have put corrupt corporations and their stakeholders in place, we can rejoice to celebrate the first work day of 2025. Volleyball on ice anyone? 😇
Based on what I remember from my economics classes, I believe Sheila’s conclusion is wrong, or at least missing some intermediate steps.
>For now, Walmart is a monopsony— a company that can pay low wages because workers have few alternatives. This helps explain why Walmart pays lower wages than competitors like Target and Costco.
Monopolies exist where there is (effectively) a single SELLER of a product; it is a consumer-facing characteristic. Monopsonies exist where there is a single BUYER; it is a producer-facing characteristic. Local producers can only sell their product to Walmart if they’re willing to accept the (dirt cheap) price Walmart is willing to pay. Because they can’t make a profit at that price, they’re driven out of business.
In a circuitous way, monopsony IS why Walmart pays lower wages. Once local businesses have been forced to close, Walmart becomes a local monopoly. And in the absence of wage competition from local businesses, wages go down.
For myself, and for the reasons Sheila mentions, I avoid shopping at Walmart if unless there’s no alternative. I travel a lot and sometime I end up needing something in places where Walmart is literally the only game in town.
I’ve set foot in a Walmart maybe twice in the past decade, and that was just to get a prescription for my husband. We ditched our Sam’s Club membership at least 20 years ago when we joined Costco. I shun both of these businesses specifically for all the reasons in Dr. K’s blog today, and all the reasons stated in the comments. And after reading today’s post, I think my husband is convinced to switch his default local pharmacy from Walmart to another. The company and its policies are loathsome and corrupt.
The profit margins listed by Norris show that similar profit margins only reveal that specific piece of their operations. Costco and Walmart couldn’t differ more in every other way. The only comparison that makes sense to me is Amazon vs Walmart, and I use that since I do not shop at the latter, while taking advantage of Amazon’s many services frequently. I would like to see a comparison of the two, as I believe both to be creating cultural norms in America. I also sometimes question my allegiance with Prime, next day delivery, unimaginable assortment of anything I want, etc., that Amazon offers, but it has proven irresistible. I can only hope that Mr. Bezos has the sensibility to offer employees better wages, or at least to unionize, while his uncanny ability to offer up possibly the best retail operation concept in history thrives. I do know that like Walmart, Amazon is squashing many small businesses and that saddens me, but I also know that progress usually involves winners and losers. The public marketplace responds to efficiency, speed, products, quality, etc., while government regulations are meant to keep the greed quotient in check (I don’t think that’s working). The results should reflect better quality and service, but if monopolizing a sector of the economy is also a result, then government regulations must make an appearance. As always, my belief that those fortunate enough to have made unimaginable amounts of money have a responsibility to give back, and I applaud Bill (and Melinda) Gates and Warren Buffet for setting the standard in that regard.
Walmart buyers have used deceptive business practices to acquire new products for their stores. They have approached manufacturers told them they liked their product and want to sell it in their stores. They ask the manufacturer if they could expand their factories/production to accommodate all the product they would order. When the new company borrowed and expanded their production at great expense, Walmart came back and told them they would now pay them a cut rate price on each item. It was not what the manufacturer was led to believe and forced them to produce a lot more with a big cut in their profit.
Are there still places where the local populace has forcibly resisted Walmart’s predatory intrusions into their communities?
The social and educational infrastructure of towns where Walmart comes in to destroy the competition may take a few years to manifest, but it affects tax bases as the local small businesses close, property values decline, schools downsize, consolidate or close outright and people who can still afford to do so, move out to places with more opportunity and better quality of life options.
For those who are interested, a piece of legislation has been proposed by the GOP legislator in the Indiana General Assembly that will force radically change public education in Indiana, especially in blue cities. In combination with the Braun administration’s stated goal of making vouchers universal, those policies will essentially destroy public education as we know it. HB 1136. https://iga.in.gov/legislative/2025/bills/house/1136/details
Think further outside the box and read: Slow Down: The Degrowth Manifesto by Kihei Saito
We do not have a functioning capitalistic system–the divide between the Have’s and Have Not’s has been increasing exponentially for the last two decades. Corporate welfare queens and their children. We need to start taxing wealth in this country.
Pasting a series from Robert Reich–I keep saying our economy is what has brought us the scourge of ‘Orange face’. Watching some documentaries of the Gilded Age and how only a few profited significantly and how at that time there was a significant wealth gap. I think for are most wealthy we are in another Gilded age for them and the gap is widening and people are seeing how gov’t entities are not working for them and how our society is rigged and the populace are pissed. Violence will rise.
https://www.bing.com/videos/riverview/relatedvideo?q=robert+reich&&mid=675094B8B307A6D1E67F675094B8B307A6D1E67F&FORM=VCGVRP
Anne;
The legislation forbidding cheaper sales to larger buyers has existed for 75 years. It is called the Robinson-Patman Act. The catch is that the law says that I can’t sell the SAME product for different prices. This allows the manufacturer to change some product specification a small amount, put a different part number on it and sell it to another buyer at a lesser price. Happens all of the time. It is why you can look at visually identical TV’s at Best Buy, Walmart, Target, etc. and see vastly different price tags due to the quantity difference that each company is buying from the same vendor. All technically legal under R-P.
I don’t support Wal-Mart because of it’s policies. I’m finding lots of retail stores are working with skeleton crews and showing signs of stress. But a lot of those locations don’t pay workers enough and are toxic places to work in.
Two things we should remember about Walmart.
In its early days, it pitted communities against each other to secure benefits (government provided access roads, water, and sewage lines and tax abatements). If “East Town” didn’t provide it, they would open their store in “West Town” next door.
Although Sam Walton was more generous to managers, most of their “regular” employees were part-time retirees and women working for “butter and egg money”. They didn’t get benefits.
One thing to remember about Costco.
James Sinegal was a protege of Sol Price, who invented the warehouse store. Sol believed that employees should be treated well. He was just from that era of business men (like Aaron Feuerstein who continued to pay his workers after his factory burned down in December, 1995). A different generation. Sol sold Price Club to James Sinegal when Walton offered to buy him out.
CGH
Thanks for the clarification. I noticed a long time ago that “price match” offers were usually meaningless because of small differences.
A friend of ours owned an independent pharmacy and tried to fight the drug companies’ discriminatory practices but was unsuccessful.
Surely there is some way around this!