Ken Jacobs, Dave Graham-Squire, Stephanie Luce, UC Berkeley Center for Labor Research and Education, April 2011

Big box retailers are seeking to expand into major metropolitan areas in the United States. Elected officials and policy makers are struggling to understand the impact these retailers would have on their cities. Some cities are considering “living wage” policies that would establish higher minimum wage standards on retailers of a certain size. As the largest retailer and largest employer in the United States, Walmart’s expansion plans have attracted the most attention and focus from policy makers.

The growth of big box retail is a mixed blessing to local communities. There is strong evidence that jobs created by Walmart in metropolitan areas pay less and are less likely to offer benefits than those they replace. Controlling for differences in geographic location, Walmart workers earn an estimated 12.4 percent less than retail workers as a whole, and 14.5 percent less than workers in large retail in general. Several recent studies have found that the entry of Walmart into a county reduces both average and aggregate earnings of retail workers and reduces the share of retail workers with health coverage on the job. The impact is not only one of substitution of higher wage for lower wage retail jobs, but also a reduction in wages among competitors. As a result of lower compensation, Walmart workers make greater use of public health and welfare programs compared to retail workers as a whole, transferring costs to taxpayers.

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