What Do Quarterly Workforce Dynamics Tell Us About Wal-Mart? Evidence from New Stores in Pennsylvania

In this paper I seek to better inform debate regarding Wal-Mart’s local impact on wages, and employment dynamics by combining data on Wal-Mart stores with the recently release Quarterly Workforce Indicators provided by the US Census. Use a panel of Pennsylvania counties, who saw entrance of a Wal-Mart in 2002, I find a new store has no effect on existing employee wages in the retail sector. However, new retail sector hires experience a roughly $0.50 an hour increase in total compensation in the quarter Wal-Mart enters. The entrance of a Wal- Mart draws employees from existing businesses, reducing job creation while increasing net job flows. Wal-Mart also has a longer term effect on net employment of a little more than 50 jobs in a total year. This employment finding is quite similar to findings in Hicks and Wilburn [2001] and Basker [2005]. Perhaps most importantly, Wal-Mart entrance is associated with a dramatic decline in retail sector job turnovers (over 40 percent). This result challenges much of the received wisdom of Wal-Mart’s role in the retail sector. The policy implications of these findings echo those of Ken Stone, who cautions against activist policy in support, or against Wal-Mart at the local level. Disclosure: The author of this study owns no stock in Wal-Mart or any related firm (other than that held by the mutual fund companies Vanguard and TIAA-CREF). I have performed no paid consulting services from any retail firm, its developers, local governments or related entities since 2002 (though I continue to field frequent questions on my earlier research). I have received no honoraria related to Wal-Mart research (other than travel costs paid by the Federal Reserve Bank of Richmond in 2001). In short, except for roughly $1,500 purchases of diapers annual since 1999 I have no financial relationship with Wal-Mart or any affiliate that I am aware of.