Scorn for Big-Box Stores Makes the Needy Needier

May 4, 2009

For release noon May 5 and thereafter (695 words)

Many churches and public-service groups organize food, coat and toy drives. The objective is to provide these goods to needy families especially during holidays. I contribute to my own church’s food and coat drives, so nothing that follows should be taken as putting down such efforts. Indeed, I support them wholeheartedly.  

The bone I want to pick is with those who couple their charitable support with scorn for big-box retailers (so called for the architectural design of their buildings). Knowingly or unknowingly, what these people give with one hand they propose taking away with the other. And when scorn turns to a political advocacy that produces legal impediments to the ability of such stores to freely operate in our communities, the needy become needier.     

The amount of harm inflicted on the needy turns on consumer prices. For example, if a store’s competitive pressure reduces prices by five percent, it means people can shop “for free” an additional 2.6 weeks each year (52 weeks multiplied by 0.05).  Were the store’s price effect larger — say, 10 or 15 percent — shoppers benefit to the tune of an additional 5.2 or 7.8 weeks of “free” shopping. 

For example, scholars have investigated Wal-Mart’s price effect. Professor Emek Basker of the University of Missouri found that Wal-Mart’s presence in a community lowers long-run prices for a number of drugstore type items by about 10 percent. An economist at MIT, Jerry Hausman, found a 20 percent effect for grocery items. My Ball State University colleague, Michael Hicks, yet another Wal-Mart-ologist, tells me that Wal-Mart’s overall price effect is on the order of 10-15 percent. 

The value of holiday food, coat and toy baskets obviously varies widely.  Nevertheless, I have a hard time imagining that the baskets equal 2.6 to 7.8 weeks of shopping at Wal-Mart. Don’t forget, moreover, that Wal-Mart’s customer base is skewed towards those at the lower end of the income spectrum. A 2005 Pew Research Center poll, for example, tells us that 53 percent of respondents reported annual earnings below $20,000 shopped at Wal-Mart regularly as opposed to 33 percent earning more than $50,000. In other words, those more likely to be recipients of the church or public-service food, coat and toy drives are also more likely to bear the brunt of restrictions on Wal-Mart.

Some might think that my “free shopping” argument is undermined by the fact that some big-box stores pay low wages. It’s these wages that make the needy needier, goes this line of thought, not restrictions on the store. This is bogus. Whatever the wage-and-benefit package at the store, no one forces people to work there. Wal-Mart “associates,” for example, are not slaves. 

People work at these stores because the wage-and-benefit package is better than what they can get in their next-best employment opportunity. Next best is precisely that — next best, meaning that the store’s employees believe they are better off as a result of working there. In fact, these employees are better off for two reasons — they work there and they can shop there.      

The root cause of the confusion is the mindset that one cannot do good while doing well in the marketplace. The mindset saturates media culture, colleges and universities (including business schools) and church pulpits. Good things happen for pundits, professors and preachers only when good people intentionally do good things.

Activities smacking of commercialism, however, are suspect. A big-box store sells to make a profit. Ugh. Its customers buy from the store to better themselves. Ugh. There’s nothing inspirational about such things, so they can’t be good. 

What about the fact that self-serving sellers don’t find buyers unless they offer terms that benefit buyers? Doesn’t matter. What about the fact that self-serving buyers don’t find sellers unless they offer terms that benefit sellers? Doesn’t matter. What about the fact that regardless of buyers’ and sellers’ “heart attitudes,” the marketplace forces them to act is if they care about those with whom they’re dealing? Doesn’t matter. 

Alas, the nuts and bolts of the marketplace don’t matter for those whose thinking stops with feel-good platitudes about noble intentions. Is it any surprise that we have policies being implemented that make the needy needier? Nope.

T. Norman Van Cott, an adjunct scholar of the Indiana Policy Review Foundation, is an economics professor at Ball State University. 



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