Dive Brief:
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Wal-Mart Stores Inc.’s Chinese import habit likely accounted for 15.2% of the U.S. trade deficit growth between 2001 and 2013, according to a new study from the Economic Policy Institute. The larger deficit, which includes Wal-Mart and others' contributions, cost the U.S. 3.2 million jobs between 2001 and 2013, the report says.
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Wal-Mart’s increased trade deficit with China triggered some 400,000 job losses between 2001 and 2013, 75% of them manufacturing jobs that many economists believe are key to the economy, according to the group’s estimates.
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The report downplays the retailer’s efforts to boost U.S.-sourced goods, saying that 100 jobs are lost because of the retailer’s buying patterns for every job it creates.
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Wal-Mart criticized the study as “an old report with flawed economic analysis.”
Dive Insight:
Wal-Mart suffers a load of criticism for its low wages, and now for its supply chain approach, which relies heavily on Chinese imports. This study in particular was put together by Economic Policy Institute, whose chief is Richard L. Trumka, president of the AFL-CIO, the country's largest federation of labor unions.
From the beginning, Sam Walton was keen on keeping pay low for workers at his stores. In the 1960s, the federal $1.15 an hour minimum wage was extended to retail workers, at a time when Walton was paying workers half that. Because the law only applied to businesses with 50 or more employees, he attempted to argue that each of his stores was a separate business. The Labor Department disagreed and fined him for the move.
Wages and benefits at Wal-Mart have been notoriously low ever since, with critics pointing out that its workers are eligible for welfare benefits like food stamps and Medicaid, to the tune of $6.2 billion in public assistance each year, something taxpayers are getting impatient with. And other research has found that wages are lower in counties where a Wal-Mart store operates, especially in the South.
Now, with the U.S. economy suffering in part because of the wage stagnation, more cities, states, and the U.S. Congress are working to push up the minimum wage, sometimes significantly. That means that Wal-Mart had to raise its hourly pay this year to attract and keep workers, and, some say, to discourage lawmakers from voting in even higher minimums.
All that puts the retailer at something of a crossroads, with its longtime model of “always low prices” under question as it continues to face criticism and, perhaps more importantly for its own decisions, as it moves to attract wealthier, more urban customers.