The Walmart Effect: A Hidden Cost of Low Prices

Walmart, known for its low prices, has long been considered a boon for lower- and middle-income families. However, two new research papers challenge this view. The studies find that while Walmart lowers consumer prices, it also leads to decreased income and increased unemployment in communities, with the negative effects outweighing consumer savings. This is attributed to Walmart undercutting local competitors, reducing jobs, and leveraging its monopsony power to suppress wages for both suppliers and employees. This raises questions about the "consumer welfare standard," which prioritizes low prices as a measure of economic health. The research suggests that a singular focus on low prices can lead to long-term economic harm, prompting a reevaluation of policy priorities.