When Wal-Mart opened its only store in Chicago, Illinois on the west side of the city, the retailer said, “This store will show what a great asset Wal-Mart can be to the community, as an employer and corporate citizen.” From the very beginning of its drive to locate stores in the Windy City, Wal-Mart has based its case on jobs. One of Wal-Mart’s most visible and vocal frontmen is Alderman Howard Brookins of the city’s 21st Ward on the South Side of town. “We need jobs, plain and simple,” the Alderman has said repeatedly. Brookins has been so outspoken on the issue of Wal-Mart and jobs that the Chicago Tribune has referred to him as “the Alderman from Wal-Mart.” But the jobs argument isn’t adding up in Chicago. A new study from Loyola University and the University of Illinois at Chicago (UIC) has put the giant retailer on the economic defensive once again. The comprehensive study, The Impact of an Urban Wal-Mart Store on Area Businesses: An Evaluation of One Chicago Neighborhood’s Experience, found that Wal-Mart’s opening in Chicago has produced a loss of 300 full-time jobs. Researchers conclude that the probability of a local retailer going out of business during the study period was significantly higher for establishments close to Wal-Mart’s location. The loss of jobs in the trade areas near Wal-Mart just about balanced out any ‘new’ jobs attributable to Wal-Mart. “These estimates support the contention that urban Wal-Mart stores absorb retail sales from other city stores without significantly expanding the market,” the researchers say. “What we’re seeing here is that placing a Wal-Mart in an urban setting is basically a ‘wash’ in terms of sales revenue for the city and jobs for local residents,” explains study co-author David Merriman, head of UIC’s economics department. “This means that communities around the city should not see Wal-Mart, and other big-box retailers, as a panacea to local economic struggles.” The two universities collected data pre-Wal-Mart, post-Wal-Mart, and post-Wal-Mart long-term. Data was collected from March of 2006 until November of 2008. A total of 306 enterprises were tracked, and the research team found that 82 (27%)of them went out of business during the study period. A key finding of the survey is that the probability of going out of business was significantly higher for businesses close to Wal-Mart. Being located close to Wal-Mart was particularly toxic for retailers selling electronics, toys, office supplies, general merchandise, hardware, home furnishings, and drugs. Based on their analysis of retail sales, the researchers conclude that “These estimates support the contention that large-city Wal-Marts absorb retail sales from other city stores without significantly expanding the market… Overall, the weight of evidence suggests that the Wal-Mart opening on the West Side led to the displacement of a range of businesses. There is no evidence that Wal-Mart sparked any significant net growth in economic activity or employment in the area.”
The researchers in this new study suggest that their findings are very similar to a number of other studies on “the Wal-Mart effect” that have been published since the 1980s. “Under the circumstances,” the new study says, “claims that the Chicago Wal-Mart has led to significant economic development in nearby areas must be considered skeptically.” Wal-Mart has been trying to break into the Chicago market like gangbusters since the spring of 2004 — almost a six year epic struggle. The Chicago City Council responded in part to Wal-Mart’s push by passing a “big box living wage” ordinance, which Chicago Mayor Richard Daley vetoed. The West Side Wal-Mart opened in the fall of 2006. To further enhance its chances of additional stores, Wal-Mart announced in the spring of 2006 that this West Side store was going to be part of a national campaign launched by Wal-Mart called “Jobs and Opportunity Zones (JOZ.” Wal-Mart promised that it would select five small local businesses for advertisements in local newspapers and on Wal-Mart’s in-store radio network. Wal-Mart also pledged to host workshops for small businesses on how to “survive & thrive” with a Wal-Mart nearby. A grant of $300,000 would be donated to local chambers of commerce to create effective programs for the funds. But researchers from Loyola and UIC interviewed 2 of the 5 businesses selected to be part of the JOZ program. Both businesses claimed that Wal-Mart did buy ads for their businesses in local newspapers — but neither attended any Wal-Mart seminars — and one owner called the Wal-Mart initiative “pretty much a failure.” This new Chicago study underscores research conducted by economists Ken Stone, Tom Mueller, David Neumark, and others that reveal the dark side of Wal-Mart’s economic impacts. One earlier study showed that each Wal-Mart worker replaces about 1.4 non-Wal-Mart retail workers. The group Retail Forward concluded in 2003 that “for every Wal-Mart supercenter that opens in the next five years, two supermarkets will close their doors.” According to the local ABC affiliate in Chicago, Wal-Mart’s only comment about this new study was that it was funded by “a group with ties to labor.” Readers are urged to call Chicago Mayor Richard Daley at (312) 744-3300 and leave the following message: “I’m calling to ask Mayor Daley to please refrain from talking about a south side Wal-Mart project as a jobs or revenue project. I urge the Mayor to read through the new Loyola University study on the economic impacts of the existing West Side Wal-Mart store. This study should dispell any notion that Wal-Mart is a job-generator. Chicago has nothing to gain from Wal-Mart — except low wages, Chinese imports, and windy rhetoric. Chicago already has plenty of all these things.”
