In our initial survey, we identified 306 businesses within four miles of Wal-Mart that sold competing goods. Two years later, 82 of those businesses had closed. We found that businesses closer to Wal-Mart were significantly more likely to close than similar businesses farther away. Although we won’t go so far as to blame the closures on Wal-Mart, our evidence suggests that the new store hastened the decline of some of its competitors.
We also asked businesses about the number of employees they had and the wages and benefits they offered, and we collected information such as the residence, gender and race and ethnicity of the owners. We found that many of the retail outlets were small and were owned by women and minorities who lived in Chicago.
Based on the disproportionate number of business closures close to Wal-Mart, we concluded that, after two years, the number of jobs lost by Wal-Mart’s nearby retail competitors essentially offset the number of jobs created at the new Wal-Mart. With this data, we were not able to directly study Wal-Mart’s impact on new businesses, but Wal-Mart may also have influenced new business openings. The affected competitors had offered relatively limited benefits and offered wages only slightly above the minimum wage. Thus, the wages and benefits of the lost jobs were probably quite similar to the wages and benefits at the new Wal-Mart. From the point of view of workers, Wal-Mart’s opening was close to a wash.
We also examined retail sales data assembled by the state of Illinois, which does account for both new and existing businesses. We found that the opening of the Wal-Mart store had no measurable impact on total retail sales in its immediate neighborhood. This suggests that Wal-Mart’s sales simply offset sales from its competitors.
Of course, our study was confined to a single Wal-Mart store in a single Chicago neighborhood at a particular point in time. But the basic results were consistent with economic theory and the findings of many other studies of the retail industry. Retail employment and sales are largely driven by neighborhood population and incomes and are not greatly affected by new retail developments such as Wal-Mart. Of course, a neighborhood’s retail characteristics can influence which competitors lose out when a store opens. The Chicago neighborhood we studied had a dense network of stores before Wal-Mart arrived, and many of these stores appeared to lose sales to Wal-Mart. Job loss might be less concentrated geographically in a place where competition is more sparse, as the proposed D.C. Wal-Mart sites are reported to be.