Wal-Mart & The Economic Multiplier Effect.

Discussion in 'Economics' started by SouthAmerica, May 30, 2005.

  1. .

    South America: Here is information of the impact that one company (in this case Wal-Mart) can have in the local economy of any area of the country, because of the economic multiplier effect.


    “Wal-Mart & The Multiplier Effect / Re-Circulated Money”

    Economists talk about the multiplier effect of money. They may disagree about the number of times it re-circulates, for instance, 3.7 or 7.3, or higher or lower or perhaps in between, but no one underestimates the importance of the fact that it does re-circulate and that re-circulation is vital in a healthy economy.

    Another thing economist generally agree on is that the longer money stays in any given area, more people in that area will get their hands on it.

    This occurs because people spend money, and the folks they spend money with, in turn, spend that money with folks that turn around and spend that money with others. This process will, in time, generate a large amount of sales tax revenue for the community. This happens each time a new and different consumer purchases a taxable item.

    If the original money is removed from the area completely, the process stops immediately.

    No one can declare, with certainty, just how many times money re-circulates, while dependant on many factors, it is thought that somewhere between 3.7 and 7.3 are traceable numbers. You may pick any number you want, anything over once will generate more tax revenue for our city/county/state, than Wal-Mart will provide.

    #1: Wal-Marts sales are electronically deposited out of state daily. This removes any possibility of multiplying our tax base on whatever profits are involved.

    Wal-Mart cannot magically produce more money in a given area than there is already present.

    No new money is generated by Wal-Mart, It is only removed by Wal-Mart.

    #2: When Wal-Mart buys its merchandise outside the United States it removes any possibility of multiplying our tax base on whatever manufacturing monies are involved.

    As an example, in a FAST* apparel survey where Wal-Mart is recorded as the company of record responsible for a particular piece of apparel, 98% of the items surveyed were produced offshore;

    75% in Asia
    14% in Africa & Middle East
    5% in Europe
    4% in Latin America
    2% in the U.S.A.

    Wal-Mart stores dramatically deplete United States taxable income each and every year on manufacturing. They bring nothing new to the taxable table. Nothing! Communist China, Korea, Taiwan, Hong Kong, the Asian Rim, receives the greatest benefit, then Africa, the Middle East, Europe, Latin America and Dead last, the good old U.S.A.

    The obvious conclusion must be there is no multiplier effect, on manufacturing created by Wal-Mart and that too is a major reason why sales taxes continue to go up.

    The 1970's saw 5% sales taxes charged the California consumer.

    The 1980's sales tax hovered around 6%.

    The 1990's sales tax is up to 8.50% in some areas of California.

    Now the Century has turned over, the State is flirting with sales taxes over 10%.

    The greater the loss of the multiplier effect, the higher California sales taxes will have to go.

    #3: The 3rd and last item that could generate additional tax revenues is wages, however Wal-Mart cannot produce Multiplied tax dollars here either. Studies show that a Wal-Mart produces' only one job for every 1.5 that they destroy. These jobs come from the business sector that was somewhere in that marketing area prior to the arrival of a Wal-Mart

    One evidence of dissatisfaction with the pay and benefit package Wal-Mart offers, is the 60% plus yearly turn over of their employee base, (approximately ¾ of a million employees quit Wal-Mart every year). With fewer people making less wages and benefits, taxable income from total wages will decline in a Wal Mart area, this also removes any possibility of multiplying our tax base on any wages involve

    Note: The average U.S. discount store is 90,000 square feet and generates $23-million in annual sales. The average Wal-Mart Supercenter is 182,000 square feet and does $87-million in sales.

  2. Excellent excellent commentary.....
  3. jem


    I am not a big fan of walmart.

    First point sales tax.

    Sales tax was 5 and now higher.

    Cause wal-mart?

    Revenues in the state have risen. And legislature run by the democrats attempted to impoverish it by creating and fostering a permanently democratic underclass that would always vote for giveaways.

    Also there was the energy crisis.

    And the incredible mismanagement of medical care.

    Wal-mart is meaningless in that sceanrio.

    You speak of the multiplier as if it is a cause as opposed to a corellation.

    Question - when we have an all electronic payment system will there be no multiplier effect. Assuming imports are going to be cheap would it be better to allow a chinesse "Branded' company to export more profit rather than let Wal Mart control the process and extract profits for its shareholders?

    Is it better to have people spend more money on more expensive goods and have less to spend on food and shelter.

    I do not know if wal mart is good or bad. But I wonder what the alternative would have been.
  4. well if you like it that much you might want to save it before Tgregg "censors" it like he did another one of SA's threads.
  5. The real question is.....

    Is Globalization good...if so..for whom ???

    Who pays...who gains...???

    It is quite interesting how concepts come up such
    as the EU...CAFTA...NAFTA...and are voted in liticiously
    without have a clear understanding of their impacts beforehand...
  6. all the answers are found on "Pinky and the Brain".
  7. .

    SouthAmerica: Wal-Mart and the “Outsourcing Machine in Steroids called - IBM” are leading the US economy into a race to the bottom.

    The goal of both of these companies is to lower wages for workers in the United States to the lowest common denominator in the global economy.

    I hope Americans workers will enjoy their ride to the bottom of the economic world.

    Wal-Mart import to the US deflation from other countries - low wages with no benefits –
    And “IBM” is exporting good American paying jobs to foreign lands as fast as they can.

    The combination of the major efforts of these two companies will lower the standard of living of middle class Americans to the level of the standard of living of the 3rd world.

    Goodbye to the good life, and welcome to the new poverty in America - With the compliments of “Wal-Mart” and “IBM” the outsourcing company.

  8. Trajan


    Interesting theory, except that Wal-Mart didn't arrive in California until after 1990, long after CA taxes got out of hand. Here is map of Wal-Mart expansion I posted yesterday at Always Low Prices. And your point about the manufacturing is silly. The consumers of the clothing benefit greatly even if the money is shipped out to other places. This is a mercantilist fallacy. And don't try and say we don't manufacture anything here anymore. It's just an absurd comment.
    Care to point to these studies? I would be curious to read them. I doubt you could because there are any serious research studies showing this. First, Wal-Mart pay is consistent with other retailers you can look this up yourself at the BLS website. Second, serious academic research has shown that Wal-Mart does have zero net impact to a positive job creation effect. I can even link to a study showing this:
  9. Congratulations on looking at everything negative about Wal-Mart.

    I buy my chicken, tires, gas and everything from them. Since everything is at one place, I might go in to buy some printing paper, and I come out with couple of pants, shirts and tires etc. I guess nobody cares about how much of an economic benefit Wal-Mart is and focuses on the negative.

    Wal-Mart is the best. Wal-Mart is an economic revival. It brings everything to an economic equilibrium. Wherein which, we can use freed up economic fire power to improve the world in other much economically efficient ways.

    You are focusing in on short term negativities which just simply doesn't outweight the longer term future benefits. I say we need at least one Wal-Mart in every American town.
  10. their customer service has gone down the toilet... i think they cut their costs so much that they are always understaffed and overworked. i havent been there recently, but the store is always crowded and not a pleasure to shop. it seems like low-income shoppers tolerate this place to save a nickel. but then again some people on et have said people drive up to walmart in porsches and benzes (lol) so it must be geographically dependent. depends if u have a hood nearby that can creep in i suppose. the nysc in wall st has escalators with golden handrails haha.
    #10     May 30, 2005