Wal-Mart and GINI

I am working on some posts on income inequality, especially as compared between nations.  One thing I have been thinking about is whether the US GINI (a measure of income inequality) is overstated because the US has a tiered retail system that gives lower income people access to lower prices (though for sometimes lower quality goods).  We have Wal-Mart and Family Dollar, discount retail concepts that are rare, and often illegal (due to limitations on retail discounting) in European countries.

On a sort of purchasing power parity basis, I wonder if this has any impact in narrowing the US effective GINI.  Of course, this mitigating factor is somewhat mitigated itself by the fact that a number of urban areas with some of the poorest families (e.g. Washington DC) restrict entry of these low-cost retail establishments.

  • kidmugsy

    It's entirely reasonable to wonder about understatement of the US Gini coefficient, as long as you also wonder about overstatements; otherwise you end up "explaining away" rather than explaining. Probably the first requirement for any such study is the decision of whether to include state handouts as part of income.

  • Johnathan

    Your concern that the US GINI might be overstated indicates a belief that income inequality measures something meaningful or important, and that higher numbers are worse. By agreeing to that premise, the only thing you can argue is what the "proper" number is, and at that point, you've lost the argument.

  • Daublin

    Black Friday is another example. Poorer people tolerate the crowds and get bettter deals because of it.

  • mjed

    It's dated at this point, but for cross country comparisons, I found this Timbro study on consumption inequality to be informative: http://www.timbro.se/bokhandel/pdf/9175665646.pdf

  • Dale

    I
    was reading a while back that Costco was one of the best companies to work for
    in the US; both in wages paid and employee satisfaction, and that Wal-Mart is
    one of the worst on both counts. I have
    also known people who worked for Wal-Mart and that assessment would seem to be correct. With that said my question is; how does this
    fit in with your guys' worship of Wal-Mart.

  • frankania

    It is irrelevant; a successful business who people work for and/or shop at, survives. Ones that do not give good service and treat their employees decently, do NOT.

  • FelineCannonball

    Don't forget the widespread availability of dry kibble dog food in the US. Pretty much a complete diet and abrasive enough to maintain decent dental health. That and newer formulations of cardboard make excellent insulated sleeping mats.

  • skhpcola

    Very interest report and reading, even if it is almost a decade old. Thanks!

  • http://ommag.blogspot.ca/ OMMAG

    It's a straw man set up by and for socialists to bash the ideas of merit, value and personal responsibility.

  • Not Sure

    Every time I go to Walmart, the place is packed. If they're as bad as what you read, why weren't all those people shopping at Costco instead?

  • Skeptiker

    I don't think that your conclusion on Walmart is true. At least in Germany, Europeans have Aldi and Lidl which are both cheaper than any Walmart I encountered in Europe. They even were cheaper than us Walmarts and the euro was even stronger then.
    And in France they have leader price, funny eh, and they are on par with Walmart in the price department.
    So if don't think you will find a lot in the discount department.

  • Dave Sheridan

    It depends on what you're trying to measure. Looking only at the distribution of market incomes can be "correct" computationally, but incomplete for most purposes. Inclusion of taxes, transfer payments and in-kind benefits is most appropriate if we want to get the whole picture of what the combination of market incomes and transfers does to the income distribution.

  • MingoV

    I helped my daughter furnish an apartment in Germany in 2010. Dortmund was supposed to have a Walmart, but construction stopped in 2009 due to adverse political pressure. The lack of a large store that stocked a huge variety of items made shopping a nightmare, and our lack of an auto made it worse. I spent days taking trains to store after store. Many stores were small: can anyone here imagine a small mattress store? All the goods had high prices. I made my first (and last) visit to Ikea: ugly furniture at shocking prices. After stocking the apartment we had more "sticker shock": food prices also were very high. The upside was the high quality of produce, meats, and bakery goods; but American goods of the same quality cost less.

    Germany has too many small stores that are kilometers apart. The stores charge a lot even if the 16% VAT is removed.

  • HSNormal

    Walmart opened 4 stores in Washington DC last week.

    There are big box retailers in Europe. Carrefour and Makro (also does business as Markt) are two. Carrefour in particular reminds me of Walmart, except with similar prices and somewhat lower quaility goods.

  • John Say

    Rather than fixate on meaningless and often distorted measures of income distribution why not focus on what actually matters.
    Mao's china had low inequality. It that our goal ?
    The US has historically had high inequality, and inarguably has a two century record of moving people from poverty to the middle class.
    Over the past generation more than 10% of the population of this country has been illegal aliens. How can you have a reasonable income distribution when the bottom 10% of your workforce is undocumented and impoverished. Yet still as with immigrants from every prior age, we keep moving them up the ladder.

    Isn't that what really matters ? We have the most diverse nation in the world. Only the UK even comes close. How can you even compare these homogeneous monoliths ?

    As you must be aware - growth is what matters. France, Italy and Germany all have lower GDP/capita than all but 5 US states. You can not redistribute what you do not produce in the first place. Average standard of living is what is produced divided by how many produced it.

    The average person in the US bottom quintile has nearly as much household wealth as a middle class european.

    Our current abysmal 2% growth rate would be a boom in much or the EU.
    A mere 1% increase in growth means the bottom quintile of the next generation will have the wealth of the 2nd quintile today.

    Do not get sucked into bogus measures of envy.

    Watch some movies from the 60's and 70's. Look at the cars and homes the wealth of people on TV and compare it to the poor in the US today ?

    Drive down the worst streets in your city and look at the cars. Where are the 30 year old rust buckets, the cars up on blocks, the innumerable cars half torn apart along the streets ? Even in the worst neighborhoods, the cars are far better and newer than 30 years ago. And those people have cell phones, and flats screens and ....

  • cal_culus

    Walmart gets about 10 applications for every job. Why would so many people apply if they didn't want to work there.

  • cal_culus

    Most of the quoted surveys don't use capital gains and/or govt handouts, so you have to compare carefully.

  • dale

    There is a lot more people looking for work then there are
    jobs. If that wasn’t so Wal-Mart would
    have to treat their employees better.

  • Sam L.
  • timworstall

    The most important thing to know about US inequality is that the usually quoted number (Census, CIA etc) is the wrong one to be using. That shows gini of about 0.47. But that is the pre-tax and pre-benefits number. The European numbers you'll see quoted, 0.23 for Sweden etc, are the post tax and post benefit numbers. So, after all the redistribution that is done to lower inequality, whereas the US number is before those effects.

    The Wikipedia page gives a very useful list of both sets of ginis. Whichever you want to use make sure you're using the same one for each country. Pre or post tax and benefit. The post both for the US is more like 0.38.

  • BobSykes

    If you're going to compare ginis, you have to do it across the whole of Europe, from Switzerland to Cyprus. That comparison might very well show that the US gini is smaller than Europe's.

  • A. Ames

    Coyote:
    You are right to consider input-output relations since a fully differentiated society should provide higher quality of living and/or lower cost.

    Since GINI gives highest marks to a feudal sociey with one king and mostly serfs, it may be considered a measure of economic differentiation thus a measure of the strength of the economy, not a measure of oppression of individuals.

  • Jess1

    "Gini"? What a load of codswollop, ranking up there with the "BMI" as a useful bit of information.
    I must have missed the memo - when did obsessing about other's incomes become a function of public political policy?
    As long as one isn't using force (government) to enrich themselves, I care not about their (or their employees') incomes.

  • Jess1

    Exactly so. The obsession (to the point of creating a "number" out of thin air) with the income of others is self destructive at best...

  • marque2

    More importantly - why aren't all those people working at Costco instead. Surprisingly when asked Walmart employees joined because of the decent pay and the upward mobility. You get promoted fairly quickly if you stick around. Much of the complaints are phoney myths perpetuated by Unions. Once unionized the complaints will all disappear even if wages do not go up at all.

  • marque2

    I have not heard about any real mistreatment at Walmart. Word on the street is Walmart employees are treated better than Target ones. But yes if the labor participation rate were higher - Walmart would pay a bit more.

  • Jess1

    "Better" than what? Do you have any insights, or just repeating what you "read"?

  • http://itsaboutliberty.com/index.php MNHawk

    Tell ya what. Let's see Costco deal in WalMart's selection and WalMart's quantities, then get back to me. Let's see Costco deli deal in McDonald's selection, then get back to me. Let's see Costco deal in (insert anyone else here)'s hours, then get back to me.

    Costco works because of very limited selection, high quantities, and limited hours.

    How does this fit in with you union trash's worship of Costco?

  • marque2

    For the phoney Wall mart hates employees posts - here is a blog from an undercover Wired writer, who joined WalMart to see what was really happening. He asked his coworkers why they worked there.
    Their reasons.
    1: Decent pay
    2: Better than Target
    3: Upword mobility.
    4: Not having to deal with quirky management from mom and pop stores.
    People are actually relatively happy to work there:

    http://boingboing.net/2009/02/01/life-at-walmart.html

  • CapitalistRoader

    Aldi stores in Illinois and Iowa too. Great prices, decent quality. I wish we had them in Colorado.

  • Stephen Lucas

    You mention that you are interested in income inequality between countries. I did a paper for a graduate economics class that you might like to read. It is a little dated, but still relevant. http://mises.org/journals/scholar/lucus1.pdf

  • irandom419

    They should compare Costco and Sam's Club, not Costco and Walmart. Warehouse clubs do pay better, but for the unskilled or unmotivated, Walmart is probably the best job they will have. I discovered there are restaurant supply places that don't charge for membership and don't harass you in the checkout line to upgrade. They have better deals on meat and less yuppies.

  • John Say

    What low income inequality looks like

    http://3.bp.blogspot.com/-laqtCbMYhX0/UqSJ_CTAjTI/AAAAAAAAJ6I/WnFpe5tN0hM/s1600/shenzen+before+reform.jpg

    The same place 30 years later with radically higher income inequality

    http://2.bp.blogspot.com/-9JdbG4WWW24/UqSLJ4H5YLI/AAAAAAAAJ6Q/_QXoczIijF0/s1600/shenzen+today.jpg

    where would you rather be poor ?

  • Me too

    More accurately there are more unskilled people looking for unskilled jobs than there are unskilled jobs. I've been trying to fill one residential painter position for over a year. I've been through 10 people that I was willing to let on a job site in that time. None have made it more than 2 days. I've lost track of how many I have interviewed.

  • MingoV

    I shopped at an Aldi in Germany. Prices were comparatively low, but selections were limited. The Aldi in Collierville, TN is a joke. It's across from a Walmart. Its prices are higher than Walmart, and it has a very limited selection of goods.

  • Todd Ramsey

    In your GINI research, please include the consequences of the U.S. absorbing huge numbers of immigrants every year, most of whom are low-skill/low-income and may not speak English well enough to secure high-paying jobs. Probably you thought of this, but just in case.

  • Zoran

    MingoV, groceries in Munich are 2 to 5 TIMES cheaper then in the US (I am in NJ, but I saw similar prices in CO, UT, PA). Check out PennyMarkt, Aldi, Lidl. Restaurant food in Germany, which you probably ate on the run, is expensive.