In a new study released today, "The Wal-Mart debate: A false choice between prices and wages", the Economic Policy Institute considers whether low prices make up for low wages at Wal-Mart. The answer is a definitive no, for two main reasons:

1. Wal-Mart drives down wages not just of its own workers, but for all workers in the area of a store.

Dube (2005) and Neumark (2005), in papers reviewed in Wrestling With Wal-Mart, present strong evidence that Wal-Mart's expansion has driven down earnings for workers not just in competing retailers, but across stores throughout the region of Wal-Mart expansion.

2. Wal-Mart may slightly reduce prices for food and household goods, but these items constitute an ever-shrinking share of American families' expenditures.

Wal-Mart essentially gives people the ability to buy food, apparel, household goods, and furniture at reduced prices. The share of expenditure in each of these categories has shrunk over time. By contrast, the expenditure shares on health care, housing, and transportation for families have gone up over time. These cannot be bought at Wal-Mart, yet they constitute an ever-growing share of American household expenditures. In short, the benefits from the same price effect in Wal-Mart's product areas are shrinking over time. The real pressures on family income are coming from items that can't be bought at Wal-Mart. These products and services can, however, be bought with higher wages.

The idea that encouraging Wal-Mart's expansion constitutes a progressive endeavor that will provide big benefits to poor Americans in the future is misguided; truly progressive policy should focus on the big-ticket items in most families' budget—health care, housing, and education.