Your analysis of the short-term effects is correct, but the long term effects depend on whether "low wage workers" are permanently so. Sometimes people condemn Walmart jobs as "dead-end" and that is getting at the right point.
I've heard the claim that Costo and Sam's Club (ie, Walmart) are very similar, but Costco is famous for paying its employees twice as much. But this doesn't come out of profits - Costco spends the same amount on labor, employing half as many people, twice as productive. If Walmart could make its employees twice as productive, that would be great for society, though in the short term it would lay off half of them.
If the productivity of people is unchangeable, then Walmart is doing society a valuable service by providing a niche to people capable of no more. But if Costco employees are more productive because Costco trains them, then Costco is doing a valuable service by improving their productivity. In the first case, we want Walmart to win because only a few companies like Walmart can make use of the least productive workers. But in the second case, we want Costco to win because it is making use of the same people, but making better use. But we observe that they are evenly matched, so there's no reason to expect either of them to win, let alone the right one. Eventually in the second scenario Walmart loses, not because Costco wins, but only when the Costco model expands into new industries, producing more training, bidding up the salaries Walmart pays.
In the particular example, I believe that Costco is not increasing productivity, but merely identifying more productive workers, and that Walmart is able to employ people that few other companies can. In general, I think the economy is generally trending away from investing in low-end worker productivity, which is terrible. In theory, raising the minimum wage should put pressure against this, but pressure to create new companies that work differently is less certain than pressure shifting the balance of power between existing companies.
(Also, there's a third scenario where Walmart provides the training, but the productive workers graduate to Costco. I certainly think Walmart is providing filtering, letting productive people build up a resume to show to Costco; I'm less certain of whether it improves the workers.)
I worked at Walmart as a teenager. Walmart does a lot of training, but the simple fact is that they work with people who have a lot of attitude and discipline problems (like the teenage me) that would make them unemployable elsewhere.
Note: Originally posted in Discussion, edited to take comments there into account.
Yes, politics, boo hiss. In my defense, the topic of this post cuts across usual tribal affiliations (I write it as a liberal criticizing other liberals), and has a couple strong tie-ins with main LessWrong topics:
The issue is this: recently, I've seen a meme going around to the effect that companies like Walmart that have a large number of employees on government benefits are the "real welfare queens" or somesuch, and with the implied message that all companies have a moral obligation to pay their employees enough that they don't need government benefits. (I say mention Walmart because it's the most frequently mentioned villain in this meme, but others, like McDonalds, get mentioned.)
My initial awareness of this meme came from it being all over my Facebook feed, but when I went to Google to track down examples, I found it coming out of the mouths of some fairly prominent congresscritters. For example Alan Grayson:
Or Bernie Sanders:
Now here's why this is weird: consider Grayson's claim that each Walmart employee costs the taxpayers on average $1,000. In what sense is that true? If Walmart fired those employees, it wouldn't save the taxpayers money: if anything, it would increase the strain on public services. Conversely, it's unlikely that cutting benefits would force Walmart to pay higher wages: if anything, it would make people more desperate and willing to work for low wages. (Cf. this this excellent critique of the anti-Walmart meme).
Or consider Sanders' claim that it would be better to raise the minimum wage and spend less on government benefits. He emphasizes that Walmart could take a hit in profits to pay its employees more. It's unclear to what degree that's true (see again previous link), and unclear if there's a practical way for the government to force Walmart to do that, but ignore those issues, it's worth pointing out that you could also just raise taxes on rich people generally to increase benefits for low-wage workers. The idea seems to be that morally, Walmart employees should be primarily Walmart's moral responsibility, and not so much the moral responsibility of the (the more well-off segment of) the population in general.
But the idea that employing someone gives you a general responsibility for their welfare (beyond, say, not tricking them into working for less pay or under worse conditions than you initially promised) is also very odd. It suggests that if you want to be virtuous, you should avoid hiring people, so as to keep your hands clean and avoid the moral contagion that comes with employing low wage workers. Yet such a policy doesn't actually help the people who might want jobs from you. This is not to deny that, plausibly, wealthy onwers of Walmart stock have a moral responsibility to the poor. What's implausible is that non-Walmart stock owners have significantly less responsibility to the poor.
This meme also worries me because I lean towards thinking that the minimum wage isn't a terrible policy but we'd be better off replacing it with guaranteed basic income (or an otherwise more lavish welfare state). And guaranteed basic income could be a really important policy to have as more and more jobs are replaced by automation (again see gwern if that seems crazy to you). I worry that this anti-Walmart meme could lead to an odd left-wing resistance to GBI/more lavish welfare state, since the policy would be branded as a subsidy to Walmart.