Retail Jobs Slide Due to Productivity Gains

Retail trade may not come immediately to mind when one thinks of innovation, but in fact, the sector has been as quick as any to adopt new technology. This is not because the leaders of retail companies are more visionary than others, but because brutal competition has forced them to adopt or die. The large number of retailers fighting for market share has driven them to find ever-cheaper sources for their goods and try to mark them up slightly less (or down slightly more) than the competition. One need only run through the list of retail companies that have merged, reorganized, and liquidated to appreciate the toughness of the industry. In this struggle to stay alive, retailers have been quick to adapt technology to speed up customer service, reduce inventories, and automate ordering.

As in every industry, however, improving productivity eliminates jobs, unless demand is rising faster than productivity. In volume terms, the retail sector has been doing well. Since early 2001, sales at retail outlets* have increased 13%, but falling prices mean that nominal sales have increased only 8%. With average hourly earnings for retail workers rising 7% over that period, retailers have had a strong incentive to make do with fewer employees. And they have. Since early 2001, the number of retail payroll jobs has fallen by nearly 400,000.

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