Why eCommerce Will Create More Jobs Than It Kills

One of the casualties of the ongoing retail death spiral seems almost certain to be the retail workforce.  That has become an increasingly certain part of the conventional wisdom – as real-world retailers are shutting locations down and laying off staff, and oceans of low-skilled service-sector workers are likely to end up on the market with fewer option available to them for gainful employment.

But one economist – Michael Mandel, head of the Progressive Policy Institute in Washington – says that narrative is fundamentally flawed.  Brick-and-mortar retail jobs may be declining, but that doesn’t mean jobs are disappearing.  In fact, he notes, he believes eCommerce will have an opposite effect and create more retail jobs at better wages.

Counting Correctly – And Drawing Different Conclusions

At the center of Mandel’s argument is a contention that government figures counting eCommerce jobs simply aren’t logging them correctly because the normal industry classification system is running behind the normal course of industry.  As a result, large segments of the employee base, those working in fulfillment and distribution centers, for example, aren’t being counted as part of the retail sector, when perhaps they should be.

Mandel, when he did a count on job statistics, found that eCommerce (when you add in all those distribution and warehouse jobs) had actually added 397,000 jobs to the U.S. economy between 2007 and 2017 as tradditional retail had shed about 76,000 jobs.

And the eCommerce jobs, on average, pay more; about 30 percent more than brick-and-mortar retail jobs.

“To be honest, this was a surprise to me — I did not expect this,” Mandel told The New York Times. “I’m just looking at the numbers.”

From Mandel’s point of view, the rise of eCommerce could be transformational and in regions where some economic transformation is needed.

Mandel noted that jobs at fulfillment centers also have the advantages of being “decent paying,”  full time and usually with benefits. He also noted that the push to build better and fuller logistics networks have meant fulfillment centers are increasingly showing up in  “places you haven’t heard of in a while.”

“This could be the pendulum swinging back,” he noted with cautious enthusiasm.

Doubts And Double-Counts

Mandel’s math is unusual, and though good economic news is always welcome, this variation on the idea that the digital economy will not be the end of employment in America has drawn some doubters.

“I’m highly dubious,” said John Challenger, president of Challenger, Gray & Christmas, an executive outplacement firm that maintains a monthly index of job losses across the country. “It does sound crazy to me.”

Apat from “sounds crazy,” Mandel’s model relies on an assumption that a large segment of the jobs created in the government’s “general warehousing” category are linked to the rise of eCommerce.  That might be a good assumption, but it’s an untested assumption that may be counting gains to eCommerce that aren’t rightful to it.

Mandel has responded that the risk of over-counting, while present, is less severe than the obvious undercounting in the way numbers are currently modeled.  Amazon, for example, says it employs 12,000 people in Kentucky, but according to the Bureau of Labor Statistics, Amazon only employs 1,640 eCommerce workers.

“By contrast, the general warehouse industry,” Mandel writes, “had more than 23,000 workers in Kentucky.”

He noted that over-counting is a risk as he might include “recent building of warehouses that are not for e-commerce reasons” but that his county-by-county search over 10 years for changes in building mostly correlates fairly strongly with the building of eCommerce fulfillments centers.

Moreover, he noted, looking at the market this way makes it clear that eCommerce isn’t just replacing retail as much as it is moving what was once  “unpaid household labor” like driving to the mall, shopping and bringing products home into the labor market.

Mandel notes that since 2007, “the decline in shopping hours is 64 million hours a week. That’s the equivalent of about 1.5 million jobs.” Some of those jobs – he noted, have been directly created by eCommerce and digital commerce efforts.

“I’m basically an optimistic person,” Mandel said. “I’ve spent a long time looking at what happened in the first part of the 20th century — how we got the combination of jobs gains and higher wages — and I think we’re on the same path.”

Of course in the 20th century, intelligent robots capable of running fulfillment centers (and possibly taking over the world) were the stuff of science fiction, not rapidly developing reality.  Mandel noted that robots represent an unknown X factor, but that he believes they will be added to the work environment rather than simply replacing the humans in it.