The article is about the overall falling rate of unemployment in the United States which dropped to 3.9% or 6.3 million people. This means that 3.9% of Americans are actively looking for a job, but are unable to find work. Despite the United States’ unemployment rate falling to the lowest since 2000, the retail sector has not experienced much growth with only 1,800 out of the 164,000 jobs added. This creates socioeconomic costs; the loss of income which leads to declining living standards and the loss of national output which leads to an increase in spare capacity.
Over the past 15 years, the percentage change in retail jobs has seen a 334% growth in e-commerce, no change in the retail industry, and a 25% drop in department stores. Although online shopping accounts for only 8.4% of all retail sales in the United States, it has had an outsize effect on the retail workforce. The number of e-commerce and warehousing jobs has leapt by 400,000 whereas the number of traditional retail jobs has declined by 140,000. The replacement of human capital with technology has resulted in structural unemployment – people are out of jobs because the demand for their skills are in decline. Though the rise of e-commerce has created new jobs, they have not absorbed the job losses at traditional retailers.
United States Retail Labor Market
According to the article, employment in clothing and accessories stores dropped by 5,300. The retail firm’s demand falls then the firm decrease its output. Employers lay off workers with skills no longer in use, hence why the demand for labor decreases from D1 to D2. The previous equilibrium A shifts to the new equilibrium B. Wages do not fall, and there is an unemployment of amount Q1 to Q2.
There is a rural/urban split in terms of retail jobs in America. There has been a lag of retail job growth in urban counties of large metropolitan areas, and an annual decline of 1.1% in rural counties and small metros. Meanwhile, e-commerce and warehousing jobs have boomed in both rural and urban areas. In low density suburbs, e-commerce employment surged 32% each year, and rose by 12% in high density suburbs. In sum, the rise of Amazon and other online sellers and the decline of brick-and-mortar retail is not spread evenly across the country.
Structural unemployment requires reshaping of the labor market to improve flexibility. This is a long term supply-side solution where the LRAS shifts to the right or the production possibility curve moves outwards. This involves training the workforce to be more occupationally flexible so traditional retail workers can change jobs to e-commerce easily. E-commerce is less labor intensive and online retailers can sell more products with fewer workers than traditional stores. Apprenticeship programs that train the youth to adapt to changing economic conditions are required. Retraining programs for adults that reskill them from traditional retail jobs to e-commerce and warehousing jobs are imported because it increases their chance of employment. The government can subsidize firms to provide apprenticeships and training, or they can set up their own government training. They may also improve geographical mobility by offering financial assistance to unemployed workers in rural counties or small metros to encourage them to move to urban areas with higher employment. However, all these policies have a high opportunity cost. First, the United States has to forego spending in other areas such as healthcare to be able to afford these strategies. Second, minimizing the job loss of the retail industry might not be a priority for their government and society. Finally, they should also consider the time lag since the policies may take years to take effect after implementation. The working population may get impatient if they do not see immediate results.
In conclusion, the United States’ retail industry suffers from structural unemployment. The job market in America is shifting as a result of contracting retail jobs and booming ecommerce and warehousing jobs. Retail positions constitute a high percentage of jobs in rural America and these areas lag in growth and have relatively high unemployment rates. The solution lies in supply-side policies. Depending on the objectives of the economy, government budget, and time frame, the solutions might not be effective or initiate new issues. But if the United States does not tackle its unemployment by industry, they will be hit harder if traditional retail jobs continue to contract and the working population does not adapt to new e-commerce and warehousing jobs.