By Melissa Mata, CML research analyst
A September 2017 report by Michael Mandel, Progressive Policy Institute chief economic strategist, offers an antidote to the fear that e-commerce’s effects on brick-and-mortar retail will hurt local economies and employment. Using data from a variety of sources, including the Bureau of Labor Statistics, Bureau of Economic Analysis, and Census Bureau, Mandel argues that even as the retail sector has lost 140,000 full-time-equivalent (FTE) jobs between December 2007 and June 2017, e-commerce has created 400,000 FTE.
In addition to the net job creation of 260,000 FTE, the new jobs’ wages are, on average, 31 percent higher than brick-and-mortar retail jobs in the same area. This calculation may actually understate the pay difference between brick-and-mortar retail and e-commerce, as the data did not include all forms of compensation such as employer contributions to health insurance or educational assistance.
Many of the jobs created by e-commerce are in fulfillment centers, where online orders are received, packaged, and shipped, often requiring only a high school diploma, much like the retail jobs that have been lost. The increased wages have the added potential benefit of reducing the income gap that has been increasing between retail workers and the remainder of the private sector for the past 50 years. In addition, the warehousing industry, which includes fulfillment centers, hires people of color at higher rates than brick-and-mortar retail, meaning that black and Hispanic workers may especially benefit from the increased wages in e-commerce.
Certain municipalities in Colorado already have seen benefits from the e-commerce explosion. Yuriy Gorlov, Aurora Economic Development Council vice president, credits Amazon’s new sortation center and fulfillment center with bringing 1,500 jobs to the City of Aurora. He, too, notes the 30 to 50 percent increase in wages when compared to traditional brick-and-mortar retail jobs.
Mandel is excited to see how the technologically-focused approach to retail will spill over into new business models for manufacturing and distribution. However, even with his positive findings with regard to job creation and higher wages, he warns that it is not a panacea. E-commerce’s fulfillment centers greatly impact specific areas where they are located, but their jobs are more geographically concentrated than retail and may present challenges to communities who lose brick-and-mortar retail to e-commerce being distributed from elsewhere.
Uncertainty also abounds with the question of the consequences of automation on the specific jobs associated with fulfillment centers.
Finally, while this particular analysis focused on employment, there are other concerns related to the online sales tax loophole. Until the loophole is closed, the rise of e-commerce will continue to negatively impact local sales tax revenues.
While the research on e-commerce is not complete, one thing is certain: The evolution of retail marches on.