A recent article in The Week considered the phenomenon of the retail apocalypse–the sudden loss of thousands of jobs in retailing.
Employment in general merchandise stores has fallen by almost 90,000 jobs since October. Just like manufacturing jobs before them, brick-and-mortar retail jobs are finally falling to the twin forces of technology and globalization — this time in the form of Amazon and e-commerce. Or so goes the narrative.
And what, exactly, is inaccurate about that narrative? According to the article–which goes into considerable detail–it omits a key cause. The story being told “vastly oversimplifies what’s going on with retail.” And it completely misses a significant cause of the collapse: the loss of a once-reliable mass of consumers and the effect of that loss on retail stores.
Things get interesting when we pick apart what we mean by “retail.” Employment in department stores has bled 500,000 jobs since 2001 — 18 times the number of jobs the coal industry lost in the same period.
Recognizable brands like Macy’s and Sears are looking shaky: the former plans to close 68 stores and lay off 10,000 workers, while the latter’s business model has been rotting for years and may collapse altogether. Malls across the country — long the home of these department store chains — are dying and emptying out.
As the article points out, department stores and malls depend upon a sufficient number of middle-income consumers. And those consumers need to live pretty much everywhere.
If you’re going to have a mall with department stores in every decent-sized town, you need middle-class consumers in every decent-sized town, too.
That’s precisely the sort of consumer we’ve lost. For the last few decades, middle- and lower-class wages have stagnated, while the portion of Americans high up the income ladder provide more and more of all consumer spending. The national economy has also gone through a remarkable geographic shift, in which pretty much all new job and business creation occurs in major cities.
The article concedes the significant role of the internet in our shifting consumption patterns, but insists that the major culprit is the loss of good-paying jobs–some as a result of trade, but far more as a result of automation and misguided economic policies that have abandoned the mid-century focus on full employment–a focus that drove up wages.
The culprit–the reason those middle-income consumers are vanishing–turns out to be low wages.
In the past few years, we’ve learned that resistance to raising the minimum wage was based on erroneous assumptions, mostly the argument that a higher wage would lead to fewer jobs. But job creation has actually improved in places that have raised the minimum wage.
What the old argument missed suddenly seems so obvious: When workers have more money to spend, they buy stuff. They consume. When they can barely make ends meet, they don’t go to the mall. They don’t eat out. They don’t browse at the department store.
There’s no doubt that the nature of retailing is changing. The Internet, Amazon’s same or next day delivery, the convenience of online shopping–all present a very real challenge to conventional retail trade. That challenge will require adjustment and innovation.
But first, you need customers with money to spend.