Economy Archives - Page 30 of 83 - Progressive Policy Institute

Expansion of the Joint Employer Doctrine Fails to Strike the Right Balance

Posted on October 5, 2017September 18, 2024 by The Progressive Policy Institute

Policymakers across the United States are struggling to figure out how to adapt to swift changes in the American workforce. So-called “alternative work arrangements,” for example, are growing: in 2015, 15.8 percent of workers were independent contractors, temporary workers, contracted workers, or “gig” workers—a 50 percent increase in just a decade. Yet some efforts at adaptation—such as expansion of the “joint employer” doctrine—may do more harm than good. PPI is committed to helping find solutions that balance worker protection with business productivity and investment and the expansion of the joint employer doctrine fails to strike that balance. We must figure out a better way forward that boosts economic dynamism without sacrificing worker interests.

At the end of July, the Save Local Business Act was introduced into the House of Representatives. The bill, with three Democratic cosponsors among over three dozen Republicans, aims to narrow the expanded definition of “joint employer” promulgated by the National Labor Relations Board (NLRB) in 2015. This elicited immediate praise from business groups—particularly those associated with franchises—and opposition from unions and other groups advocating for worker rights.

The joint employer doctrine is used by the NLRB and courts in determining legal responsibility for issues such as overtime pay when more than one employer is involved. If a bank, for example, contracts with a company to provide janitors to clean the bank facilities, the janitors are employees of the contract firm, not the bank. Yet, if the bank has some level of control over of the janitors’ wages and hours, it could be deemed a “joint employer” and would be responsible for appropriate legal compliance.

Not incidentally, the joint employer doctrine is central in shaping the ability of employees to engage in collective bargaining. Contract workers, temporary workers, and franchise employees—all of whom are affected by the joint employer doctrine—are difficult to unionize. Employees of franchise locations—fast-food restaurants, for example—are technically employees of the franchisee (the local operator), not the franchisor (the national brand). The entire purpose of the franchising model is to allow the franchisor to focus on brand and system, and leave the franchisee to focus on operations and local context, including employment.

Under the expanded joint employer doctrine of the NLRB, however, it is possible that both the franchisee and the franchisor could be considered employers of the workers at each individual franchise location. This “could fundamentally change business in the United States by destroying the franchise model.”

Until the 1980s, the NLRB threshold for a joint employer finding was “direct or indirect control” over working conditions. This was a fairly broad doctrine and, in certain circumstances, could be used to find that employees were subject to “control” by more than one employer. Nonetheless, the NLRB joint employer standard remained more modest than definitions used in Title VII of the Civil Rights Act and the Fair Labor Standards Act (FLSA).

Beginning in the 1980s, the NLRB gradually narrowed the definition to “direct and immediate” control over employment issues. The change from “indirect” to “immediate” had large implications in where the joint-employer line was drawn. If the bank “shares or codetermines” the conditions of employment of the contracted janitors, and “meaningfully affects” their hiring, firing, supervision, etc., the company could be a joint employer. Now, the NLRB says, no longer is “direct and immediate control” required—even the possession of authority to direct third-party employees is sufficient, regardless of whether the authority is exercised.

These subtleties in language and reliance on factual findings are classic examples of legalese, but cases involving worker rights and business interests frequently turn on choice of words and how those words are put into practice.

Business groups do not welcome a broader definition. Especially as it pertains to franchise arrangements, the more expansive standard could open up franchisors to greater liability and more attempts at collective bargaining. Already, we have seen arguments to apply the extended joint employer doctrine to other areas, such as student athletes. A challenge to the NLRB’s expansive interpretation is currently pending in front of the D.C. Circuit, and it is expected that the NLRB under President Trump will work to narrow the standard. In the Republican-controlled Congress, the Save Local Business Act could find easy passage and, at the state level, legislatures are being lobbied to pass laws saying that franchisors cannot be considered joint employers.

One problem is the likely response from franchisors to the expanded NLRB standard—in particular, we may see reduced business dynamism. Franchising is an engine of entrepreneurship in the United States, with independent operators who, despite the assistance of national brands, assume plenty of financial risk themselves. At the same time, we have seen the rise of large franchising operations that own hundreds of franchises across the country. Not surprisingly, large franchising operations are better able to comply with employment laws than small, single-operator franchisees. Faced with the new incentive structure of the expanded joint employer doctrine, franchisors will have a clear preference against smaller franchisees in favor of the larger organizations. This will make it much harder for new entrepreneurs to enter business through franchising, further raising barriers of entry for business creation.

The NLRB and other public agencies have the unenviable task of modifying law and policy to keep up with shifting employment arrangements, in an environment of stagnant wages for many workers, geographic concentration of economic rewards, and concerns about entire occupational categories being lost to automation. As mentioned, “alternative work” is growing. The Government Accountability Office (GAO) estimates that the “contingent workforce,” depending on the definitions used, could be anywhere from five to 40 percent of the total labor force. More people are receiving income from multiple sources, which includes new online and on-demand platforms. These changes have prompted calls for new legal classifications, such as the “independent worker” category proposed by the Hamilton Project two years ago.

Confronted with these challenges, expanding the joint employer doctrine is perhaps an understandable attempt to try to help workers cope. The fastest-growing type of alternative work arrangements is “workers provided by contract firms,” precisely those at the core of the joint employer doctrine. Yet we also need to help policymakers and businesses think creatively about other ways to manage and adapt to these challenges, as they will only increase in significance. In the face of a “fissured workplace,” how can policymakers help workers and businesses adapt and succeed together?

In managing these changes, we must ensure adequate worker protection and representation while also supporting (or at least not hindering) businesses to pursue innovation and productivity. Policymaking should be guided by certain principles, among which might be the following.

Clarity and certainty. Any standard leaves room for interpretation (and litigation), but workers and firms need to have clear ideas about where they stand regarding rights and responsibilities.
Get the incentives right. Policies should minimize the amount of “gaming” that might go on by firms in trying to avoid legal compliance. This doesn’t mean the presumption should be that all firms will act badly—policymakers need to pay attention to the incentives they establish.
New ways for workers to organize and improve. Despite the NLRB’s presumption, traditional unions may not be the best adaptive form of organizing in the modern workplace, and new Internet platforms have arisen to help fill the gap. Policy should facilitate these, but also focus on how new organizing tools can support learning and skill upgrading among workers, not just collective bargaining.
Informational equity and transparency. As the Roosevelt Institute has coherently outlined, employees in more sectors are subject to “opaque algorithms” that determine wages, scheduling, evaluation, and so on. Giving workers more transparency and control over this information will reduce asymmetry and empower workers to better manage their careers.

Most of the American labor force is still characterized by traditional employment, but new forms of work are growing rapidly, especially in sectors where low-wage and high-turnover work predominates. Addressing this challenge is a major priority, and we need to find ways that policy can jointly advance the interests of workers and firms.

Do California Legislators Understand What is Driving Rising Health Care Costs?

Posted on September 8, 2017September 18, 2024 by The Progressive Policy Institute

Based on newly revised Bureau of Economic Analysis data, we find that rising labor compensation for health care workers accounted for $55 billion, or 40%, of the increase in personal health care spending in 2016. By comparison, in May, 2017, we calculated that pharmaceuticals accounted for only $15 billion, or 11% of the rise in personal health care spending in 2016. In other words, the rising number of health care workers is by far the single most important factor driving higher health care costs.

This simple fact—which has held true every year we have done this analysis—makes us wonder about heavy-handed legislation like California’s SB17, now up for consideration. The bill would purportedly control rising health care costs by forcing pharma and biotech companies to give 60-day advance notification of most price increases. The bill would also require pharma and biotech companies to give “a description of the specific financial and nonfinancial factors used to make the decision to increase the wholesale acquisition cost of the drug“ – a regulatory requirement levied on almost no other sector of the economy.

In fact, the real health care cost problem in California, as in the rest of the country, is not the cost of pharmaceuticals. The real health care cost driver is that health care employment growth is far outpacing population growth. In 2016, California health care employment rose by 2.9%, more than four times as fast as the 0.7% increase of the state’s population, as reported by the Census Bureau (below).. As long as health care employment keeps growing out of control, intrusive bills like SB17 risk doing damage to the pharma and biotech industries without having any significant effect on the cost of health care for patients and employers. All pain, no gain.

Disassembling Kodak

Posted on September 6, 2017September 18, 2024 by The Progressive Policy Institute

Kodak is regularly held up as an example of how a “real” innovation company behaves. For example, a recent New York Times story compared Apple unfavorably to Kodak, saying.

“Think about the contrast between George Eastman, who pioneered fundamental innovations in photography, and Steve Jobs,” Mr. Summers wrote in 2014. “While Eastman’s innovations and their dissemination through the Eastman Kodak Co. provided a foundation for a prosperous middle class in Rochester for generations, no comparable impact has been created by Jobs’s innovations” at Apple.

But the NYT story did not actually look at the number of people employed by Kodak over time, and compare it to the workers employed by by Apple and other tech companies. So we’ve peered through years of annual reports to start disassembling Kodak.

Kodak was founded in 1888, but it incorporated in 1902 in its “modern” form. Its worldwide employment peaked at 145K in 1988. At that time, 40% of its workforce was outside the United States. After that point, the company’s workforce fell off sharply, heading towards bankruptcy in 2012 (not shown). Note that there is a gap in reported worldwide employment during the war years. Also, worldwide employment was not reported for 1902 and 1903, and US employment was not reported for 1902.

It took Kodak 51 years to reach 70K employees worldwide, and 65 years to reach 100K employees. By contrast, today’s tech leaders got to those employment levels much faster

	Years to reach this workforce
	70K	100K
Kodak	51	65
Amazon	16	17
Apple	32	35
Facebook	*	*
Google	13	*
Microsoft	22	30

Here’s some charts that show this difference graphically. We age-adjust employment by matching Kodak’s date of incorporation, 1902, with the 1981 FY of Apple’s IPO. This charge shows that at year 36, Apple’s workforce is almost triple the size of Kodak’s at the same age

Here are comparable charts for the other tech leaders.

An Analysis of Job and Wage Growth in the Tech/Telecom Sector

Posted on September 3, 2017 by The Progressive Policy Institute

This paper examines job growth at leading tech/telecom firms. We compare them to leading industrial firms, both in the first half of the 20th century and in the post-war era, and show that they have similar employment trajectories. Then we consider wage and industrial structure trends. We find that real wages in the tech/ telecom sector are higher and rising faster than in the physical sector. To correct for composition effects, we examine detailed occupational categories and find that, for middle-skill occupations such as sales and office support, the tech/telecom sector has significantly higher wages than the physical sector.

This paper incorporates and updates portions of earlier reports and blog posts, including: “A Historical Perspective on Tech Job Growth” (January 2017); “The Creation of a New Middle Class?: A Historical and Analytic Perspective on Job and Wage Growth in the Digital Sector, Part I” (March 2017); and “Do today’s tech/telecom companies employ too few workers?” (June 2017).

Fulfillment Centers: The Nodes of a Packet-Switched Physical Distribution Network?

Posted on August 27, 2017September 18, 2024 by The Progressive Policy Institute

Warning! Wonky post ahead.

At PPI, we are focused on understanding where the new jobs of the future are coming from, and how policymakers can help foster their growth. That sometimes requires identifying underlying trends that may not be obvious.

The growth of multiple networks of ecommerce fulfillment centers–built by retailers such as Amazon, Walmart, Nordstrom and many others–is effectively a transition from “circuit-switched” physical distribution networks to “packet-switched” physical distribution networks. Analogous to the shift from circuit-switched telephone networks to the packet-switched networks that make up the Internet, the new ecommerce distribution networks are capable of much greater flexibility and lower costs than the dumb warehouses which preceded them.

And just like the Internet helped create a wave of new industries in tech hubs, this new “Internet of Goods” is going to enable a new wave of business and job creation in domestic manufacturing and food production. With the right policy, this growth in domestic manufacturing and food production jobs will benefit states across the country.

Background

The old telephone networks were “circuit-switched”–that means the telephone company would set up a separate circuit for each call, and the callers would “own” the circuit until the call was over. The connections were solid, but they were not flexible, and they wasted network resources (since so much of a voice conversation is dead air). By contrast, the multiple networks that make up the Internet break down data (including voice) into packets, which are then routed to their destinations and reassembled. Packet switching requires a lot more intelligence in the system, but it’s much more flexible and lower cost than circuit switching.

As we’ve seen over the past two decades, the widespread introduction of packet switching in telecom opens up all sorts of possibility for entrepreneurs and existing companies to create new digital products and services. The Internet revolution transformed digital industries, creating millions of jobs in the process. In particular, since December 2007, the tech-ecommerce sector has generated 1.7 million jobs. That’s around half of private sector job growth, outside of health and education.

The old warehouse-retail distribution system was analogous to circuit switching. Big trucks would bring boxes of identical goods from manufacturers or importers. The warehouses would break down the incoming goods into predictable patterns. All the boxes of identical lamps, for example, would be stored together for easy retrieval when it was time to put together the shipments to individual retail stores. The shipments were regular and straightforward, and didn’t require much “intelligence” in the networks.

Ecommerce fulfillment centers are much more like the “routing nodes” of the Internet. They take in goods from a wide variety of sources, at irregular interviews, including returns from consumers. They store the goods according to their own internal schema. For example, Amazon uses a “random stow” method that distributes incoming products across the fulfillment center in a way that maximizes the odds of products in the same order being close together. Since most consumers don’t order multiples of the same item, the Amazon random stow method might distribute the most popular items across the whole fulfillment center, rather than clumping them all together. Then the ecommerce fulfillment center puts together consumer orders and ships them out.

The Internet of Goods

In effect, these multiple networks of fulfillment centers are creating a new packet-switched “Internet of Goods.” The first economic consequence, as we have described, is the creation of hundreds of thousands of jobs in electronic shopping companies and fulfillment centers. This is analogous to the first wave of Internet growth in the 1990s.

The next step, we believe, will be the creation of new businesses in domestic manufacturing and food production that make use of the flexibility and low cost of the Internet of Goods. For example, we can visualize custom manufacturing operations that are located near fulfillment centers. They take production orders from customers, and then ship out the product on the same day via the fulfillment center. The cost of distribution would go way down compared to today’s situation, giving domestic custom manufacturers a sustainable competitive advantage against foreign rivals.

To get an idea of magnitudes, consider that as of 2015, 57% of the retail price of furniture was the cost of distribution (transportation, wholesale, and retail). For women’s clothing, 59% of the retail price was the cost of distribution, and for food, 40% of the retail price was the cost of distribution. Reducing the cost of local distribution while shortening the distribution time could open up new sustainable business models for domestic manufacturers and food producers.

Gerwin for The Hill, “The bitter harvest of Trump’s protectionist stance”

Posted on August 1, 2017 by The Progressive Policy Institute

Donald Trump is infatuated with the 2016 election map, which underscores his dominance in red-coded rural counties. Candidate Trump repeatedly promised to “take care” of America’s rural voters who, in return, provided some of his biggest vote margins.

It’s ironic, then, that on issues from budgets to healthcare, America’s heartland stands to become an early and particular victim of Trump’s misplaced priorities. Nowhere is this more evident than with Trump’s wrongheaded, protectionist approach to trade.

Continue reading at The Hill.

Estimating the Impact of Ecommerce On Productivity Growth

Posted on July 31, 2017September 18, 2024 by The Progressive Policy Institute

In an earlier post, I estimated that the expansion of ecommerce since 2007 is saving American households 64 million hours per week in shopping time. What impact does this have on measured productivity? This is not an easy question. Unpaid shopping hours are part of “household production,” which is generally excluded from official calculations of GDP. That omission is a problem, because it undervalues the unpaid time that people contribute to their households, ranging from cooking and childcare to commuting.

The best way to tackle the impact of ecommerce on productivity is to build up a consistent set of national accounts integrating both the increased importance of data for economic growth (See Moving Beyond the Balance Sheet Economy), as well as shopping as an economic activity requiring both market hours (the retail worker) and nonmarket hours (driving to the store, choosing items from the shelves and so forth). For our purposes here, though, we are going to do a back of the envelope calculation to estimate the impact of ecommerce on productivity growth.

According to the BLS, the number of hours worked by employed workers in the nonfarm business sector rose by 2.1% from 2007 to 2016, or an increase of 79 million hours of work per week.* Suppose that we adjust for the reduction in household shopping hours, on a 1-to-1 basis.** Then total weekly hours only rise by 15 million from 2007 tp 2016, or only a 0.4% gain in hours. The annual percentage growth in hours goes down from 0.2% to virtually nothing.

This calculation suggests that factoring in ecommerce could raise measured productivity growth in the nonfarm business sector by 0.2 percentage points from 2007 to 2016. This is a significant difference, but obviously not enough by itself to reverse the slowdown in productivity growth. However, the relative gains in productivity should continue as the market share of ecommerce increases.

This type of productivity analysis, which integrates the impact of the data-driven economy on both market and household production, can be extended to other innovations as well, such as autonomous vehicles and artificial intelligence.

*The BLS reports annual hours in the nonfarm business sector, which I divided by 52 to get weekly hours.

**We could make a case for the adjustment factor to either be higher or lower than 1-to-1. We could value the household hours at the minimum wage, in which case they are less valuable than retail and fulfillment center worker hours. Or we could say that being stuck in traffic driving to the mall or waiting on checkout lines is really annoying, which would make those saved hours more valuable.

How Should We Think About Pro-Growth, Pro-Job Competition Policy?

Posted on July 29, 2017September 18, 2024 by The Progressive Policy Institute

We think of the United States as a low-inflation economy, with an overall price increase of 36% since 2000, or less than 2% a year. But the fact is, the inflation performance of different industries has varied greatly since 2000. For example, the price of construction has gone up more than 100% since 2000, as measured by the BEA’s implicit value-added price index. The price of educational services has gone up by 80%, and the price of air travel has gone up by 76%.

By comparison, according to the BEA, the value-added price of broadcasting and telecom services has fallen by 22% since 2000, while the price of computer and electronic products has fallen by 62%.

The high-inflation industries tend to be on the physical side of the economy. As they get more expensive, they eat away at living standards. Think about it. Americans spend only 6% of their consumption dollars on tech/telecom goods and services, as measured by the BEA. Other areas, such as housing, health, food, and transportation, are far more important for consumer spending.

That’s why we are suggesting a different way of prioritizing where we should focus our competition policy. Take a look at the 2×2 matrix below, where we categorize industries by whether they are high-inflation or low-inflation, and high-innovation or low-innovation.

Competition Policy Matrix

High innovation

Low innovation

Rapid price increase

Air travel, construction, education

Slow price increase

Tech/telecom

We suggest that progressive competition policy should focus on the upper right-hand quadrant–those industries where prices are increasing rapidly and innovation has been slow. There are two issues in these industries. First, has market power pushed up prices and held back innovation? Second, is government regulation helping support that market power?

Moreover, it also often turns out that high-innovation, low-inflation industries produce more jobs than low-innovation, high-inflation industries. Take a look at the table below, which just focuses on performance since 2007. The value added price index for air travel has risen almost 55% since 2007, according to the BEA. Meanwhile, prices for the tech/telecom sector has fallen more than 6%. And tech/telecom is clearly more innovative than air travel.

Over the same period, jobs have grown three times as fast in the tech/telecom sector as in air travel (including supporting services).

Comparing Performance
	change since 2007
	Air travel	tech/telecom
Price change	54.5%	-6.4%
jobs (thousands)	16.5	498.5
jobs (percent)	2.5%	7.6%

We suggesting that tackling market power in high-inflation, low-innovation industries could help boost growth, raise living standards, and create more jobs.

Democrats Take A Wrong Turn

Posted on July 24, 2017September 18, 2024 by The Progressive Policy Institute

Which one is not like the others?

Since 2000, American households have been hit by price increases which far exceed their ability to pay. Necessities like housing and food have skyrocketed in prices. Child care is 81% more expensive, passenger fares for foreign travel are up 63%, financial fees are higher by 41%. Even beer, perhaps a necessity for some, is up 40%.

In an era of low inflation, these price increases are worrisome, and have gone a long way to drag down real incomes. From this perspective, the proposal from Congressional Democrats to stiffen antitrust enforcement–part of the “Better Deal” plan they unveiled today–is a good idea. They identify sectors such as airlines, food, beer, and financial services as ripe for closer antitrust scrutiny. We agree.

But Democrats are unfortunately honing in on one target that makes no sense: The data-driven telecom and tech sector. Let’s start with telecom first, which is specifically mentioned in the Better Deal proposal. According to data from the Bureau of Economic Analysis, the price of personal telecom services—cable, landline and mobile phone, and Internet—has risen only 6% over the past 16 years. That’s far below the 33% average for all consumer goods and services.

Moreover, the share of personal spending going to personal telecom services is only 2.7%, no higher than it was in 2000. Despite the enormous surge in smartphones and Internet usage, the spending burden of personal telecom services has not risen, according to data from the BEA.

More broadly, the entire tech/telecom/content sector has produced much lower price increases and higher consumer welfare gains than the rest of the economy. In 2016, tech/telecom/content consumer goods and services absorbed 6% of consumer spending, no higher than it was in 2000.*

Moreover, tech and telecom companies have turned into big job producers across the whole country. By our analysis, the tech/telecom sector has produced over 800,000 net new jobs since 2007, including decent-paying ecommerce jobs for high school graduates in states such as Kentucky, Indiana, and Tennessee.

If Democrats are concerned by price increases that hurt consumers and workers, there are plenty of other places to look. For example, the price of parking fees and tolls has gone up 96% since 2000, according to the BEA. The price of spectator sports has gone up 83%, and funeral and burial services are 70% more expensive, driven in part by a surprising 104% increase in the wholesale price of burial caskets.

On a more prosaic level, the price of construction has doubled since 2000, propelled in part by large increases in prices of construction materials like asphalt. Are there local monopolies in these industries that drive up prices? It’s worth looking into.

If we want to use competition policy as a tool for growth, we should primarily focus on low-innovation sectors that have big price increases. These are the sectors that are draining consumer purchasing power and undercutting real income growth. Outside of healthcare, these are also the industries producing fewer jobs.

Conversely, we should place a lower competition policy priority on high innovation sectors and companies. That’s the only way to help all Americans.

*Calculations available on request.

Rotherham for US News, “Challenge Students, Don’t Shield Them”

Posted on July 20, 2017 by The Progressive Policy Institute

Tap Tapley, the legendary Outward Bound instructor, is said to have described the crux of the experiential outdoor experiential learning school’s approach as “inducing anxiety and then releasing it in a constructive manner.”

And for a half century, Outward Bound courses have done just that – putting students in challenging and uncomfortable situations with real and immediate consequences. Students find themselves climbing mountains, paddling rivers, exploring remote canyons, traveling in the wilderness in winter conditions or sailing. Students learn skills to survive and thrive in these settings. But more importantly they learn about themselves; compassion and empathy for others; their capabilities; and tenacity and resiliency in pursuit of challenging goals.

But this model is pretty much the exact opposite of the scene at many residential colleges today, especially our most elite ones. Instead of challenge, much of the debate on college campuses today turns on ideas about intellectually “safe” spaces, where students don’t have to encounter ideas that make them uncomfortable or engage with those with whom they disagree.

Just last week, Harvard University, a school regarded as a breadbasket of future American leaders, decided that free association, allowing its students to decide what clubs they want to join, threatened its ideas about inclusivity. (Yes, obviously richly ironic, given what it takes to get into Harvard in the first place.) Meanwhile, the college curriculum has at many schools become basically an a la carte experience, where students can gravitate toward courses that reinforce rather than challenge their worldview.

Stangler for Real Clear Markets, “Renewed Optimism As the Start-Up Geography Divide Narrows”

Posted on July 12, 2017 by The Progressive Policy Institute

Over the past several years, even as the national fervor over startups has continued unabated, there has been a string of negative findings about the state of American entrepreneurship. The Economic Innovation Group, among others, chronicled a long-term decline in business creation as well as ever-increasing concentration in where businesses are being created. Only five metro areas, they found, accounted for half of the nation’s increase in new businesses between 2010 and 2014. Other researchers have found similar declines across several indicators of economic dynamism—fewer and fewer Americans, for example, work for new and young firms.

Happily, a recent report by Michael Mandel at the Progressive Policy Institute (PPI) highlighted a potential reversal of these trends. (Full disclosure: I have a PPI affiliation.)

Using government data, Mandel charts a “revival of economic dynamism” since 2015 that is fairly widespread: by last year, the “growth gap” between tech hubs in Silicon Valley, New York, Boston, Austin had disappeared.

The Economic Impact of Data: Why Data Is Not Like Oil

Posted on July 11, 2017 by The Progressive Policy Institute

The saying “data is the new oil” is at times referenced by analysts working to assess whether our increasingly digital and data-driven world generates positive impact for our economy and society. However, this saying is imprecise. Data should not be compared to oil – it is not a scarce commodity, is nonrival, and cannot be monopolized.

With regards to privacy, the analogy further weakens. While regulations for traditional commodities like oil seek to protect individual rights to ownership of resources (an individual’s oil), the same regulations for the data-driven sector can have negative impact on the economy overall. This is because, when it comes to data, economic value creation is driven by the analysis of data in conjunction with other information. Thus, laws that quite rightfully protect individual rights to data can be at odds with innovation and economic growth.

overview: Power-of-Data-One-Pager

Why Retail Productivity is Being Undermeasured, and Why Ecommerce Jobs are Rising

Posted on July 11, 2017September 18, 2024 by The Progressive Policy Institute

I have consistently argued that ecommerce is boosting employment by creating jobs at fulfillment centers. For example, over the past year, ecommerce jobs have risen by 61,000, while brick-and-mortar retail has fallen by only 7,000. That sounds like a counter-intuitive result, given that ecommerce is supposedly more productive than brick-and-mortar retail.

But the increase in paid jobs is much easier to understand if you realize that shopping for goods is actually the result of two inputs: paid market work by employees and unpaid time by households, in the form of driving to the store, parking, wandering through the aisles, checking out, driving home.

According to the American Time Use Survey from the Bureau of Labor Statistics, in 2015-2016 Americans spent .645 hours per day on average shopping for consumer goods or traveling to shopping, or 4.5 hours per week. Since there are 260 million Americans aged 15 and over, that means Americans spend approximately 1.2 billion hours a week shopping for consumer goods or traveling to shopping (that’s the equivalent of 30 million full-time jobs).

By comparison, in 2006-2007 Americans spent 4.75 hours per week shopping for consumer goods or traveling to shopping, or 0.25 more. That extra quarter hour corresponds to 64 million extra hours per week (260 million x .25). So because of the increase in ecommerce over the past 9 years, American households save 64 million hours per week, or the equivalent of 1.6 million full-time jobs.

Some of these jobs are being moved into the market sector: The fulfillment center workers do the aisle-cruising that shoppers used to do themselves, the truck drivers take the place of the consumers driving back and forth to the mall.

This also implies that retail productivity is being unmeasured, since we’re not counting the reduction of household hours. I don’t have an estimate yet, but the undermeasurement could be substantial.

Evolution, Not Revolution: What Retail Apocalypse?

Posted on July 11, 2017September 18, 2024 by The Progressive Policy Institute

When I was young, oh so many years ago, my parents would take me shopping at Korvette’s, a chain of discount department stores originally based in New York City. But alas, Korvette’s went bankrupt in 1980, just one of hundreds of names on Wikipedia’s long list of defunct department stores. Then, of course, Wikipedia has an equally long list of defunct retailers of the United States, including such stalwarts as Robert Hall (whose jingle is still stuck in my mind*).

Now, of course, we have apparently entered the era of the “retail apocalypse,” a newly minted calamity which has its own Wikipedia entry. Suddenly all of our shopping malls and big box stores are supposed to disappear, washed away by the ever-rising tide of ecommerce.

But at least so far, the data shows very little signs of an apocalypse. According to the latest BLS employment report, employment at brick-and-mortar retail is down by only 7,000 jobs over the past year, a mere rounding error for an industry that employs over 15 million workers. At the same time, employment in the ecommerce sector has rise by 61,000 over the past year, more than making up for any erosion in brick-and-mortar retail.

Indeed, if we look at three month averages, brick-and-mortar retail looks more or less flat. Job losses in some retail sectors, such as general merchandise and clothing stores, is being partly offset by employment gains in motor vehicles, auto parts, building materials, and health stores. Companies announce store closings, hoping to get a better deal out of landlords–but for the same reason, stores that are doing well don’t announce that they are expanding.

So far this looks like an evolution rather than a revolution: Some retailers are closing, while others (including online sellers) are expanding. The big news is that fulfillment centers pay 30-40% more than brick-and-mortar jobs in the same area. But more about that in another post.

*”Where the values go up, up ,up

And the prices go down, down, down

Robert Hall will show you

The reason they give you

High quality, economy!”