Fulfillment Centers and Jobs: Is Amazon replacing paid retail hours or unpaid household shopping hours?

Over the past year, I would estimate the most common press/public question we have received in the Center for Business and Policy Research is about the impact of Amazon and other fulfillment centers on employment and income.  Is the growth of this industry just destroying and replacing traditional jobs in shopping center, or do they provide a net gain to employment?

I recently heard Michael Mandel of the Progressive Policy Institute speak on this topic at the National Association of Business Economists meeting in DC.  His presentation and the full report are accessible to non-economists, and provide an interesting, and often overlooked, perspective on the issue.  While much of the data analysis in the report is oversimplified, I still found it insightful and believe the general conclusions are likely accurate.  It is an effective push back against the doom narrative that surrounds much public discussion around robots and automation.

Mandel compares e-commerce to a previous retail revolution, the rise of the big box store.  He finds that the rise of lower cost big box stores was truly negative for retail workers, and that at least some of the efficiency gains of big box stores was to shift hours from paid retail workers to unpaid household work (think of people driving farther to shop at a store with lower service, but lower prices.)

In contrast, he notes that e-commerce is substituting for household hours spent shopping and running errands.  Thus, while fulfillment centers are having some negative effect on paid retail jobs, they are also creating new jobs by converting unpaid household shopping time to paid shopping time fulfilling and delivering orders directly to households.  He documents a significant decrease in household shopping hours that parallels the rise in e-commerce, and estimates that unpaid household hours of work still exceed paid hours in America's goods distribution system.  Thus, there is still a lot of potential for growth here.

He also notes fulfillment center jobs pay somewhat higher wages than big box retail, and that they only require a high-school education but utilize "a mix of cognitive and physical skills not dissimilar to industrial workers." 

In economic development conversations around the North San Joaquin Valley, I have often wondered whether these new distribution center jobs could be part of a skill building ladder for their employees - and whether experienced fulfillment center "graduates" could be an attractive workforce employers with even higher paying jobs.  There is also a lot of talk about a new wave of innovation, involving technology like 3-D printers, that could lead to some goods production or customization attached to these fulfillment centers.

I understand why there is anxiety about the robots in these automated distribution centers and what they mean for the future of work.  It is disruptive change, but I see the potential for more positives than negatives.  Indeed, Mandel said he thinks the biggest economic losers will be owners of shopping centers and big box stores.  Converting all that space and parking lots to other uses (like housing) could help alleviate some other problems we have, and create another batch of new jobs.

If you are looking for a readable and refreshing take on e-commerce, Mandel's report is well worth reviewing.