On-line v. bricks and mortar retail – tax unfairness kills jobs

Nearly 15 million Americans of widely varied skill levels are employed in the retail sector of the U.S. economy, a number second only to the healthcare sector among private employers. As such, we should expect the retail sector to play a vital role in the job market’s recovery. However, while retail sales grew 25 percent between 2004 and 2012, total sector employment over the period was virtually unchanged. One of the major reasons behind this job stagnation can be traced to the rapid rise of e-commerce. As sales move online, however, retail jobs disappear because online retailing requires less labor per unit of sales than do “brick-and-mortar” stores. To put this job loss into perspective, consider that Wal-Mart employs about five persons per $1 million in sales, while that number is only 1.4 per $1 million for Amazon.com.

Obviously, online retailing benefits from many technological advantages over brick-and-mortar sales. Since labor is a cost of production, technology often reduces the need for labor, and in many cases the purpose of technology is to do so. When driven by efficiency concerns, economists generally view labor-saving technology with favor. Yet, even if we fully embrace efficiency, a public policy which promotes labor-saving technology beyond what market incentives provide is problematic, because the ultimate result of such a policy is the government picking winners and losers. For this reason, these types of formal or informal subsidies are, as former Republican National Committee Chairman and Mississippi Gov. Haley Barbour bluntly observed, “something most conservatives traditionally abhor.”

Or do they?


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: