HOW ECOMMERCE CREATES JOBS AND REDUCES INCOME INEQUALITYHow Ecommerce
Creates Jobs andReduces Income
Inequality

Michael Mandel
Chief Economic Strategist
Progressive Policy Institute
September 2017

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HOW ECOMMERCE CREATES JOBS AND REDUCES INCOME INEQUALITY

Summary

In this paper weshow how the
expansion of
ecommerce iscreating jobs andreducing income
inequality.

September 2017
Michael Mandel

We estimate that ecommerce jobs in fulfillment centers andecommerce companies rose by 400,000 from December 2007 toJune 2017, substantially exceeding the 140,000 decline of brickand-mortar retail jobs. We explain this job growth by showing thathouseholds are saving 64 million hours of week of shopping time
because of ecommerce, and some of these unpaid household
hours are being shifted into market work. One consequence isthat productivity growth is being underestimated.
Based on a county-by-county analysis, we estimate that fulfillment
center jobs pay 31% more than brick-and-mortar retail jobs in thesame area. This suggests the shift to ecommerce jobs is reducing
income inequality by raising the wages paid to high school
graduates.1

1 We thank Michael Smith, Sophia Mietus and Elliott Long for excellent research assistance.
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HOW ECOMMERCE CREATES JOBS AND REDUCES INCOME INEQUALITYHow Ecommerce
Creates Jobs and Reduces
Income Inequality

September 2017
Dr. Michael Mandel

SECTION 1. INTRODUCTION

The last retail revolution, therise of the big box store, was
not a good thing for the typicalsales clerk or cashier.

“Warehouse clubs” and “supercenters” started
popping up everywhere in the late 1980s. Retailproductivity as measured by the government
doubled from 1987 to 2007, as this new retail
format was more efficient than traditional
department stores and mom-and-pop
operations, many of which were pushed out ofbusiness. Nevertheless, average real wages forretail workers actually fell from 1987 to 2007,
and the pay gap between retail workers and therest of the workforce widened.
Now comes the ecommerce revolution. Given
the bad experience of workers with the lastretail revolution, it’s only natural to worry that
this one will have an equally bad effect. As of
the new first quarter of 2017, ecommerce hasless than 9% of retail sales. What will happen to
brick-and-mortar retail workers as 10% or 20%
of sales move onto the Internet? Are we facing
a retail “apocalypse” that will destroy jobs that
employ 15% of the American workforce, further
depressing already-low wages?

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HOW ECOMMERCE CREATES JOBS AND REDUCES INCOME INEQUALITY

Fulfillment center jobs require only a high school
diploma, but they are hard work, using a mix of
cognitive and physical skills not dissimilar toindustrial workers. In this paper we use a countylevel analysis to show that fulfillment centerjobs pay 31% more, on average, than brick-andmortar retail jobs in the same area.

In this paper we are going to argue that thelabor market impact of ecommerce is totally
misunderstood. In our view, ecommerce
is primarily a machine for turning unpaid
household hours shopping into paid market
work. Americans spend 1.2 billion hours per
week driving to the mall, finding a parking space,wandering around the aisles, checking out, anddriving home. Some of those unpaid hours are
now being shifted to fulfillment center workers,
who do the “picking and packing” for customers,
and truck drivers, who do the driving.

Fulfillment center jobs require only
a high school diploma, but they are
hard work, using a mix of cognitiveand physical skills not dissimilar toindustrial workers.

In our view, ecommerce isprimarily a machine for turning
unpaid household hours shopping
into paid market work.

In many areas, this 31% premium for fulfillment
center work versus brick-and-mortar significantly
closes the income gap, especially since real
retail pay has been effectively flat for the past
30 years. A bigger share for ecommerce has theeffect of significantly reducing the income gap,
not increasing it.

In other words, ecommerce is a net job creator,
rather than a job destroyer. Our research showsthat ecommerce created 400,000 jobs from
December 2007, the last business cycle peak,to June 2017, while brick-and-mortar retail has
lost 140,000 full-time-equivalent jobs over thesame stretch. Many of these new ecommercejobs are in fulfillment centers, which are typicallycounted in the warehousing industry, but bear
the same relationship to ordinary warehouses as
jet planes bear to bicycles. Whereas an ordinary
retail warehouse is a stopping place for bulk
shipments on the way to stores, a fulfillment
center dynamically responds to orders fromindividual customers, integrating many different
vendors.

SECTION 2. THE STATE OF RETAIL
WORKERS BEFORE AMAZONOne can say that the era of the big box store
truly began in 1988, when Walmart opened up
its first Supercenter in Washington, Missouri.
Over the next two decades, Walmart’s workforce
went from 183,000, all in the United States,
to 1.9 million employees globally at the endof fiscal 2007. Other big box retailers showedphenomenal growth as well.
As the new format expanded, retail productivity
as measured by the Bureau of Labor Statistics
nearly doubled. Academic studies suggestthat most of the gains came because moreproductive rivals replaced the existing retailers.

Our research shows that
ecommerce has created 400,000
jobs since December 2007, while
brick-and-mortar retail has lost
140,000 full-time-equivalent jobs
over the same stretch.

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HOW ECOMMERCE CREATES JOBS AND REDUCES INCOME INEQUALITY…..within-store productivity growthaccounts for a relatively minor portion of
sector-wide productivity growth in U.S.
retail. Instead, the reallocation of activity
across stores drives most of the gains inoverall retail productivity, which in turnoccurs both through the entry of new,more efficient firms replacing a set of lessefficient exiting ones, as well as throughsuccessful firms adding new stores.2

But retail workers did not benefit from theseproductivity gains at all. As Figure 1 shows, real
weekly pay in the retail sector was flat even as
productivity soared.

FIGURE 1: Productivity vs Pay in the Retail Sector (1987 =100)
250
200
150

2015

2013

2011

2009

2007

2005

2003

2001

1999

1997

1995

1993

0
1991

Data: BLS

50

1989

Real retailweekly wages for
production andnonsupervisory
workers

100

1987

Retail productivity

the private sector as a whole. Compensation
includes wages plus a variety of benefits. We
see that the compensation gap between retailworkers and the rest of the economy has
widened by 5 percentage points over 20 years.
Indeed, the relative deterioration of retail jobs
during this period contributed significantly to thegrowing inequality and income stagnation in theeconomy.

The situation for retail workers was even worse
than this figure shows. Retail jobs during the bigbox era became gig economy work, before theterm was even coined. The average workweek inretail fell, and the typical cashier or sales worker
often couldn’t count on full workweeks or regularschedules.
Figure 2 shows compensation per worker inretail, compared to compensation per work in

2 Ali Hortaçsu and Chad Syverson, “The Ongoing Evolution of US Retail: A Format Tug-of-War,” Journal of Economic Perspectives Fall 2015
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HOW ECOMMERCE CREATES JOBS AND REDUCES INCOME INEQUALITY

Figure 2: Retail Workers Lose Ground
per worker in retail as percent of compensation per worker in private
Indeed, the relative(Compensation
deterioration
sector)of retail jobs during this period
contributed significantly to thegrowing inequality and income
stagnation in the economy.

FIGURE 2: Retail Workers Lose Ground
75% (Compensation per worker in retail and food services as percent of compensation per
worker in private sector)*
70%

65%

60%

55%

50%

45%

2015

2013

2011

2009

2007

2005

2003

2001

1999

1997

1995

1993

1991

1989

1987

1985

1983

1981

1979

1977

1975

1973

1971

1969

40%

Data includes retail trade, food services and drinking places
Data: BEA, PPIThere are certain mysteries connected withthis decline in the relative position of retailworkers. One important question is why the shift
to national chains and big box stores—which
supposedly increased productivity—did nottranslate into higher relative wages for retailworkers. Indeed, the increased productivityof the U.S. retail sector was regularly cited as
one of the important non-tech benefits of IT
investment in the 1990s, and an importantcompetitive advantage against Europe andJapan.3 But, if workers didn’t get the productivity
gains, where did they go?

3 See, for example, McKinsey Global Institute, “US productivity growth, 1995–2000,” (2001) and “How IT enables productivity growth,“(2002).
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HOW ECOMMERCE CREATES JOBS AND REDUCES INCOME INEQUALITY

One important question is why
the shift to national chains andbig box stores—which supposedly
increased productivity—did nottranslate into higher relative wages
for retail workers.

But, whatever the reason, the collapse of relative
retail pay is a key defining element of today’s
troubled economic landscape, especially outsideof the coasts. Retail jobs are low paying, often
part time and with limited benefits. As such, they
contribute to the general economic malaise andinequality.

One possibility is that the productivity gains
went into building ever more ornate shopping
malls rather than into the pockets of retailworkers. Common wisdom has it that America
is overstored compared to other countries.4

But, whatever the reason, thecollapse of relative retail pay is a
key defining element of today’s
troubled economic landscape,especially outside of the coasts.
Retail jobs are low paying, often
part time and with limited benefits.
As such, they contribute to thegeneral economic malaise andinequality.

A second possible explanation for thedeteriorating position of retail workers is that the
productivity gains were not on the department
store floor, but in other parts of the retail supply
chain. Perhaps large retailers got better atsourcing from low-cost overseas suppliers,
or managing inventories, or marketing, ormaking siting decisions. In that case, theproductivity gains would go to the managers
who negotiated the sourcing deals, rather than
to the salespeople on the store floor, who arebasically doing the same tasks salespeople havedone since the beginning of the 20th century.

SECTION 3. THE GROWTH
OF ECOMMERCE JOBS
Now America is on the verge of another retailing
revolution, or, more precisely, a distribution
revolution. It started in the second half of the
1990s, when it occurred to many smart people
simultaneously that people could order online
and receive products on their doorsteps rather
than making a trip to a store. Ecommercestartups such as Webvan and Pets.com (or, as
their award-winning 2000 Super Bowl ad put it,“Because Pets Can’t Drive!”) raised hundreds ofmillions of dollars to put this insight into action.

A third possible explanation is that retail sales
is still one of the jobs that can be done bysomeone without any post-secondary training.
So, as more and more jobs require a college
degree, workers with only a high school degree
crowd into retailing and drive down the wages,
with only the minimum wage as a constraint.

But many of these initial ecommerce startups
found that having a spiffy website was notenough to convince consumers to shift out ofbrick-and-mortar retailers. Ecommerce remained
as a small share of total retail sales, and thenumber of brick-and-mortar retail workers roseby 10% from 1995 to 2005.

A fourth possibility is that the retail productivity
gains were overstated because they didn't accountfor increased household time to shop at big box
stores. We'll discuss this more in Section 6.

4 “America is ‘over-stored’ and Payless ShoeSource is the latest victim,” Washington Post, April 5, 2017. https://www.washingtonpost.com/
news/morning-mix/wp/2017/04/05/america-is-over-stored-and-payless-shoesource-is-the-latest-victim
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HOW ECOMMERCE CREATES JOBS AND REDUCES INCOME INEQUALITY

capable of accepting merchandise from diverse
sellers and delivering orders to their correct
destinations.

However, ecommerce companies graduallyrealized that online shoppers cared about rapid
delivery, which gave them an experience muchcloser to the immediate gratification of bricksand-mortar buying. Amazon’s introductionof Amazon Prime in February 2005 was awatershed event, guaranteeing two-day delivery
at a fixed annual price.5

High-tech warehouses, such as
Amazon’s fulfillment centers, offer a
new set of capabilities that we havecalled “advanced distribution.”7 The
ability to ensure an order-delivery
lag of one day or less represents agenuinely new advance that has thepotential to generate spin-offs of its
own.

However, ecommerce companies
gradually realized that online
shoppers cared about rapid
delivery, which gave them anexperience much closer to theimmediate gratification of bricksand-mortar buying.

It turns out that, despite worries about robots,these fulfillment centers are big employers. For
example, Amazon’s fulfillment center in Kenosha,
Wisconsin, has more than 2000 permanent
employees, plus another 1000 seasonal
employees.8 The opening of this center in 2015shows up clearly as a big jump in warehouse
employment in the BLS QCEW county data.

The promise of quick delivery required that
Amazon build ecommerce fulfillment centers allaround the country, with the big surge startingin 2010 and 2011, and then accelerating.
According to one third-party source, Amazon
now operates more than 100 fulfillment centersaround the country, with 80 million square
feet of space.6 The company itself went from
14,000 workers in 2007 to 180,000 workers
in the United States in 2016, most of them infulfillment centers.

It turns out that, despite worries
about robots, these fulfillment
centers are big employers.
The fulfillment center in Ruskin, Florida, openedin 2014, employs 2,500-3,000 permanent
workers and many more seasonal workers.9
As of December 2016, the Amazon fulfillment
center in Shakopee, Minnesota, was planning tohire another 1,000 fulltime workers to double its
workforce.10

High-tech warehouses, such as Amazon’s
fulfillment centers, offer a new set of capabilities
that we have called “advanced distribution.”7
The ability to ensure an order-delivery lag of one
day or less represents a genuinely new advancethat has the potential to generate spin-offs of its
own. What’s more, this distribution capacity is

Other companies—both pure ecommercecompanies and retailers with existing brick-

5 https://www.amazon.com/p/feature/zh395rdnqt6b8ea
6 www.mwpvl.com/html/amazon_com.html
7 We coined the term ‘advanced distribution’ in a blog post “Ecommerce job gains are much larger than retail job losses: Here’s why.”(April 7, 2017). http://www.progressivepolicy.org/blog/ecommerce-job-gains-much-larger-retail-job-losses-heres/
8 “Amazon's Kenosha plant is on the clock as Christmas arrives,” Milwaukee Journal-Sentinel, December 22, 2016.
http://www.jsonline.com/story/money/business/2016/12/22/amazons-kenosha-plant-clock-christmas-arrives/95756654/
9 http://www.tbo.com/news/business/amazon-provides-tour-of-ruskin-distribution-center-for-scott-local-officials-20160330/
10 http://minnesota.cbslocal.com/2016/12/06/amazon-jobs/
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HOW ECOMMERCE CREATES JOBS AND REDUCES INCOME INEQUALITY

and-mortar operations—have been opening
ecommerce fulfillment centers are well.
Chewy.com, an online pet supply retailer, justopened its fifth ecommerce fulfillment center in
Hanover Township, Pennsylvania, just outsideof Wilkes-Barre, Pennsylvania, in coal country.11
The company is hiring 700 workers. Walmart
just opened a new ecommerce fulfillment center
in Davenport, Florida, that will hire 1,500 workers
over the next year.

Moreover, the timing of the Great Recession
makes it relatively easy to distinguishecommerce fulfillment centers from ordinary
warehouses. Immediately after 2007, warehouse
construction plummeted by 65%, as did mallconstruction. Given the collapse of consumer
spending, there was no reason for conventional
retailers to build new warehouses. Then, by
the time the economy began to recover, theimportance of ecommerce was becoming clear,and it still wasn’t a high priority for retailers tobuild new warehouses to service their brick-and-mortar stores.

The opening or expansion of new fulfillment
centers can be tracked, with some fuzzinessto preserve confidentiality, in government data.
They are large projects, generally opening in lessdensely-populated areas, which are reported in
the press.

According to the Bureau of Labor Statistics(BLS), from the last business cycle peak in
December 2007 to June 2017, the warehouseindustry added 273,000 jobs, while the electronic
shopping industry added 132,000 jobs. In total,that comes to 405,000 jobs. As noted above,
we associate the entire change in warehouse
employment with ecommerce fulfillment
centers. If we measure by full-time-equivalent
workers (assuming 40 hours per week), the gainin jobs comes to 400,000 FTE.

In general, this county-level analysis, applied
over the whole country, shows that permanent
jobs at fulfillment centers are generally reported
in either the warehouse industry (NAICS 493) orthe electronic shopping and mail order industry(NAICS 4541). The central offices of ecommercecompanies—like Etsy in Brooklyn or Amazon in
King County, Washington—are generally reported
in the electronic shopping industry.

According to the BLS, from the lastbusiness cycle peak in December
2007 to June 2017, the warehouseindustry added 273,000 jobs, while
the electronic shopping industry
added 132,000 jobs.

11 https://timesleader.com/news/667216/growing-pet-supply-firm-still-has-jobs-open-in-hanover-twp
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HOW ECOMMERCE CREATES JOBS AND REDUCES INCOME INEQUALITYTABLE 1: Change in ecommerce and brick-and-mortar retail jobs since 2007
CHANGE,DEC 07 - JUNE 17

CHANGE,DEC 07 - JUNE 17

EMPLOYEES(THOUSANDS)FTE EMPLOYEES***(3-MONTH MOVING AVERAGE, THOUSANDS)BRICK-AND-MORTAR RETAIL*

159

-140

ECOMMERCE JOBS**

405

401

WAREHOUSE (FULFILLMENT CENTERS)

273

274

ELECTRONIC SHOPPING

133

126

564

261

BRICK-AND-MORTAR + ECOMMERCE*Brick-and-mortar retail is equal to retail minus nonstore retail.
**Warehouse and electronic shopping jobs as reported by BLS, before recategorization***Assumes 40-hour week.
Source: BLS, PPI

generated 261,000 more FTE jobs than brickand-mortar retail has lost since 2007.

What about brick-and-mortar retail? The brickand-mortar retail sector is the retail sector
minus nonstore retail (NAICS 454). It includes
everything from motor vehicles to electronics togroceries to department stores.

Note that some of the decline in brick-andmortar retail FTE jobs may have been causedby the sharp slowdown in real spending
on consumer goods rather than the rise inecommerce. From 1996 to 2006, real spending
on consumer goods rose by 61%, compared to amuch smaller 24% gain between 2006 and 2016.
That earlier boom in spending may have driven
excess store expansion, and the subsequent
slowdown may help explain why brick-andmortar retail FTE employment has struggled toregain its pre-recession peak.

Measured by the number of jobs, brick-andmortar retail employment has actually increased.
That’s why we also calculate an alternative
measure, using the number of hours worked
per week by all employees and dividing by 40
to get full time equivalents. By that measure,the number of FTE workers in brick-and-mortar
retail has dropped by 140,000 since 2007, which
seems more accurate.12 So net, ecommerce has

12 This is based on a three-month moving average, because hours estimates bounce around a lot from month to month.
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HOW ECOMMERCE CREATES JOBS AND REDUCES INCOME INEQUALITYFIGURE 3: Ecommerce vs Brick-and-Mortar Retail(change since December 2007, thousands of FTE jobs)*
600
400
200
0
-200
-600
-400
-800
-1000

Jun 17

Dec 16

Jun 16

Dec 15

Jun 15

Dec 14

Jun 14

Dec 13

Jun 13

Dec 12

Jun 12

Dec 11

Jun 11

Dec 10Jun 10

Dec 09Jun 09Dec 08

Jun 08

Brick-andmortar retail-1200
Dec 07

Ecommerce*Three-month moving average. Assumes 40-hour work weeks.
Source: BLS, PPI

and Neiman Marcus, among others, havebuilt multiple fulfillment centers, warehousing
employment has soared but there has been no
gain in electronic shopping employment at all
since 2007. Similarly, in Cumberland County,
Pennsylvania—where Amazon and Chewy
have built fulfillment centers—warehousing
employment had gone up by roughly 3,000 since2007, but electronic shopping employment has
actually gone down.

Are these reasonable numbers? The ecommerceand brick-and-mortar calculations areconceptually separate. So let’s do ecommerce
first. Obviously electronic shopping jobs belong
in ecommerce, so the gain of roughly 130,000 is
solid. And there’s also no doubt there’s massive
hiring in ecommerce fulfillment centers, basedon newspaper reports and Amazon’s growthalone. So the question is whether the fulfillment
centers are already being counted in electronic
shopping, or in another industry such as
warehousing.

Is it possible some of the gains in warehousing
jobs are non-ecommerce? Yes, it’s possible. But
it’s equally likely that some of the fulfillment
center jobs are being miscategorized in either
brick-and-mortar retail or temporary help. So, allin all, I’m comfortable with the estimates above.

A county-by-county look at QCEW data leaves no
doubt that many of the new fulfillment centers
are being reported in the warehousing industry(see methodology appendix). For example, inRiverside County, California, where Amazon
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HOW ECOMMERCE CREATES JOBS AND REDUCES INCOME INEQUALITY

employees, and unpaid time by households,
in the form of driving to the store, parking,wandering through the aisles, checking out, anddriving home.

The brick-and mortar retail jobs estimatesare equally interesting. According to the BLS
published statistics, brick-and-mortar retail
employment has fallen only by 7,000 from
June 2016 to June 2017. One issue, of course,is that these numbers could simply be revised
down over time. Leaving that aside, it’s also
possible that, when a brick-and-mortar retailerbuilds an ecommerce fulfillment center, it’s
being categorized within the original retailindustry rather than either electronic shoppingor warehousing. For example, Walmart opened
an ecommerce fulfillment center in 2015 inPlainfield, Indiana (Hendricks County), employing
300 people.13 In the 2015 QCEW data for
Hendricks County, warehousing employment
jumps by a lot more than employment
in warehouse clubs and supercenters.
Nevertheless, one cannot categorically rule out
the possibility that the opening of the Walmart
facility is masking a decline in other retail
employment.

Ecommerce potentially reduces the number of
unpaid household hours devoted to shopping.
Moreover, some of these unpaid hours are now
shifted to the market sector. Paid fulfillment
center associates and truck drivers now perform
shopping tasks that consumers formerly did
for free—such as transportation and retrievalof items within the store, , as well as returningunwanted items back to the seller. Indeed,"reverse logistics"--the ability to handle flows ofgoods from consumers to fulfillment centers--isone of the striking innovative capabilities of the
new distribution systems.

Paid fulfillment center associates
and truck drivers now perform
shopping tasks that consumers
formerly did for free—such astransportation and retrieval of
items within the store.

SECTION 4. WHY ECOMMERCE
IS CREATING PAID JOBS
It may be surprising that ecommerce
employment is rising much faster than brickand-mortar retail employment is falling. Since
ecommerce companies are supposedly moreproductive than traditional retailers, people thinkthey must therefore employ fewer people.

In this section we will make an initial start at
quantifying the size of this shift. According to
the American Time Use (ATU) Survey from the
Bureau of Labor Statistics, in 2016 Americans
aged 15 and over spent 4.55 hours per week
shopping for consumer goods or travelling forpurchases of goods and services. Since there
are 262 million Americans aged 15 and over, thattranslates to almost 1.2 billion hours per week.

But the increase in paid employment can be best
understood by considering that the economic
activity “shopping for goods” actually combines
two labor inputs: paid market work by retail

13 http://corporate.walmart.com/_news_/news-archive/2015/08/12/walmart-opens-new-e-commerce-fulfillment-center-in-plainfield
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HOW ECOMMERCE CREATES JOBS AND REDUCES INCOME INEQUALITYTABLE 2: Paid and Unpaid Hours in Distribution: Retail, Wholesale, Transportation and Warehousing(millions of hours per week)
PAID
BRICK-AND-MORTAR RETAIL TRADE

471.0

NONSTORE RETAIL (INCLUDING ELECTRONIC SHOPPING)

19.5

WAREHOUSING AND STORAGE

38.4

WHOLESALE TRADE

227.6

TRUCKING

60.6

ALL OTHER TRANSPORTATION AND WAREHOUSING

132.8

UNPAID

1,192.8

HOUSEHOLD SHOPPING

TOTAL

950.0

RETAIL AND WAREHOUSING

528.9

1,192.8

Source: BLS, PPI

mall, pick up a shirt, and drive home. Now let’s
suppose it takes a fulfillment center worker
an hour to do 30 orders, and a truck driver five
hours to deliver 30 orders. Then 30 orders ofl take 60 hours of unpaid household time, but
only six hours of paid market time, for a β of 10.

On the other hand, the entire distribution
and transportation sector—comprising retail,wholesales transportation, and warehousing—had 950 million hours per week of paid work in
2016, substantially less than unpaid household
hours for shopping. What’s more, a substantial
portion of those paid hours are actually devoted
to supplying nonretail businesses or personaltransportation.

Whether it’s economically sensible to shift hours
from the household sector to the market sector
depends on V, the value that households put on
their time; W, the market wage for ecommerce
workers; N, the nonlabor cost of converting
the marginal hour of unpaid household work
into paid market work; and β, the ecommerce
productivity ratio.

So we can think of ecommerce as a machinefor converting unpaid household hours into paid
market hours, if the productivity gains are highenough. Let’s suppose β is the rate at which
unpaid household hours can be converted into
paid market hours. For example, suppose it
takes a household two hours to drive to the

V> N+W/β

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HOW ECOMMERCE CREATES JOBS AND REDUCES INCOME INEQUALITY

On the left-hand axis of Figure 4, we plot thetwo-year moving average of weekly household
shopping time. For example, in 2006-2007
Americans spent 4.75 hours per week shopping
for consumer goods or travelling to shopping.
So we can think of ecommerce as
By 2015-2016, that amount had dropped toa machine for converting unpaid
4.5 hours, a 5.1% decline. (The mild pickup inhousehold hours into
paid
marketFigure4: How
Ecommerce Affects Household Shopping Hours
shopping hours after 2011 likely reflects macro
hours, if the productivity gains arefactors such as increased consumer spending).

It’s clear that, as ecommerce productivity β rises
and N falls, it becomes economically attractive
to move more hours out of the unpaid household
sector into the paid market sector.

high enough.

On the right-hand axis of Figure 4, we plot thebrick-and-mortar share of retail sales, whichdrops from 96.6% in 2007 to 92.0% in 2016, a
4.8% decline. The similarity of the two measures
can be seen in the figure, because the two axes
are scaled the same.

Let’s see what has actually been happening.
We have two ways of measuring the decline inhousehold hours—either directly through the ATU
survey, or indirectly through the declining shareof brick-and-mortar retail sales. Luckily for us,
both methods give us roughly the same answer.

FIGURE 4: How Ecommerce Affects Household Shopping Hours

88.0%

4.3

86.0%

4.2

84.0%

4.1

82.0%

4

80.0%

*Two-year moving average. Shopping for consumer goods plus travel related to shopping.
Source: Census Bureau, Bureau of Labor Statistics

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2016

4.4

2015

90.0%

2014

4.5

2013

92.0%

2012

4.6

2011

94.0%

2010

4.7

2009

96.0%

2008

4.8

2007

98.0%

2006

4.9

2005

Brick-and-mortar
share of retailshares100.0%

2004

Weekly hours
spent shopping*5

HOW ECOMMERCE CREATES JOBS AND REDUCES INCOME INEQUALITY

would.14 That comes to a decline of roughly 64
million hours per week, or the equivalent of 1.6
million full-time jobs.

So, as a first approximation, the data seems to
be telling us that the evolution of ecommercesince 2007 means households are spending
5% fewer hours shopping than they otherwise

TABLE 3: Change in Paid and Unpaid Hours in Distribution, 2007-2016: Retail, Wholesale,Transportation and Warehousing (millions of hours)
PAID
BRICK-AND-MORTAR RETAIL TRADE-6.0

NONSTORE RETAIL (INCLUDING ELECTRONIC SHOPPING)+4.2

WAREHOUSING AND STORAGE+10.5

WHOLESALE TRADE-1.6

TRUCKING+3.1

ALL OTHER TRANSPORTATION AND WAREHOUSING+5.2

UNPAID-64

HOUSEHOLD SHOPPING

TOTAL

+15.4

RETAIL AND WAREHOUSING(BRICK-AND-MORTAR RETAIL PLUS ECOMMERCE)

+8.7

-64

Source: BLS, PPI

hours since 2007 with the increase in total
private sector work hours. From 2007 to 2016,
paid private sector weekly work hours increased
by 212 million, or 5.3%. Taking into account the
64 million drop in household hours reduces thetotal hours increase to only 3.7% over nine years.
That’s a difference of 0.2 percentage points
annually.

One important implication: Productivity growthis being significantly undermeasured, because
the BLS is not counting the fall in household
hours.
How much is productivity growth being
underestimated? One simple approach is tocompare the drop in unpaid household shopping

14 Actually, there are several alternative ways I could have done this calculation, which give a wide array of different answers. But, for the
purposes of this paper, this is the simplest.
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HOW ECOMMERCE CREATES JOBS AND REDUCES INCOME INEQUALITY

centers. Electronic shopping establishments are
predominantly heavy in management, business
operation and computer-related occupations
that require college degrees. Jobs at fulfillment
centers, by contrast, generally require only a highschool diploma.

This preliminary calculation would suggest that
overall annual productivity growth since 2007
is being underestimated by 0.2 percentage
points because of the rise of ecommerce andthe reduction in household hours. Note thatsimilar reasoning would suggest that retailproductivity gains during the big box era may
have been overestimated, since studies showthat household shopping hours increased duringthat period.

We will find that the average weekly
earnings of fulfillment centers are
31% higher than average weekly
earnings in brick-and-mortar
retail jobs in the same county.
This suggests the expansion of
ecommerce has the possibility ofreversing the years of deteriorating
relative wages in the retail sector,
which did so much to drive therising inequality.

SECTION 5. ECOMMERCE VS RETAIL PAY
In the previous two sections, we showed
how ecommerce jobs are increasing fasterthan brick-and-mortar jobs are declining. And
we offered an explanation based on higher
ecommerce productivity leading to a shift ofhours from the unpaid household sector to thepaid market sector.

Pay is excellent at electronic shopping
establishments. But, because our primary
focus is the effect of ecommerce on inequality,
especially for less educated workers, we will bemainly concerned with fulfillment centers. On
a national level, the average annual earnings
for private sector workers are $53,500. This
figure includes bonuses and other intermittent
pay. The average annual earnings for brickand-mortar retail workers are $29,300, which
includes a difference in hourly wages and adifference in hours worked. Electronic shopping
establishments pay an average of $65,600 per
employee, while the warehousing industry pays
$42,400 on average. These figures are based on
QCEW data.

But what are those jobs being paid? In thissection, we will be primarily focused on
establishing the facts about ecommerce wages
relative to retail jobs. We will find that the
average weekly earnings of fulfillment centers
are 31% higher than average weekly earnings inbrick-and-mortar retail jobs in the same county.
This suggests the expansion of ecommerce
has the possibility of reversing the years ofdeteriorating relative wages in the retail sector,
which did so much to drive the rising inequality.
First, a warning. This section is a bit like adetective story, where we build a case step bystep. There’s no rushing ahead. First, note thatthe ecommerce sector includes both electronic
shopping establishments and fulfillment

P16

HOW ECOMMERCE CREATES JOBS AND REDUCES INCOME INEQUALITYTABLE 4: National Annual Earnings in Retail and Ecommerce, 2016
AVERAGE ANNUAL EARNINGS(THOUSANDS)PERCENTAGE DIFFERENCE RELATIVETO PRIVATE SECTOR AVERAGEPRIVATE SECTOR

$53.5

--

BRICK-AND-MORTAR RETAIL

$29.3

-45%

ELECTRONIC SHOPPING*

$65.6

+23%

WAREHOUSING

$42.4

-21%

INDUSTRY*NAICS 4541
Source: BLS QCEW

Based on these figures, warehousing jobs pay
about 45% more than brick-and-mortar retailon a national level, which would be a significant
jump in pay.

wages) shows that, on average, warehousejobs pay 50% more than brick-and-mortar retailjobs in the same state. But still, in most states,
fulfillment centers are only a share of overall
warehouse jobs.

However, these national figures do not establish
the true wage difference between fulfillment
centers and brick-and-mortar retail. First, theoverall average warehouse wage figure may notaccurately reflect fulfillment center wages, which
are only a subset of the warehouse category.
Second, these are national averages, when weare concerned with comparing fulfillment center
wages with local retail earnings.

Averaging over 49 states (Hawaii
and District of Columbia don’treport warehouse wages) showsthat, on average, warehouse jobs
pay 50% more than brick-andmortar jobs in the same state.
Getting a good read on fulfillment center wages
requires us to get down to the county level. For
example, consider Bradley County, Tennessee,
just outside Chattanooga. Amazon opened
a fulfillment center in Charleston, in BradleyCounty, in 2011.15 The QCEW data shows
warehouse employment in the county jumping
sharply that same year. The site had more than
1,000 full-time workers as of 2016, according tonews reports, with the QCEW data showing justover 1,200 workers in the warehousing industry.16

Based on these figures,
warehousing jobs pay about 45%
more than brick-and-mortar retailon a national level, which would
be a significant jump in pay.
Redoing the analysis at a state level doesn’tchange much. Averaging over 49 states (Hawaii
and District of Columbia don’t report warehouse

15 http://www.timesfreepress.com/news/business/aroundregion/story/2014/sep/10/amazon-gets-ready-for-holiday-hiring-rampup/266718/
16 http://www.timesfreepress.com/news/business/aroundregion/story/2016/oct/11/amazon-has-over-4200-full-time-workers-chattanoogacharleston/391337/
http://clevelandbanner.com/stories/amazon-marks-5-year-anniversary,44637
P17

HOW ECOMMERCE CREATES JOBS AND REDUCES INCOME INEQUALITY

So clearly the great majority of workers in thewarehouse industry in Bradley County are
employed in the Amazon fulfillment center.
The average annual earnings in the warehouseindustry in Bradley County in 2016, according to
the QCEW, were $36,350, compared to $27,243
for brick-and-mortar retail in the county. That
corresponds to a wage premium of 34% for thefulfillment jobs.

There are 19 counties nationwide that fit all
three criteria—that is, a big jump in warehouse
employment, where the new jobs account for atleast two-thirds of the 2016 employment. Mostof these counties contain Amazon fulfillment
centers. The remaining mostly containecommerce fulfillment centers belonging tocompanies such as Nordstrom or Kohl’s.
We find that warehouse wages in these counties
exceed brick-and-mortar retail wages by 31%,
on average. Just focusing on the counties
containing Amazon fulfillment centers gives us
a slightly higher ecommerce-to-brick-and-mortar
wage premium of about 33%.

It’s worth noting that, in 2016, the averageannual pay in the private sector in BradleyCounty was $38,781, only 6% more than
the fulfillment center pay. So, in that county,
ecommerce reduces inequality by employing
workers who make close to the annual averagefor the private sector.

One note about scope: The approach in thissection relies on pay reported to the government
for unemployment insurance purposes, so it isaccurate under penalty of law. It does include
both nonsupervisory and supervisory personnel
for both fulfillment centers and retail. However,this data does not include employer payments
for health insurance, and certain other benefits
such as educational assistance up to a certain
amount. For example, Amazon's program foroffering tuition assistance for training in fields
such as nursing and robotics is almost certainly
not being picked up by our data.

This example maps out our analysis strategy.
We look for counties wherea. BLS provides data on 2007 and 2016
employment in the warehousing industry
b. Employment in warehousing has risen
by at least 1,000 jobs over that periodc. At least two-thirds of the warehousing jobs
in 2016 were created since 2007

We find that warehouse wages
in these counties exceed brickand-mortar retail wages by 31%,
on average. Just focusing on
the counties containing Amazon
fulfillment centers gives us a slightly
higher ecommerce-to-brick-andmortar wage premium of about 33%.

Sixty counties nationwide fit the first two
criteria. These do not include all counties where
Amazon has built fulfillment centers, because,
for confidentiality reasons, the BLS censors data
where it would clearly reveal the operations of asingle company.

So, in Bradley County, ecommerce
reduces inequality by employing
workers who make close to theannual average for the private
sector.

P18

HOW ECOMMERCE CREATES JOBS AND REDUCES INCOME INEQUALITYSECTION 6: A DIFFERENTAPPROACH TO WAGES
We must take note here of a different approachto the analysis of fulfillment center wages. In
a recent report on Amazon, the Institute for
Local Self-Reliance (ILSR), a Washington-based
nonprofit organization, estimated average pay at
Amazon’s fulfillment centers using wage reports
from Glassdoor.com.17

excludes variable compensation such ascommission and bonuses, as well as overtime.18
Their survey does ask for variable compensation
data, but the field is optional and a much smaller
percentage of people reply.
As a result, Glassdoor's "headline" wage figure isfor base pay:
Salary estimates in job listings display
a range for annual base or hourly pay
and are specific to job title, company
and location. They do not factor invariable compensation, such as bonuses,
commissions, tips, stock, benefits or othercomponents.

Drawing on more than 1,300 wage postings
on Glassdoor.com, we found that Amazon’s
fulfillment center positions pay an hourlymean wage of $12.32.
They then compared their estimate of Amazon
wages with BLS data based on government
surveys. In particular, the report notes that:

By contrast, the BLS estimates, as drawn fromthe Occupational Employment Statistics Survey,
explicitly include commissions and some typesof bonuses, including incentive bonuses andproduction bonuses.19

The average hourly pay for the nation’s 7.5
million retail sales workers was $11.72 in
2015, according to BLS data; adjusted for
inflation to 2016, that means Amazon paid
just 3% more.

For these well-documented reasons, BLS OES
wage estimates are systematically higher thanGlassdoor wage estimates across a range of
selected high-skill and low-skill occupations, as
Table 5 shows.

However, ILSR’s comparison of Glassdoor wage
data with BLS wage data is comparing apples
and oranges. Glassdoor mainly collects dataon “annual base or hourly pay,” which explicitly

17 “Amazon’s Stranglehold: How the Company’s Tightening Grip Is Stifling Competition, Eroding Jobs, and Threatening Communities,”
November 2016. ILSR
18 http://help.glassdoor.com/article/What-are-Salary-Estimates-in-Job-Listings
19 https://www.bls.gov/respondents/oes/faqs.htm#19
P19

HOW ECOMMERCE CREATES JOBS AND REDUCES INCOME INEQUALITYTABLE 5: Comparing Glassdoor and BLS Wage Estimates: Selected Occupations
ANNUAL EARNINGSOCCUPATIONGLASSDOOR ESTIMATEBLS ESTIMATEPERCENTAGE DIFFERENCE

MARKETING MANAGER$81,114$144,740

78.4%

DENTIST$132,125$179,820

36.1%

EDITOR$49,679$66,330

33.5%

REPORTER$38,176$49,830

30.5%

MAID

$18,562$23,820

28.3%

CHILDCARE$17,540$22,080

25.9%

COOK

$20,000$24,270

21.4%

DENTAL HYGIENIST$61,625$73,600

19.4%

Glassdoor estimates are base pay only, with no variable compensation or overtime. BLS OES estimates include commissions and some types ofvariable compensation, such as incentive and production bonuses. Source: Glassdoor.com, BLS

These systematic differences shouldn’t bea surprise. Glassdoor wage estimates are awonderful example of “organic” data, collected in
the course of doing business rather than throughgovernment surveys. The information containedin Glassdoor wage estimates is tremendously
useful, both to job seekers and researchers,
providing data that government surveys cannot.

Now let's turn to the particular comparison ILSR
used. Amazon fulfillment center workers are
eligible for overtime and performance bonuses,
which are not counted in the Glassdoor base pay
figures.21 Conversely, many retail jobs in the ILSR
sample get commissions and incentive bonuses,
which are counted in the BLS figures. For
example, their 7.5 million retail workers include
auto sales workers, who typically get 25-30%
commissions. High-end department stores often
utilize a commission-based pay structure, as do
jewelry stores and many furniture stores.22

However, it is well known that comparisons
between organic data and government survey
data must be made very carefully, because there
are often important conceptual differences.20
In the case of Glassdoor wage data, thosedifferences are fully explained on the site.

20 For example, the author has extensively studied online job postings, an important form of organic data about the labor market. In
this context, any analysis must account for key conceptual differences between the number of online job postings, as reported by a job
search engine such as Indeed.com, and the number of job openings, as reported by the Bureau of Labor Statistics. For further discussion,see Michael Mandel and Judith Scherer, “A Low-Cost and Flexible Approach for Tracking Jobs and Economic Activity Related toInnovative Technologies,” NESTA Working paper 15/11, 2015.
21 https://www.bizjournals.com/denver/news/2017/07/13/amazon-now-hiring-1-000-people-for-its-aurora.html
22 http://www.seattlepi.com/business/article/Nordstrom-salesman-s-million-dollar-secret-is-in-1140669.php.
https://www.indeed.com/cmp/Nordstrom/faq/what-is-the-pay-structure-like-for-a-sales-associate-how-does-commissionwork?quid=1ab8e38r5as0lclc
P20

HOW ECOMMERCE CREATES JOBS AND REDUCES INCOME INEQUALITY

at Amazon for warehouse associates is roughly
about one-third higher than base pay for major
retailers, such as Macy’s, Walmart, Target, and
Ann Taylor. That matches the results we got
from the analysis in the previous section.

According to one report:
Most furniture stores pay salespeople asalary and commission, with heavy volumeretailers giving 4% to 8% and some upscaleretailers offering 10% or more.23

Glassdoor also offers some total compensation
data based on a much smaller sample. Thatshows roughly the same result. For example, asreported by Glassdoor, the total compensation ofan Amazon warehouse associate, including cash
bonus and profit sharing, is 34% more than the
total compensation of a Macy's retail associate,including cash bonus and commission.

To sum up, ILSR appears to be using Glassdoorbase pay data for Amazon wages, which omit
overtime and performance bonuses, they arecomparing those numbers to BLS figures forretail wages, which include commissions andperformance bonuses. In other words, thecomparison is biased against Amazon because ofa misunderstanding of how to use organic data.

Still, we believe the wage analysis of theprevious section is a better approach for
examining inequality, because it systematically
includes all forms of income, including overtime,commissions, and incentives. However,
Glassdoor-type organic data has an importantrole to play as well, if used correctly. The key is
to compare apples to apples, or to adjust for thedifference in pay concepts.

In a situation like this, it would have been
methodologically sounder to compare
Glassdoor base pay data for Amazon warehouseassociates with Glassdoor base pay data for
major brick-and-mortar retailers.
Table 6 below does a simple version of thatanalysis. All samples were drawn in late Julyand early August, 2017. We see that base pay

TABLE 6: Ecommerce/Retail Wage Comparisons Using Glassdoor Data
COMPANYJOB TITLE

HOURLY WAGE ESTIMATE REPORTED BY GLASSDOORAMAZON

WAREHOUSE ASSOCIATE — HOURLY$12.53

MACY'SSALES ASSOCIATE — HOURLY$9.40

MACY'SRETAIL SALES ASSOCIATE — HOURLY$9.40

WALMART

SALES ASSOCIATE$9.79

WALMARTCASHIER$9.34

TARGET

SALES FLOOR TEAM MEMBER — HOURLY$9.50

TARGETCASHIER — HOURLY$9.44

ANN TAYLORSALES ASSOCIATE — HOURLY$9.98

Source: Glassdoor.com. Samples drawn on late July and early August, 2017.
23 http://www.marketwatch.com/story/10-things-furniture-stores-wont-tell-you-1296850666159

P21

HOW ECOMMERCE CREATES JOBS AND REDUCES INCOME INEQUALITYSECTION 7: ECOMMERCE AND INEQUALITY
So far the information revolution has been
missing good jobs for high-school-educatedworkers. It has produced plenty of jobs forknowledge workers, but high-school-educatedworkers have seen their job opportunities
contract. The result has been a rise in inequality,
as has been repeatedly documented.

So shifting jobs from brick-and-mortar retailto ecommerce fulfillment centers will havethe effect of lifting earnings for low-income
workers. The exact impact on inequality will
depend on the relative educational mix of thetwo industries. For example, if it turns out that
fulfillment center workers have a higher levelof education on average than retail workers,
then some of the pay premium is due tocharacteristics of the workers rather thanhigher pay by ecommerce companies.

The U.S. needs decent paying jobs in the techsector for high school graduates that utilize
a mix of cognitive and physical skills. That’s
exactly the description of fulfillment center
jobs—decent pay for a high school graduate,
in a fast-growing tech-related industry, which
requires a mixture of physical and cognitive
skills.24 Many of them are full-time jobs with full
benefits. They aren’t easy jobs, for sure—butneither are manufacturing jobs.

So shifting jobs from brick-andmortar retail to ecommerce
fulfillment centers will have theeffect of lifting earnings for lowincome workers.
However, according to analysis of the Current
Population Survey, workers in the retail sector
on average have significantly better than a highschool education. Out of 16.8 million workers
employed in the retail sector, 22% have abachelor’s degree or better, while another 10%
have an associate’s degree.25 Only 10% have lessthan a high school diploma. Note that, despite
this education distribution, the average weekly
wage in retail is only $583, or $30,297 annually.26

The U.S. needs decent paying jobs
in the tech sector for high school
graduates that utilize a mix of
cognitive and physical skills. That’s
exactly the description of fulfillment
center jobs—decent pay for a highschool graduate, in a fast-growing
tech-related industry, which
requires a mixture of physicaland cognitive skills.

There is also some tentative evidence that theshift from retail to ecommerce is benefiting
black and Hispanic workers. First, the common
conception is that the retail workforce is“disproportionately people of color.”27 However,that’s not what BLS statistics show. According
to the latest figures, 11.9% of all workers identify

By contrast, brick-and-mortar retail jobs not only
pay less, but also tend to be low-hour jobs, oftenwith fewer benefits. Indeed, by our calculations,even though retail is less than 8% of theeconomy, it has been responsible for 20% of
the decline in labor share since 1987.

24 Indeed, at least one company offers an Order Selector Certification for ecommerce fulfillment center workers.
http://www.prologistix.com/employees/certifications/
25 Author tabulations of CPS data for year ending June 2017.
26 This figure is based on QCEW data. The CES data gives a lower estimate of $23,276 annually. BEA reports average wage and salary
payments of $30,529 in 2015 for retail employees.
27 https://www.racked.com/2017/6/20/15817988/retail-workers-unions-american-jobs
P22

HOW ECOMMERCE CREATES JOBS AND REDUCES INCOME INEQUALITYSECTION 8. THE FUTURE
Retail is going through an evolution, rather thana revolution. The ecommerce share of retailsales is increasing at about one percentage
point annually. In the first quarter of 2017,
ecommerce had 8.5% of retail sales, compared
to 7.8% a year earlier.

as black or African-American, compared to 12%of retail workers.28 Similarly, 16.7% of all workers
identify as Hispanic or Latino, compared to 17%
of retail workers.
By contrast, workers in the fast-growing
warehousing industry—which includes fulfillment
centers—are more likely to be black or Hispanic.
In 2016, 24.3% of warehousing workers were
black, up from 18.5% in 2010. Then 30.3% wereHispanic, up from 28.8% in 2010. Thus, overthe period of rapid fulfillment center expansion,
the government data apparent show that thewarehouse industry has been hiring black andHispanic workers at a rapid pace.

So, for the near-term future, we expect current
trends to continue. Brick-and-mortar retail jobs
will continue to shrink, at a slow-to-moderatepace, especially if the slow growth of consumer
spending continues. And ecommerce jobs willcontinue to expand, as more and more unpaid
household shopping hours are moved into themarket sector. Amazon has said it plans to
expand domestic employment by 100,000 jobs
by mid-2018.30 Meanwhile, incumbent retailers
will continue to compete with Amazon bybuilding fulfillment centers of their own, or hiring
companies that are specializing in ecommerce
fulfillment.

Thus, over the period of rapid
fulfillment center expansion, thewarehouse industry has been hiring
black and Hispanic workers at
a rapid pace.
We should also note that past research from
Demos and the NAACP found that, in retail,blacks and Hispanic/Latinos tend to be sorted
into lower-paid positions and underrepresented
in supervisory positions.29 Of those lower-paid
positions, black and Hispanic/Latino retail sales
workers are overrepresented in cashier positions
that are the absolute lowest paid.

Brick-and-mortar retail jobs willcontinue to shrink, at a slow-tomoderate pace. And ecommercejobs will continue to expand, as
more and more unpaid household
shopping hours are moved into themarket sector.

The shift away from brick-and-mortar retail toecommerce will present challenges for thosecommunities that rely on entry-level retail jobs asa gateway into the labor market. Will ecommerceoffer more or fewer opportunities for blacks
and Hispanics to build wealth and create longterm careers? Which areas of the country will
be helped and which hurt? Much more researchneeds to be done on these and related questions.

Longer-term, will the job expansion of
ecommerce continue? It’s hard to tell. Somepeople worry that fulfillment center workers
are going to eventually be replaced by robots,
which automatically pick, pack and sort. That’s
impossible to assess at this point.

28 https://www.bls.gov/cps/cpsaat18.htm
29 The Retail Race Divide (Demos, NAACP 2015)30 http://www.reuters.com/article/us-amazon-com-inc-jobs-idUSPKBN14W21G
P23

HOW ECOMMERCE CREATES JOBS AND REDUCES INCOME INEQUALITY

But, in my view, the real question is what
new business models will be enabled by theadvanced distribution capabilities we are
currently developing. Rather than distribution
being a one-way bulk operation with long leadtimes, we now have the ability to deliver goods
quickly—and, perhaps more importantly, accept
returns.

We can imagine new business models forcustom manufacturing that make use of theseadvanced distribution capabilities. Imagine
you can go into a store, see a style of furniture
or clothing you like, order it from a custom
manufacturer set up next to a fulfillment center,and have it delivered the next day. That’s muchbetter than waiting two weeks or two months fordelivery from China. Indeed, a flexible and rapid
local distribution system may provide a durable
competitive advantage against overseas rivals.

But, in my view, the real questionis what new business models
will be enabled by the advanced
distribution capabilities weare currently developing.

We can imagine new businessmodels for custom manufacturingthat make use of these advanced
distribution capabilities.

P24

HOW ECOMMERCE CREATES JOBS AND REDUCES INCOME INEQUALITY

Methodology
Appendix
So a company with multiple physical locations
typically—but not always—reports each of its
physical locations in a different industry thanthe company itself is in.

The analysis of income inequality relies on
county-level data from the BLS Quarterly Census
of Employment and Wages (QCEW) program.
However, because of some classification errors,
the data requires some work before it's useful.

Moreover, the QCEW program of the BLS
publishes data down to the county level, subject
to confidentiality requirements. So, if there
are too few employers of a particular type ina county, that data may not be published.

The QCEW is based on required unemployment
insurance reports submitted by businesses,
where they report the number of workers bycounty and by industry, as well as the amountof wages and salaries paid out.

Fulfillment centers typically are counted in the“warehousing and storage” industry (NAICS
493). Because fulfillment centers are often
located in relatively low-density areas, theyoften stand out very clearly in the BLS data. For
example, Amazon opened a fulfillment center in
Kenosha, Illinois, in June 2015.31 Figure 5 shows
employment in the warehousing industry in
Kenosha County.

In terms of categories, the Bureau of Labor
Statistics tracks employment by establishment,
not by company. An establishment, as definedby the BLS, is:An establishment is commonly understoodas a single economic unit, such as a farm,a mine, a factory, or a store, that produces
goods or services. Establishments are
typically at one physical location andengaged in one, or predominantly one,type of economic activity for which a single
industrial classification may be applied.

31 http://journaltimes.com/news/local/amazon-to-hire-more-at-kenosha-center/article_9518ffa6-112c-5ed1-b002-5b0c094fe493.html
P25

HOW ECOMMERCE CREATES JOBS AND REDUCES INCOME INEQUALITYFIGURE 5: Employment in Warehousing Industry: Kenosha County, Wisconsin
6000
5000
4000
3000
2000
1000
0

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

based in Omaha, Nebraska, and recently
However, a small number of states—notably
acquired by Walmart, opened its first fulfillment
Arizona, Florida, Indiana, and Ohio—assign some
center operations in the county in 2010, andfulfillment centers to the “electronic shopping
has expanded several times since then.33
and mail order” industry instead (NAICS 4541).
Trade Global, a Cincinnati-based subsidiary ofConsider Butler County, Ohio, located north ofSingapore Post LTD that provides ecommerce
Cincinnati. Butler is a hotbed of ecommerce. For
fulfillment services for fashion and beauty
example, Kohl’s runs an ecommerce distribution
brands such as Hugo Boss, opened a fulfillment
center in Monroe, Ohio, located in Butler County.
Jobs in Butler County, Ohio
center in West Chester, Ohio, in Butler County
According to news reports, Kohl’s expanded its(though it recently announced layoffs).
distribution center employment significantly
32
in 2014. Hayneedle, an online retail company
FIGURE 6: Jobs in Butler County, Ohio
4000
3500
3000
2500
2000
1500
1000
Electronic
shopping
Warehousing

500
0
2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

32 http://www.daytondailynews.com/business/kohl-hiring-640-for-local-commerce-distribution-center/ExJnZzBdWQ8D3X0mDILvRP/
33 http://www.journal-news.com/news/online-retailer-massive-monroe-expansion-create-over-100-new-jobs/1HY4g8fJQMjnyS2ZuHW15K/
P26

HOW ECOMMERCE CREATES JOBS AND REDUCES INCOME INEQUALITY

This strongly suggests these new jobs arelikely to correspond to fulfillment centersrather than electronic shopping hubs. Indeed,in 2014 Amazon opened a fulfillment centerin Ruskin, located in Hillsborough County, andthen expanded again in 2016. Similarly, theIndianapolis MSA has added roughly 9,500 jobs
in the electronic shopping industry between
2007 and 2016. But, since average pay in thatindustry in 2016 was only $37,619, these arelikely to be fulfillment center jobs.

However, if we look at the QCEW data, asgraphed in Figure 6, it’s clear that employment in
the electronic shopping industry has expanded
in Butler County, while the warehousing industry
has been flat. This suggests that the fulfillment
centers in that county are being assigned to theelectronic shopping industry.
This conclusion is supported by looking at wage
data. The average annual wage for electronic
shopping jobs in Butler County in 2016 was only
$35,000, putting it more in line with warehousejobs in the same county rather than higherpaying software jobs.

For the purposes of this study, we use
annual pay of $50,000 as the measure for
distinguishing between electronic shopping jobs
that should be categorized in the warehouse/
fulfillment center category and those thatproperly belong to electronic shopping hubs.
For example, densely populated Hudson County,
New Jersey, just across the river from New York
City, showed a jump of roughly 3,000 electronic
shopping jobs from 2007 to 2016. At an average
pay of $64,000, these are not likely to be
fulfillment center jobs.

Looking at wage data helps us identify othercases of misclassification. For example,
Hillsborough County, Florida (where Tampa
is located), shows an increase of more than
4,000 jobs in the electronic shopping industry
from 2007 to 2016. However, over that time
period, pay in the electronic shopping industry
dropped from $50,000 to $33,000 (compared
to an average brick-and-mortar pay of $30,866).

P27

HOW ECOMMERCE CREATES JOBS AND REDUCES INCOME INEQUALITY

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