Labor productivity in the retail trade industry, 1987-99: faced with fierce competition, consolidation, and increased demand, the industry experienced strong growth in labor productivity over the period, partially due to increased investments in information technologies

Monthly Labor Review, Dec, 2001 by Mark Sieling, Brian Friedman, Mark Dumas

Average annual labor productivity growth in shoe stores was lower in the 1995-99 period (2.1 percent) than in the first half of the decade (5.2 percent). Although average output increased by 3.5 percent (compared with 1.3 percent in the 1990-95 period), employee hours grew by 1.4 percent annually in contrast to an average annual decline in hours over the 1990-95 period of 3.7 percent. (34)

Home furniture, furnishings, and equipment stores (SIC 57). This two-digit industry within retail trade had the highest annual average growth in labor productivity over the 1987-99 period, 5.8 percent, reflecting output growth of 8.0 percent per year and hours growth of 2.1 percent. As with most other retail trade groups, labor productivity gains were higher during the 1995-99 period than during the first half of the 1990s--7.6 percent versus 6.0 percent per year.

A similar pattern was found in the two largest components of this two-digit retail trade industry--furniture and home furnishing stores (SIC 571) and radio, television, computer, and music stores (SIC 573). The former increased by 2.3 percent per year during the 1990-95 period, and by 3.4 percent during the 1995-99 period. These increases reflected gains in annual output over the two periods of 2.8 percent and 3.4 percent, respectively, and gains in hours of 0.4 percent and 2.4 percent. (35)

Even greater gains were registered in radio, television, computer, and music stores for both periods. (36) For the 1990-95 period, labor productivity gains averaged 10.5 percent per annum, reflecting output gains of 15.6 percent and employee hours increases of 4.6 percent. During the 1995-99 period, labor productivity increased 12.1 percent per year, output increased 17.1 percent per year, and employee hours increased by 4.5 percent per year. In contrast to furniture stores, which remained a relatively dispersed industry with the top four firms accounting for less than one-tenth of sales over the 1987-97 period, radio, television, computer, and music stores became much more concentrated. In 1987, the top four firms accounted for about one-third of all sales, but by 1997, that percentage was a little more than three-fifths.

Eating and drinking places (SIC 58). Output in eating and drinking places expanded at an average annual rate of 2.3 percent over the 1987-99 period. Labor productivity, however, increased by only 0.4 percent as average hours growth (2.0 percent) almost kept pace with output gains.

Labor productivity in eating places (SIC 5812), which account for 95 percent of industry sales and employment, increased 0.5 percent per year over the 1987-99 period, with output increasing by 2.6 percent and hours increasing 2.1 percent per year. During the 1990-95 period, labor productivity increased 0.7 percent per annum, compared with average annual declines of 0.4 percent during the 1990-95 period. During the first half of the 1990s, average annual output gains of 1.7 percent per year were exceeded by gains in hours of 2.2 percent. In the second half of the decade, by contrast, average output gains exceeded growth in hours (3.1 percent versus 2.4 percent). Part of the increase in labor productivity over the latter part of the decade can be attributed to the growing use of POS terminals and small computer systems--especially in table service restaurants--which speed up service and reduce labor requirements. (37)