What the 'End of Retail' Means for Young Workers

The article below courtesy of Megan McArdle at The Atlantic offers up some interesting insights as to the plight of teenage workers in the US.  I would also point out that although productivity increases in retail such as online shopping have paved the wave for structural employment changes in the retail industry, the deep recession has forced some older over qualified people into that field thus taking the positions once held by the teenager.

What is also missing is how this part of the population misses out on valuable work experience and the development of work ethic and learning responsibility.

Via Atlantic piece here

• When lots of people chose to work, GDP will increase, the population-employment ratio will rise, and declines in unemployment will be dominated by folks becoming employed. When lots of people choose to retire, stay in school longer or stay home to raise a family the trends will reverse.






• What matters is whether or not the labor market is functioning smoothly. If someone chooses to look for employment will they have hard time. If the answer to this question is no, and yet still few people look, then we have to conclude that from a macro-perspective things are going fine.
• Despite the seeming acceleration in sales, this part of employment is rolling over.  Now look at the Employment Population Ratio and Unemployment rates for workers 16-19. Here I have re-normed unemployment so that I am graphing (60 = the unemployment rate) to match the early 90s. The implication is that if unemployment were zero then 60% of teenagers would be employed.

• We see a large and growing gap between unemployment and the employment-population ratio. There are numerous micro explanations here.
• One possibility, however, is that the relatively weak growth in shopping center employment relative to retail sales since 2000 and especially recently is driving down overall teen employment levels.
• However, because teenagers are especially suited to shopping center employment they are dropping out of the labor force in response. That is, the End of Retail is causing a permanent shift in teenage employment because there are no substitutes for retail jobs.
• This is a true structural downturn because it means that the production function is changing such that the productivity of teenage labor cannot meet the reservation wage.
• When that happens a factor of production simply goes out of use. It also implies that for a time the economic gains from productivity enhancements will be muted. E-commerce means more efficient shopping but because we are not repurposing teenage labor but losing it completely, the measured gains are less than they otherwise would be.