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Robert Reich: The True Price of Great Holiday Deals

December 3, 2013

How the rise of online retailing harms the very consumers it supposedly serves.

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By Robert Reich
By arrangement with Robert Reich

The most important website last weekend and in weeks to come — on which the hopes and fears of countless Americans are focused (and the President’s poll-ratings depend) – is not HealthCare.gov. It’s Amazon.com.

Even if and when HealthCare.gov works perfectly, relatively few Americans will be affected by it. Only 5 percent of us are in the private health-insurance market to begin with. But almost half of Americans are now shopping for great holiday deals online, and many will be profoundly affected — not because they get great deals, but because their jobs and incomes are at stake.

With the growth of online retailing, fewer Americans will have jobs in bricks-and-mortar retail stores.

Online retailing is the future. Amazon is the main online shopping portal this holiday season but traditional retailers are moving online as fast as they can. Online sales are already up 20 percent over last year, and the pace will only accelerate.Target and many other bricks-and-mortar outlets plan to spend more on technology next year than on building and upgrading new stores.

Americans are getting great deals online, and they like the convenience. But there’s a hidden price. With the growth of online retailing, fewer Americans will have jobs in bricks-and-mortar retail stores.

Amazon announced last summer it would add 5,000 new jobs to the 20,000 it already has. But not even 25,000 Amazon jobs come near to replacing the hundreds of thousands of retail jobs Amazon has already wiped out, and the hundreds of thousands more it will eliminate in the future.

Most of what’s being sold this holiday season – online and off-line — is no longer made by Americans.

To put this in some perspective you need to know that retail jobs have been the fastest growing of all job categories since the recession ended in 2009. But given the rapid growth of online retailing, that trend can’t possibly last. What will Americans do when online sales take over?

Add to this the fact that most of what’s being sold this holiday season – online and off-line — is no longer made by Americans. Vast shipping containers of gadgets, garments, and other goodies are fabricated or assembled or sewed together in Asia for the American market.

Online retailers are facilitating this move by having these goods shipped directly from Asian factories to distribution centers in America and then to our homes, without ever having to go to an American retail store or even a wholesaler. This means even lower prices and better deals. But it also means fewer jobs and lower pay for many Americans.

Some manufacturing is coming back to America, to be sure, but not the assembly-line jobs that used to be the core of manufacturing employment. Computerized machine tools and robots are doing an increasing portion of the work — which is why many companies can afford to bring their factories back here.

To put it another way, American consumers getting great shopping deals are also American workers on the losing end of those same deals.

Get it? Technology and globalization are driving the good deals American consumers are getting this holiday season. But the same forces are keeping wages down, and are even on the verge of eliminating many of the low-wage retail and related service jobs many Americans now need to make ends meet.

To put it another way, American consumers getting great shopping deals are also American workers on the losing end of those same deals.

The biggest reason holiday shopping is especially frenzied this season is so many Americans are already stretched to the breaking point that they’re more desperate than ever for bargains. Sixty-five percent of today’s shoppers are living paycheck-to-paycheck. That’s up from 61 percent last year, according to consumer research by Booz and Company.

Median household income in America continues to drop, adjusted for inflation, because low-wage jobs are the major ones available. Lower-wage occupations accounted for only 21 percent of job losses during the Great Recession. They’ve accounted for 58 percent of all job growth since then.

The President’s dropping poll-ratings are only partly due to the bumbling roll-out of the Affordable Care Act. The computer glitches at HealthCare.gov aren’t the most important reason why Americans are grumpy this holiday season. The bigger problem is the economy remains lousy for most people.

Technology and globalization are taking over more and more American jobs. There’s no easy fix for this, and it’s hardly the President’s fault. But the sobering reality is the United States has no national strategy for creating more good jobs in America. Until we do, more and more Americans will be chasing great deals that come largely at their own expense.

Robert B. Reich, Chancellor’s Professor of Public Policy at the University of California at Berkeley, was Secretary of Labor in the Clinton administration. Time Magazine named him one of the ten most effective cabinet secretaries of the twentieth century. He has written thirteen books, including the best sellers Aftershock: The Next Economy and America’s Future and The Work of Nations: Preparing Ourselves for 21st Century Capitalism. His latest, Beyond Outrage, is now out in paperback. He is also a founding editor of the American Prospect magazine and chairman of Common Cause. His new film, “Inequality for All,” is now in theaters.

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2 comments for Robert Reich: The True Price of Great Holiday Deals

  1. Comment by elaine comstock-leirer on December 3, 2013 at 10:31 am

    love you. read you and pay attention.

  2. Comment by MK Kellogg on December 4, 2013 at 11:02 am

    Bravo! I have had these same thoughts for a while now; re: the ever widening wage gap and wealth gap. The 1% and 15% that own and run business in the US seem so smart. Yet why do they not understand that if they want to keep the golden goose alive they have to stop strangling it? Who will buy their goods and services when the credit cards are maxed out?

    I saw the MSNBC piece on this where you were a commentator, and appreciate that they are putting this message out there. I wonder what the Waltons et al would think if they were invited to a forum on this golden goose subject (if they would attend ;-)? And how to get mainstream media to pick up on this and keep drilling the message, since MSNBC is basically preaching to the choir and we all know what a dismal state MSM is these days.

    The US consumer needs to own this and practice restraint which is a whole other forum topic. I think they are so dazed and distracted by their addiction to consumerism that it will be near impossible to pull the pacifier out of their mouths. Shame on those who walked passed the protesting Wal-mart employees. What would the story have been if EVERY shopper refrained from entering the store and instead stood in protest outside with the protesters??

    I recently passed a female beggar on a busy street corner (actually they are on every street corner here in San Diego) but as she was holding up her help sign I was floored to see she had a fresh set of acrylic nails in the popular French white and pink. About $40…’nuf said.

    But just to show that I am not a knee-jerk Liberal…I do not think that any employer owes a worker a wage that can support a family of 5. If you are making minimum wage, maybe choosing to have 4 children is not the right choice.

    The overall message is “responsible living”, whether you are a billionaire who “just wants another million” in his coffers this quarter, or a citizen from the lower economic stratum…make responsible choices!

    My guess is if you could reach in to the minds of the 1-15%, in their heart of hearts they are all nihilists, hence there is no fixing the problem. Remember what Barbara Bush said after Katrina….”they were all underprivileged anyway”. I take it out of context however it was Freudian at the least considering the use of the word “underprivileged” and what does that term mean these days anyway. OK…’nuf said.

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