The Amazon Impact on Retail Jobs — Defining Technological Unemployment

I’d like to try to help people understand the impact that technology has on a specific sector — retail. Amazon is clearly the dominate player in the space and has become a behemoth since 2007. But without carefully looking at retail employment numbers — we can be fooled. Many authors and researchers have made the mistake of not trying to dissect Amazon as a member of the space and as a result, they miss the picture. Often asserting things such as Tim O’Reilly asserts “What Amazon teaches us about AI and the “jobless future”.” People who think that Amazon is not directly tied to the destruction of jobs in the retail sector are fooling themselves. Yes, Amazon will hire more people, but more importantly, for every job they hire, they will likely destroy three or four at a minimum.

So I figured I’d try to put the math on what everyone feels. Amazon grows and adds jobs. But they destroy more jobs than they create because of their efficiency and profitability. THAT is the definition of Technological Unemployment.

Since 20007, using the Bureau of Labor Statistics (BLS) data

Amazon is classified as nonstore retailing (NAICS 454) and further classified as Electronic Shopping (NAICS 4541)

So since 2007, Amazon has added 324,000 jobs approximately and the sector they are in has only grown by 126,000. So Amazon may have destroyed 198,000 jobs just in the non-store sector.

Ok, that’s one take but, since that sector (non-store NAICS 454) includes things like door-to-door sales, which by anyone’s definition are arcane, let’s dive deeper into the whole retail sector and see if the argument holds.

The BLS estimates a 7% growth rate in employment in retail from 2014–2024 (7% is the growth in jobs SINCE the financial crisis). Now it may not be a fair assumption but let’s drag that back to 2007. If we do that, the entire retail sector should have grown by 1.1 million jobs since 2007. Now employment was reduced during the financial crisis, but it still has increased by 395k jobs since 2007 including the reductions during the crisis. Don’t forget about the the 324k jobs that Amazon added into that number. That means the retail sector added 71k over 10 years EX-Amazon, even the financial crisis can’t explain that. What does explain an 82% share of job creation in a sector is that Amazon is the most profitable, most efficient retailer on the planet and they are forcing the rest of the industry to adapt or die, and most are dying.

When we examine where that growth over 10 years came from on a subsector basis the story becomes even more clear. In our examination, we allow for some sectors to be directly influenced by Amazon and some to be completely untouched. For example, Amazon likely has influenced these subsectors of retail (all subsectors of retail are included below):

While not influencing these sectors at all:

While some of these might be debatable, I’ve tried to include as many sectors as possible to give Amazon a fair review.

Here are the results for sectors directly influenced -5 k (including the +324k at Amazon itself), said differently -329k jobs directly related to Amazon in sectors they have affected since 2007 (job gains or losses after each sector):

While not influencing these sectors at all which grew by +394k jobs:

And none of this analysis includes the gigantic amount of layoffs expected in 2017 in the retail sector. So to summarize, depending on the analysis you’d like to use, Amazon has destroyed 198k jobs in the non-store retail sector, hindered BLS expected job growth by as much as 1 million jobs or explicitly caused a loss of 329k jobs in competing sectors all since 2007.

Take that a step further, Jeff Bezos (now the richest man in the world) and Amazon shareholders have been greatly enriched over that time, while thousands upon thousands of retail sector employees have or will lose their jobs, creating serious income inequality as a result of technological unemployment. But income inequality is a story for another post.

Look, I’m a capitalist, I’m a fan of efficiency. I’m a fan of service and sometimes I’m a fan of Amazon itself. Amazon has changed the way we shop, no one in their right mind would deny that. But let’s not kid ourselves. It will come at the cost of thousands upon thousands of jobs. These job losses and store closures will have serious repercussions on their local communities, many of which will not benefit from Amazon’s job growth. There are meaningful consequences to the technological unemployment directly caused by Amazon, and our desire for Amazon’s service. Amazon is leader in AI and Automation in the retail space. Those efforts cost humans jobs and always will. AI and Automation combined are replacement level machines for human labor. Those companies that replace humans the fastest will reap the largest profits and be the most successful. They will continue to hire humans because they can expand their businesses. The humans that work at these companies will continue to become more and more efficient and profitable on a per head basis. However, it will result in net job losses for society. That is TECHNOLOGICAL UNEMPLOYMENT and it is coming to all industries, not just retail.