TTABL 31.-Employment in retail trade selected years, 1939–54

1 Excludes proprietors, self-employed, unpaid family workers, domestics, etc. Sources: U. S. Department of Labor, Bureau of Labor Statistics, Employment and Earnings, May 1955, pp. 49, 54; U. S. Department of Labor, Bureau of Labor Statistics, Employment, Hours and Earnings in Retail Trade, 1939-50, pp. 1, 3.

Similar data for trade, including the self-employed and unpaid family workers, are not available on an annual basis. The data contained in table 32 are derived from the decennial census of occupations. They show that for retail trade, the ratio was 17.4 percent in each census. Here, again, therefore, we find that the rise in retailing employment has been the same as that for the national economy as a whole. In terms of the increase in labor requirements, therefore, there has been little difference between retail trade and the balance of the economy during the past 15 years.

TABLE 32.-Total employment in trade, 1940 and 19501

Includes proprietors, self-employed, unpaid family workers, etc. Source: U. S. Department of Commerce, Bureau of the Census, Census of Population: 1950. vol. II. pt. 1, Washington 1953, pp. 1-103, 1-104.

Retail trade productivity has lagged sharply behind gains for the national economy.—Productivity data for retailing are virtually nonexistent. A rough approximation has been attempted by R. R. Griffin for the period 1900-40. Griffin found that output per person in trade was some 50 percent greater in 1940 than in 1900. On a compound interest basis, this would yield an annual increment of 1.02 percent per person employed. The rate would be somewhat higher for output per man-hour, since allowance must also be made for the shortening of the workweek over these four decades. Even after such correction, however, the rate of increase of productivity in trade is substantially lower than that for other sectors of the economy characterized by higher wage scales. Fabricant found the rate of increase for manufacturing over the same period to be just under 3 percent. For the national economy, Kendrick found the annual increment in productivity to be roughly about 2 percent.

Griffin's findings were challenged by Reavis Cox" and others, but no alternative measures have been supplied.

R. R. Griffin, Changing Output Per Person Employed in Trade, 1900-40, The Journal of Marketing, October 1947, pp. 242-245.

0 Reavis Cox, The Meaning and Measurement of Productivity in Distribution, The Journal of Marketing, April 1948, pp. 435–436.

A rough approximation of the relatively low productivity per employee in trade is presented below. The income originating in trade, as estimated in the national income accounts, has been matched against the total number of full-time employees in trade, including entrepreneurs. This income produced per person engaged in trade is then compared with corresponding estimates for other sectors of the economy. This comparison makes no allowance for the longer workweek prevailing in trade than in many other industries. In 1954, for example, hours worked in all nonfarm industries and in trade were as follows:

As a result, productivity per man-hour would be significantly lower, on a relative basis, than in the per-person-employed comparison.

Arrayed in descending order, the relative income produced per person engaged in 1953 by major industries was as follows:

Income produced per trade employee (including entrepreneurs) was lower than in any othe major industrial group, excepting only contract construction and the service industries. Using these figures as a rough measure of productivity per person engaged, productivity in trade was nearly a fourth lower than an manufacturing. Income produced per man-hour would undoubtedly reveal an even wider spread, because of the longer workweek in retail trade. It would be expected, therefore, that hourly wages in retail trade also would be sharply lower than in manufacturing industries.

The high figure for the finance, insurance, and real estate group is due to the inclusion in that group of rental income of persons, including computed rentals of owner-occupied homes. Eliminating rental income of persons would reduce the income produced per employee in this group to about $7,900 in 1953.

In the main, the income produced per employee is highest in the industries where capital investment per employee is greatest: Real estate, public utilities, mining, and manufacturing. It is significantly lower in trade and services, where opportunities are limited to lengthen the arm of the worker through providing more tool power.

Through this approach it is also possible to portray, again in broad, rough strokes, the relatively more rapid increase in productivity in manufacturing than in trade. Income produced per employee in manufacturing was nearly 215 percent greater in 1953 than in 1939. (No attempt is made in these figures to remove the influence of price change or product mix.) For trade, the corresponding gain was about 192 percent. Since the war's end, the rise has been even more marked for manufacturing. It boosted its income per employee from 1946 to 1953 by about 70 percent. Income origination in trade per employee rose by little more than 30 percent.

It is probable that productivity has increased to some extent in trade. The development of supermarkets, the growth of large shopping centers and the mechanization of handling and transportation within the entire system of distribution, have undoubtedly contributed toward greater efficiency. But economies of scale are difficult to achieve where convenience and service play important roles as they do in trade. Thus, while productivity has undoubtedly increased in trade, the limited data available lend support to the thesis that productivity

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has increased at a significantly lower rate in trade than in manufacturing and other sectors of the economy characterized by relatively higher wage scales.

Relatively lower skills (and younger age) in retailing.—Perhaps as significant a factor as any yet enumerated in this analysis of the relatively lower wage scales of retailing is the high percentage of younger workers it employs. (See sec. 5.) This in turn, reflects the unskilled or low-skilled characteristic of much of the labor force engaged in retailing. Melvin Rothbaum and Harold G. Ross account for this low-skill, young age aspect of retailing as follows:

"Such groups as wholesale and retail trade, laundries, and hotels have a number of interrelated labor force characteristics that may lead to diversity (in wages). They employ large numbers of women and minority groups, both of which have high turnover rates. In addition, these industries tend to be intrastate and, therefore, not subject to the Federal Minimum Wage Act. Thus, we have industries that legally can and do pay low rates, using as their unskilled labor force many people who are unemployable in manufacturing (because of age, disability, turnover characteristics, and minority-group discrimination) except in peak employment periods. Finally, they may provide both a starting point for young people just entering the labor force but who have no intention of staying in the service and trade industries, and a dumping ground for manufac turing unskilled labor when there is unemployment ***" 67 [Italics added.] The situation in retailing in connection with degrees of skills required appears to be markedly different from that in the high wage industries. The large proportion of relatively unskilled workers, who are the lower paid workers, necessarily pulls down the average wage reported for retail trade. The employment of a large number of part-time workers, who tend to be paid the starting wage, has a similar effect on the reported average hourly earnings. Despite these figures, there are many well paying jobs in retailing. Retailers must compete with other industries for skilled employees and must pay wages which will attract such workers. Nevertheless, there is a high proportion of workers in retailing who receive the lower wage scales because of the small amount of skill required on their jobs.

The relatively small amount of unionization and the reasons for it were discussed earlier (sec. 5) and need not be repeated here.

From the survey of the six factors which characterize high wage industries, it seems clear that these characteristics are not generally present in retail trade. Relatively lower capital investment per worker, and particularly the difference in the use of capital, relatively higher labor costs, relatively small changes in productivity and relatively low skill requirements-these factors distinguish retailing from high-wage industries.

8. Labor costs as percent of sales-Large stores often have same or relatively higher labor costs

The Department of Labor Materials includes a tabulation (E, p. 17) showing "retail payrolls in stores of multiunit firms as a percent of retail sales in those stores, by kind of business, United States, 1948." It is stated that this table shows “* * * payrolls in large retail stores *** as a percent of retail sales in 1948" (E, p. 16). An examination of the data contained in the Census of Business reveals that the data shown in the table covers all firms which have two or more stores. As is noted in an earlier section, many of the stores in a multiunit chain are not large stores. It is inaccurate, therefore, to describe the data as representing the relative importance of wage costs for "large retail stores." In fact, the ratio of 12 percent shown in the table for all retail trade, except eating and drinking places, is not much different from that shown by the United States Department of Commerce for all retail trade (12.6 percent). At F. page 9, it is stated that the "retail payroll averages only 10 cents of each consumer retail dollar." The meaning of this figure is not clear; it is out of line with the total shown for all retailing by the United States Department of Commerce.

Labor costs vary by lines.—There are wide variations in the relative proportions of payroll costs to total sales among retail lines. Payroll costs include management salaries as well as employees' wages. Table 33 hows that in only 4 out of 33 retail lines was the proportion below 10 percent-and these are the same lines with low gross margins. Seventeen lines had payroll costs which

67 Melvin Rothbaum and Harold G. Ross, Interoccupational Wage Diversity, Industrial and Labor Relations Review, April 1954, pp. 378–379.

ranged between 15 and 20 percent of total sales. These included variety stores, department stores, dry goods and general merchandise stores, hardware stores, and men's and women's clothing and accessory stores. Average figures for all retail trade must be used with great care under these conditions. A study of table 33 will also show that payrolls account for varying proportions of the gross margin out of which they must be paid. As a result, wage adjustments fall with varying impact upon different retail lines.

These same studies show that individual lines of retail stores have markedly different characteristics within the framework of their essentially local nature. Table 33 reproduces several key operating ratios for the 33 lines of retail trade. The data cover the latest years for which data are available between 1949 and 1953. Some branches of retailing are characterized by relatively low gross margins and rapid turnover (for example, meat markets, groceries), while others must operate on large margins because turnover is small (for example, jewelry stores, furniture stores, shoe stores). For 3 categories of retailing the gross margin exceeds 40 percent (jewelry stores, restaurants, bars, and taverns) while for 5 categories, the gross margin was less than 20 percent (farm equipment dealers, farm supply stores, grocery stores, grocery and meat stores, meat markets).

TABLE 33.-Selected operating ratios for 33 lines of retail trade (percent of sales)

1 Inventory turnover has been computed by dividing inventory into cost of goods sold.

2 Ratios shown are for stores in the following volume groups: Department stores with annual sales volume under $250,000; furniture stores between $200,000 and $350,000; women's wear stores, under $1 million. Not available.

Source: Dun & Bradstreet, operating ratios for 33 lines of retail trade, September 1954.

Labor costs by size of store.-Table 34 shows the Census data by stores with varying numbers of employees. It will be noted that the larger the store, on this basis, the higher the relative importance of payroll costs. However, the figures for stores with fewer than six employees do not present a fair picture of labor costs because of the relatively large proportion of unpaid family workers and proprietors. Nevertheless, there appears to be a tendency for labor costs already to be higher for the larger stores.

TABLE 34.-Relationship of payrolls to sales by employee size, 1948
[Millions of dollars]

Source: U. S. Department of Commerce, Bureau of the Census, United States Census of Business, 1948 vol. I, Retail Trade, General Statistics, pt. I, Washington, 1952, pp. 4.02-4.07.

Data are also available for department stores and specialty stores by size of store. Table 35 shows the relative importance of payrolls, gross margins, and total expenses for department stores in 1954. There is little difference in relative payroll costs among the stores of different sizes. Payrolls plus pensions and retirement allowances accounted for between 18.2 and 19.4 percent of total sales. Smaller and large department stores had similar employment costs. Total expenses, however, were moderately lower for department stores with sales of less than $500,000 than for the large stores. For the smaller stores, the average expense ratio was about 32 percent as compared with 34 percent for the larger stores. Gross margins followed a similar tendency, with an average of about 36 percent for the larger department stores as compared with 32 to 33 percent for those with a volume of less than $500,000.

TABLE 35.-Selected operating ratios of department stores by volumes of sales,

Source: Malcolm P. McNair, Operating Results of Department and Specialty Stores in 1954, selected tables from Bulletin No. 143, Harvard University Graduate School of Business Administration, May 1955, table 4.

A similar pattern is shown in table 36 for specialty stores. For this group, payroll costs and total expenses tended to be lower for the stores with total net sales of less than $500,000; the difference is particularly marked for stores with sales of less than $250,000.