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Why are retail redundancies rising when retail employment continues to grow?

Author
Published date
12 Jun 2018
These apparent contradictions need to be explained

How is it that recent news is full of retail redundancies and failing chains, yet employment continues to grow in the sector?

How can we be spending more on shopping at a time when real wages are still being squeezed?

Surely there must be an explanation for these apparent contradictions.

Big high street names shed jobs but retail employment carries on growing

House of Fraser is the latest in a long line of companies shedding jobs or shutting up shop this year. The roll call of redundancies also includes Bargain Booze, Wine Rack, Claire’s Accessories, New Look, Toys R Us, Debenhams and electronics chain Maplin.

There’s an obvious bad news bias in the media. Redundancies get reported while hirings are largely invisible. Retail chain failures leave a hole in the high street that remains more persistently visible than, say, the failure of a business on an industrial estate.

But the redundancies are real enough, and it is also true that many industry figures accept the idea that there will be fewer retail employees in future. The British Retail Consortium’s 2020 project talks about “fewer jobs, but better”.

Such predictions should always be taken with a big pinch of salt. Perhaps there may be fewer retail jobs in the medium term, but this is certainly not happening yet.

In fact, there are more employees in the sector than there were last year, although employment has not quite recovered to pre-recession levels.

Chart showing the percentage change in retail workers since 2014
The number of retail workers continues to rise despite increased redundancies

The supermarkets added 88,000 employees between them during the last five years, making up 68% of retail employee jobs growth. Meanwhile, shops that sell furniture, carpets and electrical equipment for the home quietly added another 38,000 employee jobs.

As unemployment is quite low, the most likely hypothesis is that many retail employees who will be displaced in the next few months will end up getting jobs with other retail employees.

Retail sales growing faster than average wages

The total value of retail sales continues to grow, increasing by 3.5% in the latest year’s figures. Given that CPI inflation increased by 2.4%, this represents modest real growth of about 1%.

This increase explains how retail can afford to employ more people but not how the sales are being funded. While a fair number of shops have difficulties, many more are doing well and hiring more staff.

The apparent paradox is that the increase in sales is bigger than the 2.9% growth in average earnings last year, or just half a per cent in real terms.

Worse still, real wages have not yet recovered from the 2008 crash the average employee has less purchasing power than they did ten years ago.

But more people in work boosts total earnings

However, the UK has seen strong employment growth in recent years, so whilst the average employee is still suffering a real pay squeeze, total real incomes and spending power have been boosted by the growing number of people in work.

Employment has grown by 1.9 million since 2008, generating a £47 billion total increase in real earnings. The rise in total spending power generated by employment growth certainly goes some way to solving the mystery.

More consumer credit also played a part in maintaining retail growth during the past, but this trend may now have started to reverse, as households seek to pay down debt ahead of uncertain economic times.

Retail needs decent pay and decent jobs

Working people want decent pay and conditions, fair treatment and rewarding jobs with good progression prospects. Trade union membership is growing in the retail sector because they are delivering real improvements for their members.

Sadly, there are also some dodgy or slipshod employers to be avoided and even some of the big chains have been caught failing to pay the national minimum wage in full. Young workers are most at threat.

More positively, our agenda for good work has a clear blueprint for improving progression so that young retail workers don’t get stuck on the bottom rung.

Retail jobs depend on healthy sales. Actually, the retail sector is in much better shape than most commentators would have us believe. But Britain still needs a pay rise so that customers will have more money to spend.