Are big boxes better career builders than small stores?
It’s never been easy figuring out whether big box and chain retailers have been good or bad for the economy as a whole. On the one hand, they offer consumers tons of SKUs at good prices, offer "one-stop shop" simplicity, and due to their ubiquity are typically in convenient locations. On the other hand, they have put lots of small retailers out of business, reduced the diversity of retailers consumers have to choose from, and are rumored to pay sub-standard wages.
Yet, according to a new study from NBER and reported by the American Enterprise Institute (AEI), "large chains and large establishments pay considerably more than small mom-and-pop establishments."
"We show that wage rates in the retail sector rise markedly with firm size and with establishment size," the study’s researchers from Stanford University and the University of Michigan wrote in a summary of their findings. "These increases are halved when we control for worker fixed effects, suggesting that there is sorting of better workers into larger firms."
The study also found that large chains offer more management level jobs, which pay about 20 percent more than regular workers earn. The researchers wrote, "We conclude that the growth in modern retail, characterized by larger chains of larger establishments with more levels of hierarchy, is raising wage rates relative to traditional mom-and-pop retail stores."
Noting that retail jobs pay less than manufacturing jobs, the AEI story posits that with manufacturing jobs declining, workers are doing better than they otherwise would, because they gain jobs with large retailers who pay better than small ones. And they say that manufacturing jobs are unlikely to return anyway due to automation, so the best bet for workers is to try for retail management positions.
On the other hand, an advocacy group called Good Jobs First (GJF) blames big box retail for everything from undermining small businesses and entrepreneurialism, to harming the environment, homogenizing the world of retail and depressing retail wages. On the wage issue, they cite a Civic Economics study purporting to show that national retail chains generally pay lower wages and benefits than local businesses. And GJF says that low chain wages cause workers to seek out government assistance, harming the overall economy.
- Do Large Modern Retailers Pay Premium Wages? – National Bureau of Economic Research (Purchase required)
- Why big box retailers are good for worker wages – AEI
- Harms of big box retail – Good Jobs First
- Thinking Outside the (Big) Box – The New York Times
- The impact of big-box retailers on communities, jobs, crime and more: research roundup – Journalist’s Resource
Discussion Questions
With advancement potential, do chain/big box retailers offer a better career path than smaller stores? Does it make sense that “modern retail, characterized by larger chains of larger establishments with more levels of hierarchy,” is also causing chains to support higher wage rates than mom & pops?
It all depends upon your career path.
If your long term career path is to remain in retail, large retailers have many more layers of management offering both financial pay rewards and management experience. To become a senior manager at a big box most often requires field store experience, plus additional knowledge and skills required for managing people, systems and technology.
While small retailers may pay less, you can acquire a wealth of experience rapidly because you have to wear many hats in helping to operate a small store. Many use their experience in small stores to launch their own retail shops or online e-commerce.
As a small retailer, we have trained and sent many good employees on to college, with skills to get them a head start in life. There are many success stories from just our store, with CEOs, head meat department managers, high-ranking military officers, small business owners, and others who come back to visit me occasionally, and say how valuable it was to learn the skills needed to succeed in the larger markets, or best of all, succeed as human beings in their communities.
Making young people successful is reward enough for me, as we need the next generation of people to excel in all areas in life, and I couldn’t be happier for them. We pay as much as we can, but the higher wages are obviously in bigger markets, or having their own business, and good luck to all of them.
Happy Labor Day to all!
The inherent size of chains naturally offer more career opportunities than smaller stores, it’s a function of the numbers. So if we define a “better career path” as number of opportunities and the variety and depth in these opportunities, then chains have a distinct edge. However, if creativity, agility and expertise with shorter decision-making paths are considered, then smaller stores offer better training grounds.
On the wage rate front, this is really dependent on how well the retail company is run but there are inherent advantages—size does matter. Larger chains do have an advantage with their volume/scale and can spread regulatory and reporting costs against a large revenue base. A mom and pop store has less room to maneuver in, and employee labor cost is a variable cost category that gets a lot of their attention.
The increased levels of hierarchy in larger chains is a symptom of complex and inefficient operations that need serious simplification. Smaller stores are wonderful sites to live and learn the core retail learnings and really understanding the needs of your customers.
Bringing the passion and knowledge inherent in smaller retail chains to the scale afforded by larger chains is the path to pursue.
With big stores come big responsibility. Wages are usually determined by how much responsibility we choose to take on. It doesn’t really matter the size of the retailer but the amount of responsibility involved. There are plenty of a small and mid-sized retailers that are doing quite well and pay well. Business is good all the time for good retailers. There are plenty of high-wage alternatives in this country such as technology, oil and gas, mining, etc. No one has to settle for a low-wage retail job. It’s more about how much risk and responsibility someone wants to accept, willingness to relocate and such.
This question is being painted with a very broad brush. It is not the size of the operation that makes the difference, it is the quality of the management and the philosophy of the organization. Want a real opportunity to grow in retail and want to work for a large retailer? I would take a job at Costco over a job at Sam’s any day of the week. If I want to really learn not how to do a job but how to run a company, I would go to a small operation owned by someone who is interested in growing employees as much as running a business.
The problem is that most employees spend more time thinking about where they want to go on vacation versus where they want to go with their career and what company will help them get there.
While working for a smaller or larger retailer can be a personal decision, based upon the employee’s preferences, in general I believe the larger stores and chains are in a much better position to provide the employee with advancement opportunity, exposure to retail technology and higher wage rates than their smaller competitors.
While there are certainly exceptions to my position, big boxes have done much more good than harm to the communities they serve. They generally have lowered prices on commodity items, provided time-starved shoppers a place to consolidate their shopping lists and provided jobs with advancement opportunities.
These big boxes have also mandated that the smaller independent retailers sharpen their pencils on logistics and price and provide better, more personalized service in order to survive.
This isn’t just about wages. There has been a great loss of diversity in retail with the closing of many mom and pop stores. Artisans have fewer and fewer places to sell their wares because they can’t produce them on a large enough scale to sell at a big box retailer.
Without small independent retailers we risk losing much of what makes our communities unique and vibrant. Large grocers may sell locally-grown produce or locally-brewed beer, but what about selling locally-produced arts and crafts? What about small boutiques that feature local fashion designers?
Does it have to be one or the other, or can we find a way to allow both big-scale and small-scale retailers to thrive? Both make positive contributions to our communities.
Like most, I shop at big box retailers, but I still want to be able to shop at local galleries and boutiques.
Of course we in retail would like to think that most folks who seek jobs in retail are doing so because they are interested in the industry. That they are truly interested in a career path.
While I don’t know the stats, I would venture to say that large numbers of them are joining retail as a stepping stone to something else. For those who are truly interested in a career in retail, yes, big box/chain retailers do offer the better career paths. They simply have more jobs. Simple.
But let’s not forget that there is a ceiling to that career path unless the employee is prepared to move to other stores and then to corporate positions and that begs the question, are they really trained for those corporate positions?
My 2 cents says, maybe just a few. Hmmmm
Getting a start in career path that offers experiences to learn and grow can be achieved in small firms and in large firms. It depends upon what an associate might be seeking. Some associates—in large or small firms—are there for a paycheck, and little more. Other associates want to invest in their company, fellow associates, and themselves. Generally speaking, who wouldn’t take the latter?
Having worked for Fortune 100 companies, small firms, and been an entrepreneur, when interviewing a candidate I have always probed for work ethic, growth orientation, team experiences, honesty, and integrity. Companies of all sizes do and should look for human, technical, and conceptual skills. When the associate is hired, organizations and associates have to continually work toward common objectives.
Short term (24 – 60 months) career pathing or a lifetime of enjoyable and productive experiences can be garnered in large or small firms.