Academic journal article Monthly Labor Review

Labor Productivity Growth in Wholesale Trade, 1990-2000. (Wholesale Trade Productivity)

Academic journal article Monthly Labor Review

Labor Productivity Growth in Wholesale Trade, 1990-2000. (Wholesale Trade Productivity)

Article excerpt

Use of information and communication technologies in the fastest-growing wholesale trade industries spurred strong labor productivity growth in the sector as a whole, over the 1990-2000 period.

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According to the most recent economic census, there were more than 453,000 wholesale trade establishments in the United States in 1997, with total sales exceeding $4 trillion. These sales substantially exceeded total sales in the retail trade sector and also exceeded the value of all manufacturing industry shipments in the same year. BLS data show that 7.3 million workers were employed in wholesale trade industries in 2000, or about 6.5 percent of total business employment.

The wholesale trade industry provides an important link in the supply chain connecting producers with consumers in the economy. Wholesale firms act as intermediaries between goods-producers and the business customers that buy their products. These customers may be retail establishments, manufacturers, mining establishments, contractors, other wholesalers, or government agencies, among others. Wholesale establishments are characterized by the fact that they usually do not sell directly to household consumers--with few exceptions, their customers are businesses or institutions.

Wholesalers provide services both to the producers of the products that pass through their operations as well as to their customers who purchase those goods. In addition to the basic distribution function, wholesalers may be involved in marketing, sales, customer support, and market research--activities that benefit the wholesaler's supplier. For the benefit of the customer, wholesalers provide ready access to products in appropriate quantities, information on product characteristics and availability, sales advice, credit and financing, customer service, and technical support. (1)

The rapid diffusion of information and communications technology throughout the sector and the economy has led to shifts in the nature of the wholesale business. These shifts, in some cases, may threaten the traditional structure of the industry. In addition, heightened competitive pressures can place at risk the survival of many small local and regional wholesale firms that typify the industry.

Both the wholesale and retail trade industries are involved in getting the products of the goods-producing sector to consumers and other end-users. The wholesale-retail partnership in the distribution function invites comparisons between the two sectors, yet their differences are more striking than their similarities. In 2000, wholesale trade's 7.3 million workers were less than a third of the nearly 25 million employed in retail trade. At the same time, wholesale sector sales exceeded sales in retail trade, reflecting much higher levels of sales per employee in wholesale establishments. On average, employees in wholesale trade earn more per hour and work longer hours per week than workers in the retail sector. These differences reflect the presence of higher levels of skilled workers and fewer part-time workers in the wholesale sector. Wholesale trade's lower labor intensity and more highly skilled workforce, relative to retail trade, are likely to have played a role in the extent to which wholesalers were able to more quickly adapt to technological change. (2)

Wholesalers invested heavily in computers and other high-tech equipment and in computer software, allowing them to take advantage of technological advances more rapidly and to a greater extent than did retailers. (3) For example, wholesalers' quick adoption of new technology made it possible for them to take advantage of the growing use of Universal Product Code symbols on the products they handled to automate their operations. These advances, in turn, made feasible new production strategies such as just-in-time inventory management--the process in which shipments of production inputs are received just prior to their use. …

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