Variety Stores Experience Shifting Trend in Productivity

By York, James D. | Monthly Labor Review, October 1988 | Go to article overview

Variety Stores Experience Shifting Trend in Productivity


York, James D., Monthly Labor Review


Output per hour of all persons decreased at an average annual rate of a 5 percent during 1967-86,- however, from 1977, productivity improved modestly, aided by technological innovations Productivity, as measured by output per hour of all persons, in the variety store industry' decreased at an average annual rate of 0.5 percent from 1967 to 1986, compared with an average annual rate of 1.0 percent for the total nonfarm business sector of the economy during the same period.2 The overall decline in productivity reflects an average annual decrease in output of 2.6 percent and a slightly slower rate of decrease in hours of 2.1 percent. (See table 1.) The decline in industry productivity was not a steady, gradual decline, but reflected a sharp falloff from 1972 to 1977, with modest increases in both adjoining subperiods.

In the 1967-72 period, productivity in the variety store industry advanced at a rate of 1.7 percent. Output rose at a rate of 2.7 percent and hours increased at a rate of 1.0 percent. Productivity and output both peaked in 1972. However, from 1972 to 1977, productivity declined at an annual rate of 4.3 percent, output declined at a rate of 7.1 percent, and hours declined at a 2.9-percent rate. It was the only sustained drop experienced by the industry and accounted for the overall decline in industry productivity. Within this period, the two largest declines were 13.0 and 6.5 percent, which occurred in 1976 and 1977. In those years, output fell by 14.7 and 6.7 percent, respectively, while hours dropped by only 2.0 and 0.3 percent.

Productivity turned around in 1978, increasing by 0.5 percent. This increase continued in 5 of the next 8 years. In the third subperiod, 1977 to 1986, productivity rose at an average annual rate of 1.4 percent. Output fell at a rate of 1.4 percent, but this was more than offset by the rate of decrease in hours of 2.7 percent. In contrast to the first subperiod, productivity in the 1977 - 86 subperiod grew in the face of declining output. In the first subperiod, both output and hours were advancing.

Productivity in this latter period was quite volatile, declining in 1982, 1985, and 1986, and increasing substantially (10.3 percent) in 1981 as output declined by 0.5 percent and hours fell by 9.9 percent.

Unlike most of the industries examined by the Bureau of Labor Statistics, there is little correlation between output movements and changes in the business cycle for variety stores. Since the early 1970's, demand for variety store products has been adversely affected by increasing competition from drug stores, supermarkets, discount stores, and specialty stores. This has been a crucial factor in the average annual output decline of 3.4 percent since 1972. A major industry retailer declared bankruptcy in 1972. The vacuum left by this bankruptcy was not completely filled by other variety store operators and, as a result, industry output suffered.

Industry structure and employment

As their name suggests, variety stores offer the consumer a broad selection of merchandise. Sales of apparel constitute the largest category as a proportion of total sales. Other major categories include kitchenware and home furnishings; drugs, health, and beauty aids; sewing, knitting, and needlework goods; stationery and school supplies; toys; and curtains, draperies, and dry goods. The industry is characterized by moderate-size establishments. Almost half of the industry's sales are transacted in establishments with 20 to 99 paid employees. By contrast, only about 7 percent of sales took place in stores with more than 100 employees in 1982. This is a very different situation from department stores, which are also general merchandise stores. They transacted 84 percent of their sales in stores with more than 100 employees in 1982.

As is the case with sales, about 54 percent of all paid employees worked in establishments with 20 to 99 employees in 1982. …

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