Stores hope higher pay will buy efficient workers
WASHINGTON >> America’s retailers, struggling to fill jobs, have been raising pay to try to keep and attract enough employees. Now, some stores want something in return: A more efficient worker.
To that end, retailers, fast food restaurants and other lower-wage employers are boosting investment in technology and redesigning stores. Walmart is automating its truck unloading to require fewer workers on loading docks. Kohl’s is using more hand-held devices to speed check-outs and restock shelves. McDonald’s is increasingly replacing cashiers with self-service kiosks to free up workers for table service.
Retail workers, though comparatively low-paid, have enjoyed some of the best wage gains in the past year. Their hourly pay rose 4.3 percent in November from a year earlier — much faster than such higher-wage industries as manufacturing, where pay rose 1.8 percent.
Walmart raised its starting pay to $11 an hour this year. Target’s minimum is $12, with plans to make it $15 by 2020. Amazon’s starting wage leapt to $15 in November. And more than 20 states have raised minimum wages above the federal $7.25 an hour. California and Washington state’s wage floors will reach $12 on Jan. 1. New York’s will be $11.80.
Even as they’ve absorbed higher labor costs, most retailers remain reluctant to pass them on to customers in the form of price increases. American consumers have grown increasingly insistent on bargain prices — in part a hangover from the Great Recession, in part a function of online price-comparison tools. Retailers are loath to alienate them and send them looking for alternative sellers.
“It’s extraordinarily hard for retailers to systematically raise prices,” said Jason Goldberg, chief commerce strategy officer at Publicis Communications NA, a digital consulting agency. “These days, everyone’s prices are way more transparent. It’s just one click away from your super computer in your pocket.”
So unless companies are willing to eat all or part of their higher labor costs, they need to increase their workers’ efficiency. A company’s wage increase of 10 percent can be offset if its employees produce 10 percent more.
“We need ...meaningful improvements” in productivity, said Greg Foran, CEO of Walmart’s US division. “Pricing generally isn’t going up. It’s going to come down as competition intensifies.”
Though higher wages are driving retailers to make workers more efficient, cost isn’t the only factor. The companies are also under intensifying pressure to speed delivery times of online orders to compete with Amazon and please customers who expect fast delivery.
Walmart employees can now use mobile devices to check whether an item is in stock and avoid trekking to distant storerooms. The phones also send alerts when an item needs a price change and directs workers to those items.
And in a cluster of stores, Walmart has deployed robots that monitor stockpiles and can send photos of empty shelves to employees’ phones. The information is sent to a conveyer system that scans boxes being unloaded from trucks. Workers then organize the boxes for delivery to the sales floor. The system has slashed the number of people needed to unload trucks.
“When I first started working for Walmart, we would unload the truck and you would have associates running all over the backroom trying to find out where to put things,” said Ty Ford, who has worked at Walmart in Houston for eight years. “It wasn’t organized in any way.”
One technology being tested is “smart glasses,” which display information on the lenses so workers can identify items from online orders for curbside pickup. The glasses can identify which items to pick, thereby saving time that would be spent looking at phones.
To try to raise productivity, retailers are turning mainly to technology rather that hounding employees to work harder. But pressure does creep in: At Target, workers who carry online orders to shoppers’ cars now hear a honking horn on their devices, instead of a generic bell, to signify that customers are waiting.
Jaana Remes, an economist at McKinsey Global Institute, noted that after the Great Recession, stagnant pay reduced the incentive for employers to invest in labor-saving technology. Now, that’s starting to reverse. Remes pointed out that laborsaving technology is more common in countries where pay is higher. Self-serve restaurants, for example, are more prevalent in Scandinavia and Japan than in the United States.
“When have you seen grocery baggers in Europe?” Remes said. “We still have them in the U.S.”
But perhaps not for long. For this year’s holiday shopping season, some Target employees began using mobile devices to check out shoppers. Under pressure from online retailers, Target is also investing in technology to transform its stores into shipping hubs to cut costs and speed deliveries.
CEO Brian Cornell said in November that the company wants to achieve efficiencies to help offset the cost of higher pay and other investments. So Target has redesigned the back rooms of most of its 1,800 stores to shave seconds off picking and packing and to accelerate online shipments.
During a recent tour of a Target in Edison, New Jersey, workers undertook specialized tasks in assembly line operations in a space the size of about 12 of its parking spaces. Once filled, carts are placed on marked spots within arm’s reach of workers who pack shipments. Apps reveal how much tape to use for each box. Packers use foot pedals to dispense inflated air pillows to cushion items when boxed.
It’s unclear whether retailers’ efforts will be enough to boost the overall productivity of America’s workforce, which has been mired in anemic growth since the Great Recession. Productivity — output per hour worked — is critical to rising living standards. An economy can expand only as fast as its working age population and the growth in worker productivity.
Though U.S. productivity has picked up a bit this year, it grew just 1.3 percent in the July-September quarter from a year earlier. That’s only about half the pace of the 1990s and early 2000s.
Economists have suggested several theories to explain chronically weak productivity growth. Some say the U.S. is just less innovative than in the past. Others think the government has trouble measuring the impact of free or low-cost inventions, like search engines and music streaming services, and that workers are actually more productive than we think.
Many economists also note that it can take time for businesses to determine how best to capitalize on new technologies. Retailers are still experimenting, for example, with mobile devices, which have been in use for at least a decade. Personal computers began appearing in offices in the 1980s but didn’t accelerate productivity until much later.
Kohl’s is just now stepping up its use of mobile technology to help employees restock shelves more efficiently and equipping some with iPad devices for faster checkouts.