Amazon Warehouses Kill Jobs and Wages
PLUS: A new poll shows banning secret subsidy deals is a good political move.
This is Boondoggle, the newsletter about corporations ripping off our states, cities, and communities. If you’re not currently a subscriber, please click the green button below to sign up. Thanks!
An Amazon warehouse in Waco, Texas, that received $9.5 million in local tax breaks was supposed to open last year. But it hasn’t yet, along with several other warehouses and distribution centers across the country.
According to a recent study, those communities don’t actually have all that much to look forward to if and when those facilities do open. The working paper by Sudheer Chava, Alexander Oettl, Manpreet Singh, and Linghang Zeng found that the opening of an Amazon warehouse drives down wages for local retail workers, especially part-time hourly workers, depresses sales and openings at local businesses, and accelerates the closing of local retailers, especially smaller ones.
For all this destruction, Amazon has received billions of dollars in state and local subsidies. This is one more piece of evidence that the local economic development machine, as it currently exists, is a sham.
To be clear, the paper doesn’t bill itself as an examination of Amazon, specifically, but rather of the e-commerce sector more generally. In fact, the authors don’t even identify that the corporation they studied is Amazon — though a quick perusal of the footnotes and matching up the dates for warehouse openings they mention makes it patently clear which corporation they’re discussing.
Here are some of the specific findings:
The rollout of an Amazon fulfillment center reduces traditional retail workers' income in the area by 2.4 percent. The wages of hourly workers, especially part-time hourly workers, decrease by a lot, driven by a drop in the number of hours worked, costing them $825 per year. This effect doesn’t disappear until about 100 miles away from a warehouse.
There’s an increase in credit card delinquency locally, suggesting that workers who lose jobs or see their pay reduced at retail outlets have some trouble finding another job.
Sales at nearby retail stores decrease by 4 percent and employment drops by 2.1 percent. Closings, especially of young and small stores, increase, and new openings decrease.
Overall, the retail sector loses 938 jobs per county per quarter, and the transportation-warehousing sector gains 256 jobs — meaning the job losses helped along by the warehouse aren’t offset by the jobs created inside.
Within a year of a fulfillment center opening, local Google search activity for Amazon increased by 7 percent and for its Prime Service by 20 percent compared to four years before the warehouse opened, at least suggesting that Amazon’s presence in the community drives more business to Amazon.
The data the researchers used only goes through 2016, so I’d expect to see these trends accelerating since then, as Amazon has gone gangbusters to build out its distribution network.
But those are numbers across jobs and occupations, not an apples-to-apples comparison. What happens within the same industry Amazon enters? Well, data I worked on with the New Yorkers for a Fair Economy coalition shows that for warehouse workers and delivery drivers in that state, Amazon’s growth has corresponded with wages falling by thousands of dollars: Specifically, $6,000 annually for a warehouse worker and $5,000 for a driver.
Why? Because though it constantly touts its commitment to a $15 per hour minimum wage, Amazon actually tends to pay below-average wages for the warehousing and logistics industry, by an average of 15 percent. Especially in a state like New York, where the sector is highly unionized, workers can expect to make much more working for non-Amazon companies than they can working for Amazon. The effect would certainly be smaller in states with lower union density, but I’d be surprised to see it disappear entirely.
Put all of these numbers together and you have a corporation that not only drags down conditions for workers in the exact industry it enters, but also harms those in adjacent industries, as well as local businesses, sucking everything in the local economy into its orbit and leaving the wider community worse off — just so Amazon Prime deliveries in nearby zip codes can arrive a little bit faster.
Add this to the Walmart numbers I previously wrote about and its clear that these large, national retailers are having a detrimental effect on both the quality and quantity of jobs locally. They also show why examining corporate power solely through the lens of consumer prices is foolhardy — is being able to buy cheap stuff worth an across the board degradation in the local labor market? Folks who are working less and making less aren’t coming out ahead, even if products cost less.
There are plenty of steps lawmakers can take to address these problems, from antitrust reform, to labor law reform and enforcement, to better zoning regulations. But they also need to stop subsidizing Amazon’s buildout with public dollars, perhaps by approving something like New York Sen. Sean Ryan and Assemblymember Michaelle Solages’ bill to ban subsidies for e-commerce facilities.
Paying to support Amazon’s buildout is not actually buying anything worth having; instead, it’s subsidizing Amazon’s monopoly play, which is erected on a foundation of local economic destruction.
ONE MORE THING: Fight Corporate Monopolies put out some new polling this week on corporate power and accountability. It included a question about something readers here should very much recognize.
You can read the full polling memo here.
Thanks for reading this edition of Boondoggle. If you liked it, please take a moment to click the little heart under the headline or below. And forward it to friends, family, or neighbors using the green buttons. Every click and share really helps.
If you don’t subscribe already and you’d like to sign up, just click below.
Finally, if you’d like to pick up a copy of my book, The Billionaire Boondoggle: How Our Politicians Let Corporations and Bigwigs Steal Our Money and Jobs, go here.
— Pat Garofalo