Amazon Warehouses May Leave Cities Worse For Wear

AP Photo/Patrick Semansky

Myrtice Harris packages products for shipment at an Amazon fulfillment center in Baltimore.

The battle between cities to host Amazon’s second headquarters continues to dominate headlines, but the new HQ remains only the latest and largest prize in the tech giant’s long history of masterfully soliciting public subsidies.

In Amazon’s quest to control same-day delivery, its network of almost 100 fulfillment centers—where products are sorted, packaged, and shipped—has now spread across 25 states. Lured by the prospect of hundreds or even thousands of new full-time warehouse jobs with competitive pay and benefits, local government officials crawl over each other to land the world’s largest online retailer in their backyard.

But according to a new report by the Economic Policy Institute (EPI), many of these policymakers might really be selling their constituents short. The report found that, on average, counties that are home to Amazon fulfillment centers did not see any overall job growth in the years following warehouse openings. While there was a sizeable increase in warehouse jobs in the counties, private-sector employment remained largely flat. The report’s author suggest this could be for two reasons: Either fulfillment centers are causing other jobs to de displaced, or growth in warehousing jobs is too limited to make a notable difference.

If the former is the case, then that would that mean that workers are leaving other industries for these new Amazon jobs. But just what kind of jobs are they? According to Amazon, its fulfillment centers pay on average 30 percent more than traditional retail work. That may be true, but these are warehouse jobs, not retail jobs—the work is far more strenuous. The EPI report found that a fulfillment center opening led to little to no change in warehouse workers’ average wages. A recent Economist study found even grimmer conclusions: that warehouse workers in counties where Amazon operates a fulfilment center earned nearly 10 percent less than in the rest of the country. 

Fulfillment centers do provide an immediate fix for local governments, particularly in areas already struggling economically, but not without significant cost. In 2015 and 2016, local and state governments committed at least $241 million dollars in subsidies to Amazon facilities, according to an analysis by Good Jobs First, a research group that tracks economic development deals.

Amazon announced last year that it planned to add more 100,000 full-time jobs by mid-2018, many of which would be in new fulfillment centers.

Unlike Amazon’s headquarters, known as HQ2, fulfillment centers are not going to attract higher paying jobs and new tech startups; unlike large manufacturing plants, fulfillment center areas are also unlikely to attract investments from other supplies. Beyond these limitations, there’s also the looming threat of automation in these warehouses, which could see some jobs being replaced by robots.

“There’s a multitude of ways to go about long-term economic development,” says Janelle Jones, one of the EPI report’s authors. “Too many lawmakers’ first instinct is to fall back on tax incentives to draw in business.”

The logistical demands of Amazon’s dream of near ubiquitous same-day delivery dictate that the retailer’s distribution network must continue to expand to new regions, regardless of tax incentives. That means that in many cases localities might be needlessly giving away revenue—and still not receive any overall job growth in return. The EPI report’s authors argue that instead of taking that risky bet, policymakers should instead consider investing in education and transportation, which would make a locality more attractive to big companies in the long run. Transportation, a strong university system, and a highly-educated workforce are among the chief requirements Amazon listed for the location of its second headquarters.

Jones made it clear that fulfillment centers shouldn’t be taken as proxies for estimating the effects of Amazon’s new headquarters. Headquarter jobs pay far more than warehouse jobs, for instance, and their overall impact on a city is entirely different, as the Prospect reported earlier this month. But, as Jones says, “Amazon continues the sprawl—the number of fulfillment centers is going to keep growing. This problem is bigger than a new headquarters.”

In 2015 and 2016, 13 states approved laws requiring regular evaluations of major tax incentives, according to The Pew Charitable Trusts, a nonpartisan policy research group. In 2017, however, more than 20 states still lacked a plan to regularly evaluate incentives.

Tax Cuts for the rich. Deregulation for the powerful. Wage suppression for everyone else. These are the tenets of trickle-down economics, the conservatives’ age-old strategy for advantaging the interests of the rich and powerful over those of the middle class and poor. The articles in Trickle-Downers are devoted, first, to exposing and refuting these lies, but equally, to reminding Americans that these claims aren’t made because they are true. Rather, they are made because they are the most effective way elites have found to bully, confuse and intimidate middle- and working-class voters. Trickle-down claims are not real economics. They are negotiating strategies. Here at the Prospect, we hope to help you win that negotiation.

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