The Economist - UK (2022-03-26)

TheEconomistMarch26th 2022 UnitedStates 39

Amazon instituted a $15 minimum wage in
2018, workers’ fortunes rose, but not faster
than for warehouse workers as a whole (see
right­hand chart). Amazon says this is not
a fair comparison. Workers elsewhere may
belong  to  unions  or  be  trained  to  use
equipment such as forklifts, boosting their
pay. Most workers in Amazon’s fulfilment
centres,  the  firm  says,  are  younger  and
come without any training, often after be­
ing  unemployed.  Employing  these  work­
ers  may  depress  average  wages  in  the  in­
dustry, but boost earnings across the econ­
omy as a whole.
The effects of Amazon’s wage floor were
felt  beyond  its  own  workforce.  A  paper
published in 2021 by Ellora Derenoncourt,
now  of  Princeton  University,  and  col­
leagues found that a 10% increase in Ama­
zon’s average hourly wages led other com­
panies in the same region to raise wages by
an  average  of  2.3%.  Walmart,  Target  and
Costco caused similar spillover effects. 
A  forthcoming  study  by  Vikram  Patha­
nia  and  Serguei  Netessine,  economists  at
Amazon  who  have  posts  at  the  University
of Sussex and the University of Pennsylva­
nia  respectively,  found  that  Amazon’s
presence boosts a county’s economy. Com­
paring counties with Amazon warehouses
with  similar  counties  without  them,  the
researchers  found  that  in  the  first  three
years after opening a fulfilment centre jobs
were created beyond Amazon’s hires, pov­
erty declined and household income rose.
It  is  no  surprise  that  a  study  co­pro­
duced with Amazon highlights such bene­
fits.  Still,  logistics  experts  and  local  offi­
cials in Alabama describe a positive “Ama­
zon effect”. Marc Wulfraat, the president of
mwpvl, says logistics firms tend to cluster:
if Amazon picks a town because of its high­
ways  and  workers,  it  may  make  sense  for
parcel carriers such as FedEx to be there. 
Amazon  was  not  the  first  big  firm  to
come to Bessemer. Dollar General opened a
distribution  centre  there  in  2011.  But  net­
ting Amazon is “a Good­Housekeeping seal
of  approval”,  says  Ron  Kitchens,  until  re­
cently  boss  of  the  Birmingham  Business

Alliance.  “If  you  get  Amazon,  others  are

coming.”  Kenneth  Gulley,  the  mayor  of

Bessemer, saw wooing Amazon as a way to

buck the trend of small­town decline. Bes­

semer’s  poverty  rate  is  still  around  26%,

much higher than the state average of 15%. 

Signed, sealed, delivered

The  process  of  persuading  Amazon  to

choose one town over another comes with

its own costs, however. Good Jobs First, an

economic­development  watchdog,  esti­

mates that Amazon has been given at least

$4.2bn  in  subsidies  from  state  and  local

governments  for  its  facilities.  Critics  of

such incentives suggest that towns are dol­

ing out subsidies to Amazon when it would

settle there anyway to serve its customers

quickly.  Timothy  Bartik,  of  the  W.E.  Up­

john Institute for Employment Research in

Kalamazoo, Michigan, reviewed 30 studies

of  incentives  in  2018,  and  found  that  at

least  75%  of  firms  analysed  would  have

made a similar decision without a subsidy. 

Thatdoeslittletodeterlocalofficials.

“You’recompetingnotonlywithcitiesin

otherstates,you’recompetingwithcities

righthereinthestateofAlabama,”saysMr

Gulley.“You’regoingtohavetoincentivise

oryou’renotgoingtobeabletosecurethe

companies.”EvenifAmazonhadchosen

anothertownnearBirminghamforitsful­

filmentcentre,Bessemerprobablywould

have benefited.The warehouse employs

about6,000people—morejobsthanBes­

semer’s26,000residentscouldfillalone.

Workers in Bessemer complain that

Amazon’sfocusonefficiencyanditsuseof

performance­trackingalgorithmsfeellike

surveillance,andthatbathroombreaksare

tooshortandsecuritychecksonerous.In­

juriesatfulfilmentcentresaremorecom­

mon  than  at  other  warehouses  and  em­

ployee turnover is high. In his book “Fulfil­

ment”, Alec MacGillis, a journalist, relates

several stories of Amazon employees hurt

on the warehouse floor, fired for encourag­

ing unionisation or, simply, unfulfilled by

the work of picking and packing orders. 

Last year discontent in Bessemer led to

a union drive. It failed, but the National La­

bour  Relations  Board  said  Amazon  had

pressed workers into opposing the union,

and  ordered  a  new  election.  Votes  will  be

tallied on March 28th, two days before Am­

azon workers at a Staten Island warehouse

in New York finish their own union drive. 

Around  Bessemer,  red  posters  in  resi­

dents’ front yards shout “Vote union yes!”

and  “This  home  supports  Amazon  work­

ers”.  Jennifer  Bates,  one  of  the  leaders  of

the  union  drive  and  a  native  Alabamian,

doesn’t think Bessemer has changed much

since  Amazon  arrived,butshe  does  have

one  observation:  “Theonlything  I  see  is

more businesses coming.”n

Making its presence felt

United States, warehousing and storage industry

Sources:BureauofLabourStatistics;MWPVL *Four-quarter moving average

Planned

Amazon,numberofselectedfacilities

1,050

950

850

750

212018161412102008

Workers’ average weekly wage*, $

Other counties

Counties

with Amazon presence

1,500

1,200

900

600

00

0

102008 15 2420

Delivery

stations

Fulfilment

centres

Sorting

centres

Flying the flag for fulfilment