The Economist Asia - 20.01.2018

32 United States The EconomistJanuary 20th 2018

2 Grandma will freeze in the dark.”

Mike Jacobs, an energy analyst at the

Union of Concerned Scientists, says that

will happen “only if grid operatorsstop do-

ing their jobs”. Rather than simply buying

coal from companies like Murray Energy,

as they did for decades, grid operators to-

day have more choices. Natural gas—the

most widely used fuel for electricity gener-

ation—and renewables have been snatch-

ing coal’s market share. Fracking has made

American natural gas abundant and

cheap. The cost of renewables, especially

wind and solar, is also falling. These two

trends have caused coal’s decline.

But Mr Murray principally blames “the

regulatory rampage of the Democrat

party”, driven by the party’s professed be-

lief in climate change—which, like Mr

Trump, he considers “a hoax”. It has been

perpetrated, he contends, by“developing

countries of the world to get American

dollars...[by] radical environmentalists

...liberal elitists [and] Hollywood charac-

ters. I don’t refer to them as ‘people’.” Hilla-

ry Clinton talked about climate change not

out of environmental concern, he says, but

because wind-turbine- and solar-panel-

makers gave “hundreds of millions [to] the

Clinton campaign and Clinton Founda-

tion.” All he wants, he says, is to “get the

government out of picking winners and

losers in the electric power grid”. Yet, by

some amazing coincidence, his action

plan—in addition to cutting the EPAstaff by

half, repealing the Clean Power Plan (an

Obama-era scheme to reduce greenhouse-

gas emissions from power plants), and

ending other environmental rules—urged

the administration to fund clean-coal tech-

nology and coalminers’ pensions. 7

W

HEN Amazon announced in 2010

that it would build a distribution cen-

tre in Lexington County, South Carolina,

the decision was hailed as a victory for the

Palmetto State. Today the e-commerce

giant employs thousands of workers at the

centre. Just 3.5% of the local workforce is

out of work. Alas, the influx of jobs has not

boosted wages for the region’s forklift driv-

ers and order-fillers. In the years since Am-

azon opened its doors in Lexington Coun-

ty, annual earnings for warehouse workers

in the area have fallen from $47,000 to

$32,000, a decline of over 30% (see chart 1).

Lexington County is not alone. Since

Amazon opened a warehouse in Chester-

field, Virginia, warehouse wages in the re-

gion have fallen by17%. In Tracy, California,

they have dropped by 16%. Flat or falling in-

dustry wages are common in the cities and

towns where Amazon opens distribution

centres, according to an analysis byThe

Economist. Government figures show that

after Amazon opens a storage depot, local

wages for warehouse workers fall by an av-

erage of 3%. In places where Amazon oper-

ates, such workers earn about10% less than

similar workers employed elsewhere.

About 44 cents out of every dollar spent

online in America flows to Amazon, ac-

cording to eMarketer, a research firm. The

firm’s success can be attributed in part to

speed and convenience. To get orders to

customers as quickly as possible, the com-

pany relies on a vast network of ware-

houses the size ofaircraft carriers where

the company stores its products and pro-

cesses orders. Amazon operates more than

75 “fulfilment centres” and 35 sorting cen-

tres in America, manned by 125,000 full-

time workers.

To keep costs in check, Amazon must

not only maintain dozensof warehouses,

but run them efficiently. Whereas tradi-

tional shop workers might remain idle for

hours at a time, Amazon’s workers—the

“stowers” that stock inventory, the “pick-

ers” that pluck items from shelves and the

“packers” that box them up for shipment—

are constantly moving. Pickers are

equipped with hand-held devices that

show them what each item looks like,

where it may be found, and how to get

there as quickly as possible. Asthey navi-

gate row after row of shelves, timers count

down the seconds needed to retrieve each

item. To meetperformance targets, pickers

must collect as many as 1,000 itemsand

walk up to 15 miles in a single shift.

According to available data from the Bu-

reau of Labour Statistics (BLS) for 35 coun-

ties, warehouse workers in counties where

Amazon operates a fulfilment centre earn

about $41,000 per year, compared with

$45,000 per year in the rest of the country,

a difference of nearly 10% (see chart 2). The

BLSdata also show that in the ten quarters

before the opening of a new Amazon cen-

tre, local warehouse wages increase by an

average of 8%. In the ten quarters after its

arrival, they fall by 3%.

Why would Amazon pay its employees

less than otherfirms in the industry? Mi-

chael Mandel, an economist at the Progres-

sive Policy Institute, a think-tank, says it

may be because the company’s ware-

houses are in areas that have been “left be-

hind”. But on most economic measures—

including wages, unemployment and pov-

erty—counties with Amazon warehouses

are no different from the rest of the country.

In fact, they are generally better-off. Per-

haps, suggests David Autor, a labour econ-

omist atMIT, Amazon’s workers are young

and inexperienced. There is some evi-

dence for this. Amazon’s employees tend

to be younger—data from the Census Bu-

reau suggest that nearly half of its ware-

house employees are under 35. Job tenure

at the company is typicallyjust one year,

according to PayScale, a research firm.

Another possible explanation for Ama-

zon’s pay is its reliance on unskilled work-

ers with minimal qualifications. David

Neumark of the University of California,

Irvine, who has written about the impact

of Walmart’s growth on retail wages, says

Amazon’s highly automated warehouses

may not require as many workers who

can, say, operate a pallet jack. Staff benefits

may also play a role. Amazon offers its full-

time employees health care, retirement

savings plans and company shares. Such

generous perks may explain whythe com-

pany pays below-market wages.

New research offers yet another pos-

sibility. An NBERworking paper by José

Azar of the IESEbusiness school, Ioana Ma-

rinescu of the University of Pennsylvania

and Marshall Steinbaum of the Roosevelt

Institute finds that a relatively small num-

ber of employers account for a large share

of job opportunities in many American

communities. In places where such la-

bour-market concentration is highest,

wages tend to be lower. These findings sug-

gest that if Amazon is the only major em-

ployer in the cities and towns where it op-

erates, the company can offer wages that

are well below those of its competitors. 7

Amazon

Unfulfilled

Is the world’s largest online retailer

underpaying its employees?

One-click dropping^2

*Four-quarter

moving average

United States, warehousing and storage industry

Workers’ average weekly wage*, $

2008 09 10 11 12 13 14 15 16 17

750

775

800

825

850

875

Counties with

Amazon presence

in Dec 2017

Other counties

Sources: Bureau of Labour Statistics;

MWPVL; The Economist

Basket case^1

Source: Bureau of

Labour Statistics

*Four-quarter

moving average

United States, warehousing and storage industry

Lexington County, South Carolina

2004 06 08 10 12 14 17

0

1

2

3

4

5

0

200

400

600

800

1,000

Total employment

’000

Workers’ average

weekly wage*, $ AMAZON OPENS WAREHOUSE