The Amazon Dilemma

Amazon shipping packages on a conveyor line

Amazon shipping packages on a conveyor line
Late last year Seattle-based Amazon.com announced plans to build a second headquarters in order to better serve its growing customer base in North America. Amazon says the new plant will cost $5 billion dollars to construct, and will eventually bring 50,000 jobs to the community that lands it. But not every community is in the running. For one thing, Amazon said it would only locate the so-named HQ2 in a metropolitan area with a population of at least one million people. Moreover, the new facility will require 750,000 square feet of space from the get-go, and up to 8 million square feet by 2027.

Immediately following the big announcement, a number of big cities began wooing the e-commerce giant, while some smaller localities let it be known that they hoped to team up with adjacent cities and counties in order to meet Amazon’s population criteria. Nevertheless, Atlanta is now rumored to be the front-runner. In fact, according to Business Insider’s Haley Peterson, Amazon is sending a lobbyist to meet with Georgia lawmakers sometime this month, presumably to negotiate potential perks, such as tax breaks and cash incentives. Even so, Amazon could do a lot worse than the Piedmont Triad. After all, we have the space. We have a slew of community colleges to help train or re-train prospective employees, and we have the infrastructure to accommodate Amazon’s logistical requirements. But there are some ethical flies in the ointment for Triad area officials.

Over the past few years a number of local governing bodies and business organizations have urged all of us to “Buy Local”, rather than do our shopping online. They point out that local businesses pay local taxes, hire local employees, bank locally, and contribute to local charities. The message from local leaders has been clear: “Local is good, Amazon is bad”. Now, these same local officials are all giddy over the possibility of luring “bad” Amazon to our area. Suddenly their “Buy Local” message has become convoluted. So which message are we to believe? How can we support local businesses if we recruit their nemesis to locate here? It’s a dilemma for sure, but one which might easily be resolved by examining a few facts.

First of all, in order to land Amazon’s new HQ2, we would have to pony up massive incentives. True, most economic development perks are tied to specific conditions of performance and employment. But we’ve been burned before by playing that game. Remember when Dell made our Commerce Secretary believe that we’d need to come up with over $300 million dollars in incentives in order to beat Virginia’s bid, which turned out to be only $30 million dollars? Then Dell promised to hire hundreds of people, only to turn around a year later and announce that the desktop computer market had dropped off, so they were closing the new plant in Forsyth County. Amazon says its new facility will eventually employ 50,000 people, but some market experts are already predicting a stock drop for Amazon, so there’s no guarantee that those jobs will ever materialize.

Second, let’s get back to the harm Amazon does to local businesses. One reason Amazon is able to undercut local stores is because of the tax breaks and other incentives it receives, which are not available to those local stores, and which helps to lower Amazon’s overhead. In a 2014 article for Alternet, Jim Hightower reported that, in Texas, Amazon enjoys a “price subsidy of more than eight cents on every dollar of its sales”. Those kinds of subsidies net Amazon an additional several billion dollars in profit each year. Hard for a local shoe store to beat those odds. Then there is the matter of pay. According to a 2013 report by Glassdoor.com, Amazon pays its warehouse workers about 17% less than the average American warehouse worker. That also translates to lower overhead for Amazon. And speaking of warehouse workers, that brings us to another ethical dilemma when recruiting Amazon to our area.

According to the Institute for Local Self Reliance (ILSR) and other sources, Amazon works its employees long hours under sometimes unhealthy conditions. For example, ILSR noted “life threatening” temperatures inside some of Amazon’s warehouses during summer months. And just last week, Tribune newspapers reported that an Amazon fulfillment center in Plainfield, Indiana had been without heat for at least three weeks. Facility employees feared losing their jobs if they complained of the frigid working conditions, and Amazon only attended to the problem after word leaked out to the news media.

So let’s review. If the Piedmont Triad were to land Amazon’s new plant, there would be no guarantee of 50,000 jobs, nor of how well those employees would be paid or treated. Local businesses would continue to suffer because they can’t compete with Amazon, who we’ve agreed to help subsidize. And, our local leaders would have to change their slogan to, “Buy Local, Except for Here.”

Truth is, Amazon probably won’t locate HQ2 in the Triad, but that might not be such a bad thing. Newly fashioned jobs are important, but so are old-fashioned ethics.

 
 

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