Obama needed a visual to show that, no, really, truly, jobs really are being created somewhere in America for yet another one of his exercises in trying to pretend that he’s on the side of ordinary Americans. But it’s hard finding any really good success stories in an economy with 12.2 million counted as unemployed and over 28 million as “disemployed” which is the number of people out of work relative to normal labor force participation rates when the economy is in good shape. So Obama chose as his backdrop an American success story, Amazon, which is opening a new a warehouse in Chattanooga and hiring 7,000 people.
But Obama in trying to tout this as a success story revealed either that he’s completely out of touch or that he’s conditioning American to regard a state of peonage as middle class. Not all that long ago, “middle class” meant you could after a few years of work and savings, buy a house in the suburbs, afford to have children and have a reasonably comfortable family life, and send those kids to college. “Middle class” also generally meant college educated, white collar employment plus the higher-skilled, better paid blue collar jobs.
If you had any doubts that that vision of middle class life was on its way to extinction, the Obama speech made it official. Amazon has been repeatedly cited here and abroad for abusive conditions in its warehouses. The Los Angeles Times reported in 2011:
Over the past few months, interviews with 20 current and former warehouse workers provided a glimpse of what it’s like to work at the facility near Allentown.
Workers said they were forced to endure brutal heat inside the sprawling warehouse and were pushed to work at a pace many could not sustain. Employees were frequently reprimanded regarding their productivity and threatened with termination, workers said. The consequences of not meeting work expectations were regularly on display, as employees lost their jobs and got escorted out of the warehouse.
During summer heat waves, Amazon arranged to have paramedics parked in ambulances outside, ready to treat workers.
In a better economy, not as many people would line up for jobs that pay $11 or $12 an hour in a hot warehouse. But Amazon and Integrity Staffing Solutions, the temporary employment firm that is hiring workers for Amazon, have found eager applicants.
Amazon was embarrassed into installing air conditioners in many of its warehouses. But otherwise, the picture hasn’t changed much. From the Lehigh Valley Morning Call, one of the papers in the Allentown area, on Monday:
The Seattle company announced Monday that it is hiring a total of 5,000 warehouse workers at 17 fulfillment centers, including the Lehigh Valley. It is also hiring 2,000 customer service representatives in North Dakota, Washington, West Virginia and Kentucky…
Pay for warehouse positions in Upper Macungie is $12 per hour, according to Amazon’s website. The median pay for similar jobs in the region is $14 per hour, according to data from the Bureau of Labor Statistics.
The jobs come with a benefits package, company stock awards and bonuses, the company said.
So notice, first, that those 7,000 jobs aren’t in Chattanooga, but all over the US. Second, Amazon’s cash comp is markedly below local averages. And although it offers a “benefits package,” it’s not clear that it’s better than what other area employers offer. The article doesn’t add that some of these 7,000 jobs are part time and/or seasonal.
A quick look at a Chattanooga job site shows the hourly for a comparable job at $9 an hour for someone with a minimum of six months recent experience. That’s just above the living wage for a single person in that city of $8.92. Given Amazon’s record in Allentown, there isn’t good reason to expect it to be paying over the prevailing rate in the local market.
The message from Obama is clear: Americans are now expected to celebrate when companies are willing to pay at or not much above a living wage. As long as you pay enough that the workers don’t wind up having to seek public assistance in the form of food stamps or emergency rooms for medical care, you’ll now be promoted as creating better conditions for Americans. That’s true as long as you remember that the Americans that benefit from this grinding down of ordinary citizens are Obama’s backers and other members of the elite.
And how does that take place? As Wolf Richter explains below, Amazon is a net job destroyer. So the enlargement of the pool of unemployed gives Amazon the sort of leverage over workers that it has used to grid down book sellers and other merchants.
By Wolf Richter, a San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Cross posted from Testosterone Pit.
Amazon’s promotion machine par excellence shifted into high gear to tout President Obama’s visit on Tuesday to one of its warehouses – “fulfillment center” is the newfangled term – where he unveiled his “better bargain“ for “middle class jobs.” That visit was artfully synced with Amazon’s announcement on Monday that it would create 7,000 jobs. Out of nothing. One of the ongoing lies in America’s jobs crisis – and the President stepped right into it.
He was at the Amazon warehouse, a 1-million sq. ft. facility in Chattanooga, Tenn., to talk about “a good job in a durable growing industry.” The durable growing industry he was referring to was retail, specifically online retail, and more specifically Amazon’s online retail empire. And the jobs he was referring to were warehouse jobs – many of them part-time or seasonal.
Of the jobs Amazon announced it would create, 5,000 would be in its “fulfillment network,” so warehouse jobs – picking, packing, checking, and shipping customer orders. These jobs would be spread over more than a dozen of its warehouses across the country, including the one in Chattanooga, which already employs about 1,800 full-time and 700 part-time workers. And 2,000 jobs would be in customer service spread over five locations or might involve work at home. A portion of these jobs would be part-time or seasonal.
“What the president wants to do is to highlight Amazon and the Chattanooga facility as an example of a company that is spurring job growth and keeping our country competitive,” explained White House deputy press secretary Amy Brundage.
Alas, there is another side of the ledger of our job-creation hero. Amazon has been a juggernaut. I’m not complaining: I’m both a customer and an author with two books, and I’m happy with the company in both areas. But much of the retail industry, particularly booksellers, have seen their livelihood trampled.
Borders went bankrupt in 2011, eventually liquidating over 500 stores. Nearly 20,000 jobs went up in smoke. Barnes & Noble announced in early February, after a crummy holiday season, that it would shutter about a third of its nearly 700 stores. Thousands of jobs would get axed. The B&N down the street from us closed after Christmas a couple of years ago.
The battlefield of the booksellers is littered with memories of thousands of smaller shops. Ask the owner or manager of your local bookshop how they feel about Amazon, assuming that there still is a local bookshop in your neck of the woods. I made that mistake only once, mentioning the A-word in a conversation with the manager. His face turned red, his lips formed a thin line, and when they opened again, it was to utter “Amazon” as a pejorative.
The jobs that were lost in these stores were often held by people who liked books, knew books, read books, could help you find books, and could recommend books. Often times, these people were at once sales reps, merchandisers, customer service reps, cashiers, inventory clerks, computer technicians, and what not. They’ve been replaced largely by a website – and by some warehouse jobs.
“What is woefully underreported is the number of jobs its practices have cost the economy,” wrote Oren Teicher, CEO of the American Booksellers Association, in a letter to the President to protest his appearance at the Amazon warehouse. The letter put a figure on those jobs lost in the wake of Amazon’s success:
All told, according to the Institute for Local Self-Reliance, every $10 million in spending that shifts from Main Street retailers to Amazon results in a net loss of 33 retail jobs. That would mean for 2012 alone – using Amazon’s own numbers about its increase in sales – Amazon cost the US economy more than 42,000 jobs just last year!
This would be in all brick-and-mortar retail operations combined, not just bookstores, but nevertheless. “Small businesses are the engines of the economy,” the letter said. “When a small business fails and closes its doors, this has a ripple effect at both a local and a national level.” And so the CEO and the board of the ABA told the President that they were “disheartened to see Amazon touted as a ‘jobs creator’ and its warehouse facility used as a backdrop for an important jobs speech, when, frankly, the exact opposite is true.”
Life without online retail is hard to imagine these days, and Amazon has been on the forefront with countless innovations. Online retail sales this year are expected to reach $262 billion in the US – of which over a quarter is likely to go to Amazon.
Amazon has an advantage over small stores: it has the Fed. The Fed’s money-printing and bond-buying binge has produced the largest credit bubble in history and another stock market bubble. Both of them are the most magnificent corporate giveaways ever. Amazon benefits enormously: it can lose money, no problem, and yield-hungry investors are still willing to buy its bonds that yields so little it’s ludicrous; and it can use its inflated stock as currency, of which it can always print more, to compensate its employees and executives and buy other companies. Smaller retail businesses can’t do any of that.
What President Obama conveniently overlooked when he used Amazon as a platform to tout his “better bargain” was the subsidy Amazon received from the Fed and the negative net effect on jobs that that subsidy had.
People in the upper income categories, those who don’t have to worry about the price of toilet paper, have seen their incomes rise over the years. The rest are in a downward spiral. The lower end got hit the hardest. For these folks, tissue makers have a special strategy: desheeting. Read…. The Exquisite Art Of Marketing To Pauperized Consumers.
Update: A Bloomberg video yesterday reported that a survey by Glassdoor found that the average Amazon warehouse “associate” salary $11.69 an hour, and got bonuses, so that average pay was $23,800. Pulling out my calculator and assuming 250 work days at 8 hours a day, that’s $11.90 an hour all in. And report quickly skips over that Glassdoor reports that job satisfaction is lower than average.
The company’s temp agency is now the target of a suit for making warehouse workers go through a security line at the end of their shift (which can take up to 25 minutes) but refusing to pay them for the time.