Amazon Slammed for its Negative Impact on U.S. Jobs and Economy

Amazon is a behemoth of American commerce. The $107 billion online retail and cloud-computing giant keeps surging, though the evidence of its growth is stealth other than the packages seen on porches.

Recently, the company announced that it will build a new cargo hub in northern Kentucky, which will open with 2,000 new jobs.  That is just a sliver of the 100,000 jobs the company says it will create in the U.S. over the next 18 months.

But one NGO says that Amazon’s reach has actually destroyed more jobs than it created. The results, it says, are not only fewer opportunities for employment, but also lower wages, unstable employment due to a reliance on temporary workers, and growing inequality across the U.S.

The Washington, D.C.-based Institute for Local Self-Reliance (ILSR) recently issued a report that described Amazon as a company with a “stranglehold” on the American economy. Culling data from the U.S. Census Bureau as well as from Amazon’s own annual reports and corporate website, ILSR paints a dire portrait of Amazon’s influence on the economy.

ILSR points to Illinois, where Amazon had zero employees for years in order to avoid the state’s income tax. Nevertheless, the online retailer amassed $2 billion in sales from Illinois in 2014, without employing a single person within the state’s boundaries.

The company opened its first warehouse operations in Illinois two years ago. But ILSR insists that Amazon’s job creation in Illinois is minimal compared to the revenue the state’s residents generate for the company: an estimated $1.5 million in sales for each employee. ILSR claims it takes about seven brick-and-mortar employees on average to reach that same figure.

Multiply Amazon’s impact on Illinois by how the company operates across the U.S., and ILSR says that the future of employment in retail is bleak. When counting part-time and temporary employees, ISLR estimates that Amazon employed over 145,000 people by the end of 2015. But when accounting for the approximate 295,000 jobs that have been lost at brick-and-mortar stores, ILSR maintains that Amazon was responsible for the disappearance of almost 149,000 jobs by the end of 2015.

In fairness, it is a stretch to say that all job losses in retail lay at the hands of Amazon. Some retailers’ struggles, such as those suffered by chains like Abercrombie & Fitch and Wet Seal, were due to changing consumer tastes or poor strategic decisions. Nevertheless, it is hard to deny that online retail has changed how Americans purchase items, as more shopping malls bite the dust and department store chains such as Macy’s and Sears shutter more stores.

But if retail is already a field in which many struggle to make a living, ILSR’s report suggests that many of Amazon’s employees are even worse off.

While Amazon brags about the sunshiny atmosphere at its “fulfillment centers” (a fancy MBA word for warehouse), ILSR compiled interviews with workers that describe these settings as “finely-tuned machines.” The constant monitoring by scanners, daunting packaging quotas and a punishing work culture make standing on one’s feet at a mall store seem much more appealing.

And while Amazon claims its accident, or “incident," rate is low, ILSR counters that those statistics are due to the company’s reliance on third-party contractors to fill temporary positions. Furthermore, unlike logistic companies such as UPS and FedEx, which boost temporary hiring during Christmastime, ILSR accuses Amazon of relying on temporary workers year-round.

The results for workers are dreary: ILSR’s data reveals that the pay rate at Amazon’s warehouse centers lags as much as 9 percent lower than the nationwide average for similar work.

Watch for the situation to only worsen, claims the ILSR. Amazon actually loses money on using courier services for delivery, so efforts to expand its air fleet are likely to continue. But those high-paying jobs at companies like FedEx and UPS provide a decent way of life for 1 million unionized workers and their families across the U.S.

Based on Amazon’s reputation for how it treats workers at warehouses, as well as the pressure it imposes on the company’s white-collar employees, ILSR predicts a grim future for those who make their living delivering packages. Amazon did not respond to TriplePundit's request to comment on the ISLR report.

So, how can policymakers stand up to the creeping power of mega-companies like Amazon? ILSR called on states to enforce their wage-and-hour laws, while making companies such as Amazon and their contractors jointly responsible for temporary workers’ well being.

The organization also asked states and municipalities to stop subsidizing Amazon’s warehouses, which it says has caused millions in lost revenues. ILSR even goes so far as to suggest that Amazon be broken up so that it does not have the unfair advantage of conducting business as a direct online retailer and platform for other companies.

Finally, the report urges governments to find ways to groom local businesses with programs such as loans instead of looking to lure an Amazon fulfillment center to town.

Would these efforts alone be enough to spur local retail businesses and keep logistics workers employed? Doubtful. But cities may be wise to keep an eye on companies like Amazon as they gain more power while sometimes giving little in return.

Image credit: Scott Lewis/Flickr