Thursday 22nd November 2018

What does an Amazon warehouse do for a local economy?

by on 6th February 2018

Scores of local officials will do whatever it takes to drive Amazon to establish fulfillment centers in their states or cities, however a new report released by the Economic Policy Institute (EPI) has called into question the contribution made by Amazon warehouses to local economies.

After analyzing data between 2001 and 2015, the report finds that while Amazon’s presence can lead to a 30% increase in warehousing jobs in a city or state, it produces little to no overall net gain in employment.

EPI claims that the extra jobs created by a new Amazon warehouse in the areas they’ve analyzed are simply offset against job losses in other industries, and these losses could be a consequence of the Amazon’s presence, eg job losses among immediate competitors.

The report also claims that Amazon has received a number of tax breaks and incentives which have been offered on the promise of promoting ‘regional economic development’.

It cites one particular example of Amazon being offered a permanent corporate tax rate cut by the District of Columbia in return for situating their warehouse in the district.

Data from Good Jobs First, a subsidy tracker, shows Amazon has accumulated over $1.2 billion of subsidies since 1996, with the largest subsidy being handed down by Texas in 2012 (a value of $269 million).

The report also emphasizes the opportunity cost in offering tax incentives to corporations to establish a presence in a local area – it claims that offering such large incentives can deprive states of much needed investment in public services.

The distribution of Amazon fulfillment centers has increased markedly in recent years from roughly 10 across all states in the USA in 2005 to 95 across 25 states in the USA in 2017.

Amazon has called the report into question and has accused the EPI of cherry-picking its date range.

After reviewing the EPI report it argued “The study looks at a window of 2001 to 2015, which is misleading as it includes the time in which communities struggled during the recession and when Amazon was not building out its network of fulfillment centers as it is today,”

“In addition to the 200,000 Amazon employees in the US, we know from 2016 data, which is more current than the EPI data, Amazon’s investments led to the creation of 200,000 additional non-Amazon jobs, ranging from construction jobs to healthcare industry positions.”