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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

July 30, 2013 at 11:01 AM

Digging into the ‘Amazon effect’

President Obama talks with Sarah Richey as he tours the Amazon distribution center in Chattanooga, Tenn. (Susan Walsh / The Associated Press)

President Obama talks with Sarah Richey as he tours the Amazon distribution center in Chattanooga, Tenn. (Susan Walsh / The Associated Press)

As President Obama tours the Amazon.com distribution center in Chattanooga, Tenn, today, he is partly celebrating the company’s announcement that it would add up to 7,000 jobs. Most of the media swallowed this announcement Monday without being bothered to use the “series of tubes,” as Alaska’s late Sen. Ted Stevens memorably called the Internet, to find my Seattle Times colleague Amy Martinez’s groundbreaking look at the company’s practices, including dismal working conditions at many of its warehouses. It is not a particularly apt place to trumpet middle-class wages, either. Amazon, which is not very forthcoming for such a large corporation, did not say what these jobs would pay. But the starting wage at the Phoenix distribution center in 2010 was $11 an hour; according to the MIT Living Wage Calculator, one adult with a child would need to make $19.87 in Arizona to stay out of poverty. The site warns, “The estimates do not reflect a middle class standard of living.”

Amazon has used its power over the supply chain and tax advantages to wreak great destruction in traditional retail. Former Labor Secretary Robert Reich (@RBReich) tweeted yesterday, “Progress on jobs front? While Amazon adds 5,000 warehouse jobs it destroys 50,000 retail jobs.” But does the “Amazon effect,” although real, risk being overstated? See this chart:

Retail1990_2013

It shows total retail employment in the United States over the past 20 years. As with many sectors, the decline was sudden and deep with the Panic of 2008 (aka “the Great Recession”). But with more than 15 million retail workers in June, employment has climbed back to 2004 levels. (And yes, dear reader: Amazon sells my mystery novels; so do brick-and-mortar stores).

Of course, the overall workforce has grown, too, and there’s no guarantee the jobs trajectory can continue climbing. Nor does this get into job quality — not just wages, but widespread use of temps, including at this Amazon warehouse. Still, retail jobs have not tanked. I’m not trying to give Amazon a pass. But it is part of a larger disruption, including globalization, widening inequality (e.g. Lake Union Amazonians vs. Chattanooga workers), rent seeking and technological advances including robotics, that is undermining the middle class.

And to those saying, “The automobile industry put the buggy makers out of business, you have to adapt,” the reality is the auto industry created orders of magnitudes more jobs, at princely wages that, with unions, became the backbone of the middle class, than the artisan buggy makers. What we’re seeing across too many areas of the economy today is a retrograde move. Ultimately, low wages for the many can’t support an economy that depends on consumer spending, no matter how cheap the stuff is on the shelves or on the tubes.

And Don’t Miss: Obama and the economy — growth and inequality | The Economist

Today’s Econ Haiku:

JPMorgan pays

To settle pesky fraud charge

Shows where power lies

0 Comments | More in Amazon.com | Topics: Amazon.com, Obama

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