BLOOMBERG, DECEMBER 18, 2020
Despite a starting wage well above the federal minimum, the company is dragging down pay in the logistics industry and bracing for a fight with unions.
By Matt Day and Spencer Soper for Bloomberg – Amazon.com Inc. job ads are everywhere. Plastered on city buses, displayed on career web sites, slotted between songs on classic rock stations. They promise a quick start, $15 an hour and health insurance. In recent weeks, America’s second-largest employer has rolled out videos featuring happy package handlers wearing masks, a pandemic-era twist on its annual holiday season hiring spree.
Amazon’s object is to persuade potential recruits that there’s no better place to work.
“More than 4,000 Amazon employees are on food stamps in nine states studied by the U.S. Government Accountability Office”
The reality is less rosy. Many Amazon warehouse employees struggle to pay the bills, and more than 4,000 employees are on food stamps in nine states studied by the U.S. Government Accountability Office. Only Walmart, McDonald’s and two dollar-store chains have more workers requiring such assistance, according to the report, which said 70% of recipients work full-time. As Amazon opens U.S. warehouses at the rate of about one a day, it’s transforming the logistics industry from a career destination with the promise of middle-class wages into entry-level work that’s just a notch above being a burger flipper or convenience store cashier.
Union workers who make comfortable livelihoods driving delivery trucks and packing boxes consider Amazon an existential threat. While labor tensions have simmered for years, the stakes have risen sharply amid the pandemic, which prompted Amazon to hire more than 250,000 people to keep up with surging demand from home-bound shoppers. Risking infection while toiling in a crowded warehouse for $15 an hour has many Amazon workers asking if they’re getting shortchanged.
A Bloomberg analysis of government labor statistics reveals that in community after community where Amazon sets up shop, warehouse wages tend to fall. In 68 counties where Amazon has opened one of its largest facilities, average industry compensation slips by more than 6% during the facility’s first two years, according to data from the Bureau of Labor Statistics. In many cases, Amazon quickly becomes the largest logistics player in these counties, so its size and lower pay likely pull down the average. Among economists, there’s a debate about whether the company is creating a kind of monopsony, where there’s only one buyer—or in this case one employer.
While Amazon’s arrival coincides with rising pay in some southern and low-wage precincts, the opposite is true in wealthier parts of the country, including the northeast and Midwest. Six years ago, before the company opened a giant fulfillment center in Robbinsville, New Jersey, warehouse workers made $24 an hour on average, according to BLS data. Last year the average hourly wage slipped to $17.50.
Wages often tick higher in subsequent years, but don’t reach their pre-Amazon level till five years after a new facility opens—meaning that industry workers, on average, find themselves no better off half a decade after Amazon’s arrival.
“Bloomberg’s conclusion is false—it violates over 50 years of economic thought, and suspends the law of supply and demand,” a company spokesperson said in an emailed statement. “Hiring more, by paying less, simply does not work. Many of our employees join Amazon from other jobs in retail which tend to be predominantly part-time, reduced benefit jobs with substantially less than our $15 minimum wage. These employees see a big increase in pay per hour, total take-home pay, and overall benefits versus their previous jobs. What surprises us is that we are the focus of a story like this when some of the country’s largest employers, including the largest retailer, have yet to join us in raising the minimum wage to $15.”
Amazon Workers Need Help Buying Food
Companies with the most employees receiving government food vouchers through the Supplemental Nutrition Assistance Program (SNAP).
Chief Executive Officer Jeff Bezos, whose wealth grew about 65% this year as his company posted record sales and profits, has so far managed to keep unions out of his U.S. operations. Now that’s being challenged. In November, representatives of the Retail, Wholesale and Department Store Union quietly filed paperwork with the National Labor Relations Board, proposing to form a union on behalf of 1,500 workers at Amazon’s Bessemer, Alabama, fulfillment center. On Wednesday, the NLRB gave workers the greenlight to put the proposal to a vote, which promises to be the biggest referendum to date on the retail giant’s fraught relationship with its frontline workers.
“The concern isn’t so much ‘the robots are coming, and they’re going to put everybody out of work,’” says Ben Zipperer, an economist with the Economic Policy Institute. “It’s more that the jobs being created by extremely profitable companies have either poor pay or poor working conditions, or are not the kind of jobs that you would expect an extremely rich country, and rich company, to be able to provide.”
Breaking down pallets or hauling cartons of lettuce is hardly the stuff of American business mythology. Warehouses, featureless rectangles located in exurbs and commercial districts, are far from the plant-filled orbs and office perks of Amazon’s Seattle headquarters. But for many Americans, the logistics industry has long provided a path into the middle class, particularly for those who didn’t attend college.
Warehouses have typically paid less than factories but more than retailers. These haven’t been highly skilled jobs, but do require a certain level of ability—whether managing inventory or driving a forklift without damaging goods and hurting anyone. As recently as the early aughts, municipal officials in southern California looking to replace vanishing aerospace manufacturing jobs settled on the logistics industry, believing it would give lower-skilled workers the opportunity to move up.
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Since then, industry wages have come under pressure amid a push to carry less inventory and to subcontract work to lower-cost middlemen. But logistics really started to change with the rapid acceleration of e-commerce. And no company has done more to reshape how products are warehoused, packed and shipped than Amazon, with its strong focus on customer service.
Shipping orders directly to consumers from an inventory of millions of products required redesigning not just the physical buildings but the jobs of the people working inside. After 20 years of trial and error, Amazon has turned its fulfillment centers into finely tuned assembly lines, often grueling workplaces that have been the subject of frequent media reports over the years, including investigations probing injury rates and pay practices.
Most of the labor in Amazon’s largest fulfillment centers is divided into simple, repetitive tasks: receiving goods arriving in trucks, placing items into mesh shelving, or retrieving and speeding them along a conveyor belt in yellow plastic bins to be boxed and shipped. Most jobs are marketed to high-school graduates—no resume required, start as soon as next week—who spend 10-hour shifts standing at a single station, cogs in a giant machine built for speed and efficiency. Workers receive about one day of training and are put on the line to see if they have what it takes.
Matt Giannini, who spent five years at a warehouse in New Jersey, says Amazon’s genius lies in simplifying most tasks to the point but where anybody can do it. “They’ve gotten it to such a science,” he says. “Every single process is very simple.”
But job satisfaction can be elusive when most workers are interchangeable cogs. Quality of life in the warehouse, Giannini says, often breaks along a very simple divide: people who spend their days standing by a computer terminal that tracks their every move, and those with less scrutiny and more freedom.
Amazon’s Arrival Means More Jobs, Lower Pay
Average warehouse industry wages fall at first in counties where Amazon opens new facilities, and only reach their pre-Amazon level five years later.
Bloomberg interviewed 42 employees in 20 states. Some enjoy the work and say news reports of workplace travails can be overblown. Many joined to get health insurance, a rare perk for entry-level jobs, and came to Amazon from lower-wage employment in retail or logistics.
But most say there’s little opportunity to move up in a highly automated environment where a handful of people per shift oversee an entire facility. One worker in the Midwest was hoping to rise quickly because he had previous management experience. “It’s the greatest company in the world right now,” he recalls thinking. “I’m going to be able to get in there and move up.” Three years later he’s still at the entry level, picking items.
Amazon touts a training program for promising workers and says it issued more than 35,000 promotions in its logistics operation this year. Ron Delosreyes, who joined Amazon in 2018, says the first step up added responsibility and no raise. But today he’s a salaried supervisor at a Staten Island, New York, warehouse. “I’d like to stay and keep advancing my career,” he says. “Up and up.”
“The last thing we want to do is lose our job because we’ll go back to being homeless and have nothing.”
While 35,000 promotions sounds like a lot, it represents 3.5% of the more than 1 million people who worked in Amazon’s logistics group this year. That’s well below the 9% promotion rate for the industry, as calculated by the payroll processing firm ADP.
Many Amazon workers quit or are fired for safety and productivity infractions within a year or two of starting—a high rate of turnover even in an industry where people change jobs frequently. Studies have shown worker churn rises when Amazon moves to town. And workers say the company does little to encourage long tenure.
The relative few who do last more than a year or two often struggle economically.
Courtenay Brown was hired at an Amazon grocery distribution hub in Avenel, New Jersey, three years ago. For several months after joining Amazon, she and her sister, who also works there, were homeless, bouncing from one motel to anotherwhile trying to save a deposit for an apartment. They found places they could afford, but landlords denied their applications because they didn’t make enough, she says. With motel rooms eating up about $600 a week, the sisters missed meals and slurped down free coffee and cocoa at work. Eventually, a charity paid their first month’s rent and security to get them established in their current apartment. Brown, 30, was excited to have a washing machine to rid her clothes of the cigarette smell that often permeated the motels.
About half of her take-home pay covers her share of the rent. The balance mostly covers food, utilities and the cost of commuting, which includes frequent $50 Uber rides when she has to work late and misses the final van shuttle home. Brown pays about $200 a month for the van shuttle. She usually arrives at work at 5:30 am and works until close to 6 pm. She spends her vacation time doing errands or resting at home in her pajamas because she can’t afford to go anywhere.
Brown finally got the promotion she’d been hoping for in the fall and a $2 hourly raise, but it will last only through the holiday season while she helps train new workers and open facilities. She’ll find out in January if she goes back to her old job and previous pay rate of about $17 per hour or if Amazon has a permanent promotion for her.
“Amazon comes to places when people are desperate.”
“Me and my sister, the last thing we want to do is lose our job because we’ll go back to being homeless and having nothing,” says Brown, who joined community groups advocating for Amazon workers despite colleagues’ warnings she could be fired for speaking out. “We’re in a tough situation, and this is all we can find that’s stable. Amazon comes to places when people are desperate.”
Similar jobs at unionized logistics companies typically pay twice as much—enough for workers to pay the bills and save.
Joey Alvarado, 42, makes almost $30 an hour moving boxes filled with pet food, shampoo, canned goods and other items sold by Stater Bros. Markets, a southern California supermarket chain. His wife stays home with their three children, and the family eats out twice a week, has a boat called Penny Lane and a travel trailer. They vacation on Lake Havasu and the Colorado River. They’re buying a 2,000-square-foot home on half an acre about 30 minutes from the San Bernardino warehouse where he works. Down the street is an Amazon warehouse where people earn far less. “I don’t see how a big company like Amazon can be so greedy,” he says. “The CEO is already a billionaire. What does he want to be a trillionaire? It’s just greed.”
Alvarado belongs to the Teamsters Local 63, which he sees as the difference between what he is paid and what Amazon workers are paid. He has been on the job 19 years and plans to remain. He doesn’t pay any premiums for medical benefits for himself and his family members and has a pension. “This job, you bust your butt, but you get paid,” he says. “No one leaves. You’d be stupid to leave.”
Jeff Fretz, 49, was working part time for United Parcel Service Inc. and attending community college to pursue a career in law enforcement. A full-time UPS truck driving job opened up, and he picked that over becoming a cop. Now he spends his days maneuvering trailers around a UPS warehouse in Bethlehem Township, Pennsylvania, and looks forward to retiring and moving south in seven or eight years with a Teamster’s pension. The job gave him a stable income and good life. He owns a home in Easton and took vacations with his wife and son in Cape May.
Fretz gets disgusted hearing about working conditions at Amazon because UPS pays its workers so much more and is still a profitable company. “A human body is not a machine,” he says. “I can’t do now what I did when I was 25. Working in a union shop protects you for a career.”
“I thought Amazon was more like a Google. But nah, it didn’t go like that.”
Now the unions fear that Amazon will do to the delivery business what it did with warehousing. The number of Americans employed as delivery drivers and couriers, outside of U.S. Postal Service work, has surged by 22% in the last two years, driven partly by the expansion of Amazon’s nationwide network of contract delivery firms and partly by the advent of new grocery delivery services. Wages in the industry fell last year by half a percentage point, the biggest decline in more than 20 years, according to BLS data.
Amazon, which has long sought to reduce its dependence on UPS, Federal Express and the U.S. Postal Service, now ships most of its own customer orders. Many of those deliveries are handled by Amazon’s network of delivery service partners, contract firms that work exclusively for Amazon and lease the trademark blue delivery vans. Driver salaries average $16 an hour, according to recruiting sites, a couple bucks an hour less than the national average for frontline delivery service workers, and roughly half the pay package of an experienced UPS driver.
Amazon also borrowed the gig-economy tactics pioneered by Uber with Flex, a service that relies on people making deliveries in their own vehicles. The idea was to boost delivery capacity without having to buy thousands of vehicles and hire people. Drivers download the Amazon Flex app and can accept assignments that typically pay about $50 for three hours. Once they factor in the cost of a vehicle and fuel, drivers say, the pay is closer to minimum wage.
UPS started a similar service for seasonal work a year after Amazon. But the drivers are employees, get 57 cents per mile, a $5 daily smartphone stipend and belong to the Teamsters union. One driver says he can easily earn $1,800 a month working part-time, about 80% more than he ever made doing Flex routes. He can also count on regular work rather than competing against other Flex drivers, who spend hours watching their phones in the hopes of getting work that sometimes never materializes. The seasonal UPS job is a step up for Amazon Flex drivers. UPS’s full-time drivers see it as a step-down, depriving them of overtime and potentially undermining their wages.
Amazon’s growth in the logistics industry is undermining union clout.
They have reason to be worried. Amazon’s growth in the logistics industry is undermining union clout. Union membership in transportation and warehousing dropped to 16.1% in 2019 from 21.3% a decade earlier, by far the biggest decline of any industry, according to BLS data. The slide was driven by the rapid growth of non-union jobs at places like Amazon, not a loss of union work.
Now, the RWDSU, an activist unit of the United Food and Commercial Workers union, is campaigning to organize the Alabama facility, which opened in March. A website for the union drive says employees are seeking safer working conditions and protections from arbitrary dismissal, among other things. “I thought Amazon was more like a Google,” one employee says in a video posted to the site. “The bigger the company, the more benefits, the more loyalty to the worker. But nah, it didn’t go like that.”
Now that the federal labor regulator has approved the union’s proposal, a vote is likely some time next year.