Amazon and The Scandalmongers
(This article also appeared in Chief Executive Magazine)
“Adversity builds character and it is the character of this community that makes it the best location to start new beginnings with happy endings.”
— North Randall Mayor David Smith
Too Small To Save
For 850 mostly African Americans living in a gritty suburb of Cleveland, the diagnosis was pretty bleak: “North Randall, Town of 850 is close to collapse.” One look at the Olympic pool in the old shopping mall told you all you needed to know; the community wasn’t just dying, it was drowning.
After the Randall Park mall closed in 2009, the retailers shut down. Then a few real estate tycoons sniffed for bargains but ran away, big labor was a no show, and the housing czars under Obama made soothing sounds but did nothing because it was a recession, and the election was over. The media just saw flyover country. North Randall was a case of too small to save.
The best idea anyone in town hall had to avoid bankruptcy was to sell the fire truck. For North Randall, it was a jack and the beanstalk moment.
But where was Jack, the town was asking?
The Little Village That Could
Fortunately, the town’s mayor, David Smith, is an incurable optimist. On the town website, he posted: “Adversity builds the character of this community and makes it the best location to start new beginnings with happy endings.” At the time he wrote those words, Smith had no idea North Randall’s luck was about to change.
Fortunately, Smith is the kind of public servant whose job is meant to be part-time but puts in hundred hour weeks visiting his people in a 10-year-old Ford Crown Vic. The way Smith saw it, the town had potential. All he needed was a smart business partner.
It is hard to find a good strategy when you are up against multiple survival threats. So there wasn’t much to lose when Smith threw the longest Hail Mary since the town was incorporated in 1908. North Randall filed an application that would part the waters for this forsaken town in the American midwest. It was for an Amazon fulfillment center that would bring 2,000 jobs.
They were not just any jobs, either, but right smack in the digital infrastructure, and came with good wages, benefits, tuition reimbursement, parental leave, and would give North Randall a reason to go on. As a scout will tell you, to light a fire, you need a spark.
In 2017, Amazon sent RFPs to communities across the state inquiring if they were interested in bidding on a new fulfillment center along with its 2,000 jobs. The Amazon jobs were right smack in the digital infrastructure, came with good wages, benefits, tuition reimbursement, and parental leave. Many towns were bidding on the project, which left North Randall with an existential question, why should Amazon take a chance?
The Amazon warehouse RFP was a moonshot and the odds against this deal happening were astronomical. There were classier towns, richer towns, and less troubled places bidding on the project. There was also the question of whether North Randall could get its house in order. The town’s fiscal condition was deemed un-auditable. That wasn’t the only problem. The dead mall needed rezoning, investors needed to buy a vacant, dilapidated hotel they didn’t want, and then pay for demolishing it. Finally, the North Randall Village Council had to approve property-tax abatements while operating on an austerity budget. All these details were revealed in a public meeting one evening, and they needed to happen now.
Twenty-four hundred miles away in Seattle, Amazon’s North American customer fulfillment group concluded its review of the Ohio proposals. According to Vice President Sanjay Shah, the company wasn’t looking for just ‘anywheresville.’ Amazon takes into account many factors that go into the warehouse location algorithm because “our ability to expand is dependent on incredible customers and an outstanding workforce.” When they looked at North Randall, they didn’t see a desperate town in the middle of nowhere as most others aw. They recognized an indomitable spirit.
When news of Amazon’s decision to consider North Randall leaked out on a public meeting agenda, Mayor Smith was exultant. “I’m lost for words because we are so fortunate….”
No one dreams that one day — if they’re lucky — they’ll get a job in a warehouse. But for working-class families, the Amazon jobs were a reason to celebrate. The wages, starting at about $14 per hour or $30,000 per year before stock options and bonuses, are the best starting salaries of their kind, according to Digital Commerce, “and significantly exceed federal and state minimums.”
The medical benefits can have a life-changing effect. Unlike more short-term conscious employers or labor unions, Amazon’s package begins day one: Employees who work more than 20 hours receive life and disability insurance, dental and vision insurance with premiums paid in full and partial funding of medical insurance, as well as a 401(k) plan, paid time off and employee discounts.
To help employees develop the skills for a digital future, Amazon grants one of the most generous tuition reimbursement packages in the United States, covering 95 percent of the costs. Nicole Smith, the chief economist at the Georgetown University Center on Education and the Workforce, commented that Amazon’s education-related benefits are unique for people with only a high school education, where the job market has crashed.
At Amazon’s 100 fulfillment centers across the country, in one month alone in 2017, the company hired 50,000 workers. But until Amazon showed up, these places were like a mining town without any gold. No one else is offering that scale of the opportunity, not big labor, government, and for that matter not Facebook and not Google. Only Amazon. To paraphrase Winston Churchill, small-town America is saying, “give us the jobs, we already have the tools.”
Crates of Wrath
The cheering from places like North Randall may have drowned out the catcalls from a different corner of the state, ironically, one closer to money and politics than people and labor. PolicyMatters Ohio, a local labor activist, sent out a press release alleging the company underpaid its warehouse workers to the point they had to rely on food assistance. The intent was to embarrass Amazon not because it employs people who move packages but because they are non-union.
The press release noted: “more than 700 Amazon workers received (food) benefits…or more than one in every 10 of those Ohioans employed by the company.” Then the tearjerker, “It is troubling that so many of those who qualify are working and still don’t make enough to get by.”
It sent the media into a frenzy, but unfortunately, they forgot to check the facts. CNN to Salon.com, Slate, and Huffington Post, and others echoed a populist rant, “Jeff Bezos deemed the richest man in the world while Amazon warehouse workers suffer grueling conditions.” Money worshippers like CNBC and The Street made it about employee fairness: Amazon Warehouse Employees’ to Jeff Bezos — We Are Not Robots. Although the whole story was a red herring, journalists ate it up because Jeff Bezos in the same headline as food stamps was delicious schadenfreude.
More to the point, PolicyMatters Ohio claims were statistical sleight of hand. Every successful ‘con’ needs a ‘mark,’ and in this case, the mark was the media.
For instance, the difference between part-time and full-time worker’s wages was blurred. In Ohio, to qualify for food assistance, income for a family of two must fall below $20,826. Amazon confirmed its warehouse salaries with fact checker Snopes.com are in the range of $15 per hour or $31,000 per year, before stock and performance-based bonuses.
The labor activist implied 700 Amazon employees were on food stamps because someone in the household also received assistance. That was like inferring from a list of employees with children that the company employs child labor.
The third flaw was leaving a false impression that Amazon knew which employees were on assistance. Privacy laws prevented Amazon from finding out who those employees are, and Business Insider confirms the law of large numbers is the culprit, not Amazon: “Other large employers in the state, like Walmart, Kroger, Home Depot, the Cleveland Clinic, and Target also have employees that draw benefits.”
The fourth oversight was to conceal the ways someone can qualify for food assistance, leading readers to believe the wage level is the problem. Compassionate social programs like Ohio’s can offer assistance, for example, if a family member is elderly or disabled. It may not be based on income in cases like this. That is why, according to Snopes, “This circumstance might well qualify someone for food stamps even if their hourly wage at Amazon were otherwise not too bad.”
Get The Facts
There are two inviolable rules of good journalism, and the first is to get all the facts. When the media fails to do this, the philosopher George Santayana said, “it has surrendered its skepticism to the first comer.”
In the big data, crowdsourced world, checking an employer’s reputation is simple. Glassdoor, the Yelp of employee review sites, reveals how actual employees feel about their company’s wages and benefits. It can also identify who is the labor advocate and who is the publicity hypocrite.
An employee of PolicyMatters Ohio posted a review complaining that as a research intern they weren’t paid any salary, which is ironic given the focus of the research was on blue-collar wages. It is also the case that, according to expert Alex Granovsky, “unpaid internships are nearly always a violation of Ohio and Federal law under the Fair Labor Standards Act:”
Arianna Gets All The Scratch
That second rule of journalism is to follow the money. This line of inquiry had a shocking revelation: people aiming for a media career might be better off taking a job at an Amazon warehouse. Glassdoor was quite revealing on the matter of pay and worker conditions at media companies as well as Amazon warehouses:
At The Street, the hourly rate is $10.12 and may explain why employees at “booyah” Jim Cramer’s stock tip website disparage the atmosphere: “People sit and stare at their computers. I go home and am in a depressed mood because I didn’t speak for 8 hours.” *
At Verizon-owned but uber liberal Huffington Post, the tagline is ‘know what’s real,’ so they will applaud our telling you the hourly rate, at $11.87, may be why employees say “40% of the staff was drunk. They fire everyone and hire back at half the rate. Work-life balance is off. Arianna gets all the scratch.”
Compare those to an Ohio Amazon warehouse worker where the hourly rate is $14 an hour, and as an employee notes, “Benefits from day one. I only pay $16 for medical, dental and vision. The trainer I had was awesome, and the atmosphere is awesome. Right off the bat, you get 10 hours personal time.”
This suggests the media is dreadfully elitist, if not downright hypocritical, towards the blue-collar world. Journalists see a high school educated warehouse worker making $12 an hour; they call it slave wages. But if they hire an Ivy League graduate as a reporter at $25,000 a year, which also computes to $12 per hour, somehow that’s following your passion.
In 2018, the most critical question to ask about Amazon is not its stock price or how rich is Jeff Bezos. The key metric is are people’s lives enriched by making a steady wage, healthcare benefits, educational options, and the opportunity of working for a company with a wide variety of disciplines, locations, and sectors of the digital economy?
As Bezos might say, the answer to that question begins with a number: 566,000. That is the number of people employed by the company today, making Amazon the second largest employer in the United States, more than the unionized labor forces of the U.S. Postal Service at 508,000 and far more than General Motors’ 209,000. Facebook’s 25,000 employees are a small gathering by comparison.
While Bezos moves the company forward through a combination of vision, skill, and high ideals, he knows his employees are his most valuable asset. As every equity analyst pleads to change his long term ways, Bezos snubs Wall Street by overinvesting in people and in the communities where he drops anchor.
Progressive leaders have publicly praised the company for these reasons. If the media and big labor can get over their parochial hysteria, even they will admit there is something for everyone to love about Amazon.
(Disclosure: I served as a board director of The Street from 2009–2010).