The president traveled to an Amazon fulfillment center today to announce a “grand bargain” where he offered Republicans corporate tax reform in return for their support for a legislative package intended to create middle class jobs. Both ideas have merit, and provide the president with a new economic offensive which he has sorely lacked. But the choice of Amazon as backdrop is an interesting one.
From the consumer perspective, the retailer is magnificent. Who doesn’t love its ease, convenience and breadth of choice? Near instant gratification at a price less than most retailers and without the hassle. Amazon founder and CEO Jeff Bezos, along with Bill Gates, Steve Jobs and the Google twins, are this generation’s Carnegie, Rockefeller, Ford and Vanderbilt: great pioneers of capitalism.
But from other perspectives, the story is more complex. Bezos’ company, which is now moving to dominate cloud computing, is not profitable, despite having a stratospheric market valuation. And while the Amazon business model has so far benefited customers, shareholders and some small businesses that benefit from its vast distribution network, it, along with Wal-Mart, has hastened the demise of thousands of other retail jobs, and placed downward pressure on the earnings in publishing and other creative services. Moreover, it’s fair to ask whether the bulk of its jobs are the kind President Obama would call conducive to a “middle class” life. As Amazon expands and builds out fulfillment centers across America to speed distribution, it is creating a lot of new jobs; 7,000 were announced timed to the President’s visit. Estimates are that these jobs pay an average of $24,000 a year, or about $26,000 with benefits. The poverty line for a family of four is $25,000, so Amazon’s wages may be a “living” one but not a particularly good one.
The point is not to bash Amazon or to denigrate the people who work hard there, but to comment on how much our economy has changed and how hard it will be to reclaim one where the majority of Americans are thriving, not just surviving. Twenty years ago, the starting wage at a union automobile factory was $17 an hour plus generous benefits. The starting wage at an Amazon warehouse today is about $11 an hour. Into that wage gap has fallen the broken dreams of millions of Americans.
Once the most admired companies in America paid strong wages. They were admired for their products and services, for their share value and for their ability to build the middle-class. Today, only two legs of our private sector stool seem steady.