The Amazon Economy Undercuts President Obama’s Message

clee August 2, 2013 3

Cross-posted from the Next New Deal, the blog of the Roosevelt Institute.

By Richard Kirsch, USAction Board Member and Senior Advisor

The president is promoting a business model that puts everything we want just a click away — except for good jobs with decent wages.

On Tuesday, President Obama gave a great speech on why good jobs are the foundation for his middle-out economic strategy… from a huge Amazon warehouse where the workers do not have good jobs. I’m still stuck on the setting.

There is so much in President Obama’s speech that I’ve been wanting him to say. While the press focused on his announcement of a proposal on corporate taxes, the speech was almost entirely about jobs. After Obama described “what it means to be middle-class in America” as “A good job. A good education. A home to call your own. Affordable health care… A secure retirement,” he pointed out, “It’s hard to get the other stuff if you don’t have a good job.”

He told the Amazon warehouse workers, “we should be doing everything we can as a country to create more good jobs that pay good wages.”

But as The New York Times reported, “the White House came under fire because many Amazon jobs pay only $11 an hour, and the pace of the work in these warehouses has been described as exhausting.”

Mr. President, those are not good jobs. Not even for a single person. The BEST (Basic Economic Security Table) data calculates that to meet the basics of housing, food, transportation, health care, personal items, plus putting aside a little for emergencies and retirement, a single person would need to earn $14 an hour. That is if he or she gets health care at work. Add one child – and the cost of child care – and the calculation jumps to $23 an hour.

That is not what we would really call a good job. There’s no provision to save for that child’s higher education, for instance. And a vacation, even a modest one? Not in the BEST budget.

The way warehouse workers are treated represents all that is wrong with the new American economy. Anew study from U.C. Berkeley found that the average wage of warehouse workers in California is $14,500 a year. But the industry also employs many temp workers, who earn on average under $10,000. You can learn more about the often abusive treatment of workers in the warehouse industry atwarehouseworkersunited.org.

Of course, the president made no acknowledgement of the working conditions in the Amazon warehouse. He did call on America’s CEOs to “help get these workers back on their feet,” saying that companies who make the 100 Best Companies to Work for in America list “know if a company has employees that are motivated and happy, that business is more likely to succeed.” Amazon is not on the list.

There are so many other places the president could have chosen to speak, including one of the new manufacturing facilities he talked about. But he chose Amazon, according to the Times article, because the company recently announced that it would add 5,000 jobs at 17 warehouses around the country. The president also delighted in Amazon’s new consumer model, opening his speech by saying, “Last year, during the busiest day of the Christmas rush, customers around the world ordered more than 300 items from Amazon every second, and a lot of those traveled through this building. So this is kind of like the North Pole of the south right here. Got a bunch of good-looking elves here.” With elven paychecks, he might have added.

Amazon is a great example of how the new economy has created a crisis in good jobs, in which most of the jobs being created are low-wage: a highly-profitable information technology firm that drives local stores out of business while paying low wages to its non-union workers.

Of course, Amazon has been great for consumers, with convenience, selection, great service, and lower prices. Throughout our history, those kinds of innovations have driven the economy forward, and we are not going to stop them. But low-wages and poor working conditions do not have to be part of the story. We have also, in our history, transformed a low-wage economy to an economy that paid decent wages and created a huge middle class.

One of Amazon’s initial investors, Nick Hanauer, is the coiner with his colleague Eric Liu of the “middle-out” economics phrase, which the president has adopted. But Hanauer has a very different view of what workers should be paid than the CEO of Amazon or President Obama do. While the president has proposed a $9-an-hour minimum wage, Hanauer is proposing a minimum wage of $15 an hour.

As Hanauer wrote for Bloomberg News in a post titled “The Capitalist’s Case for a $15 Minimum Wage,” “The fundamental law of capitalism is that if workers have no money, businesses have no customers.” Hanauer backs up his argument with a simple example:

My investment portfolio includes Pacific Coast Feather Co., one of the largest U.S. manufacturers of bed pillows. Like many other manufacturers, pillow-makers are struggling because of weak demand. The problem comes down to this: My annual earnings equal about 1,000 times the U.S. median wage, but I don’t consume 1,000 times more pillows than the average American. Even the richest among us only need one or two to rest their heads at night.

He concludes, “Raising the minimum wage to $15 an hour would inject about $450 billion into the economy each year. That would give more purchasing power to millions of poor and lower-middle-class Americans, and would stimulate buying, production and hiring.”

Given the huge obstacles to passing any part of his middle-out economics program through Congress, it will be very tough for the president’s campaign to produce legislative results. He can educate the country about the challenges of the new economy and why we need the kind of middle-out economics he and Hanauer both describe, but he will only breed more cynicism and resignation if Americans see an Amazon warehouse job as his vision for their future.

Richard Kirsch is a Senior Fellow at the Roosevelt Institute, a Senior Adviser to USAction, and the author of Fighting for Our Health. He was National Campaign Manager of Health Care for America Now during the legislative battle to pass reform.