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Despite promises to hire 1,600, study says Amazon will drain jobs from local economies

online commerce giants like Amazon are taking some of the blame for a retail slump at brick-and-mortar stores.
Nicholas Eckhart
Flickr - http://j.mp/1SPGCl0
Stacy Mitchell says with layoffs in retail continuing, Amazon's expasion to Michigan could drain jobs from local economies.

Amazon is in the process of building two distribution centers in Michigan. The online retail magnate has received millions in state money as an incentive to build, and hire, in the Great Lakes state. Yet, researchers at the Institute for Local Self-Reliance suggest Amazon’s impact on the overall economy destroys more jobs than it ever creates.

Despite the fact that Amazon CEO Jeff Bezos briefly surpassed Bill Gates as the richest person in the world, Amazon has successfully landed over a billion dollars in subsidies from local governments, according to Stacy Mitchell, co-director of the Institute for Local Self-Reliance (ILSR).

In the past year, the Michigan Strategic Fund has granted Amazon $12.5 million in state funds to build distribution centers in the Wayne County cities of Romulus and Livonia, respectively. As part of the deal, Amazon promises to hire 1,600 full-time workers.

“There’s a lot at stake here, and I question why a company that is sitting on an enormous pile of cash actually needs our tax dollars,” Mitchell said.  

Mitchell says Amazon is building distribution centers across the United States with the goal of locating themselves as close to customers as it can get. Distribution centers in Wayne County could mean faster delivery times to customers.

State officials said offering the grant money to Amazon was a way to lure them to build in Michigan instead of a different location in the Midwest or Canada, which Amazon was reportedly considering. Mitchell says its “outrageous” that governments have continued to subsidize Amazon’s expansion when it will continue to build new distribution centers “regardless.”

When it comes to Michigan’s economy, Amazon’s promise to hire 1,600 seems like a boon for Michigan. But the ILSR report, “How Amazon’s Tightening Grip on the Economy is Stifling Competition, Eroding Jobs, and Threatening Communities,” found that Amazon’s overall impact on the economy is bad for growth, eliminating two retail jobs for every one job it creates.

Amazon’s job creation numbers look good and, Mitchell says, are easier to see than the many jobs that are disappearing in retail as Amazon continues to grow and train its customers to shop habitually.

Mitchell says Amazon’s Prime membership costs Amazon more than the annual $99 fee from each customer to provide one-day delivery and other services, and that the company frequently sells goods and services at a loss in a calculated effort to eliminate competition. Mitchell says Amazon has benefited from lax anti-trust regulation and tax loopholes that have allowed it to dominate the online marketplace.  

“We are rapidly moving towards a situation where we have one retailer that controls online shopping,” Mitchell said. “Amazon is already capturing one of every $2 Americans spend [online]. That’s not competition, and we think the public policy support that’s helping lead us in that direction really needs to be changed.”

Listen to the entire conversation with Stacy Mitchell, co-director of the Institute for Local Self-Reliance, above.

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Tyler Scott is the weekend afternoon host at Michigan Radio, though you can often hear him filling in at other times during the week. Tyler started in radio at age 18, as a board operator at WMLM 1520AM in Alma, Michigan, where he later became host of The Morning Show.
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