Fascinating finding

A new report by EPI economist Ben Zipperer and economic analyst Janelle Jones finds that Amazon fulfillment centers do not boost overall employment in the counties where they open—undermining the case for providing large tax breaks and incentives to lure Amazon facilities to a particular place.

Analyzing data for counties in 25 states containing Amazon fulfillment centers, the authors find that within two years, the opening of an Amazon fulfillment center leads to a 30 percent increase in warehouse and storage employment in the surrounding county. However, this does not lead to an increase in overall employment in the county—and in some cases, the data even suggest reductions in overall employment.

“Amazon has received over $1 billion in state and local subsidies to open its fulfillment centers at taxpayers’ expense—but does not increase overall employment in the county,” said Zipperer. “If policymakers instead invested in public services—particularly in early-childhood education and infrastructure—that would be a much stronger recipe for long-term economic development, rather than giving tax breaks to national employers like Amazon.”

The authors speculate that jobs created in warehousing and the storage sectors are offset by job losses in other industries, or that the employment growth generated by Amazon is simply too small to be meaningfully detected in the data.

This does therefore mean that closing a factory – due to, say, increased trade – doesn’t lower the number of jobs in a county either.

Which is a bit of a killer for just about every complaint the EPI ha about trade really.

24 comments on “Fascinating finding

  1. I think the Sports Economist, forgotten his name, used to blog about this with regard to American Football stadia.

  2. They’re going to put warehouses in cheap places. They don’t need to be in expensive places. And cheap places tend to be losing jobs beyond the short term.

    What jobs do they think are being destroyed? Shops? Ok. But they’re going to destroy jobs in shops in neighbouring countries too.

  3. Solution to every problem known to man = invest in public services.

    ie Steal wealth from the productive and dead end it in some ill thought out quango

  4. The basic premise seems to be that more employment is a good thing – for the investor! They don’t seem to understand that jobs are a cost, not an objective.
    I say the more efficient a project and the fewer jobs it creates the better. We then have more money left over to do other projects which also will generate some jobs.

  5. Zipperer et al. have got it wrong because – and Tim seems to overlook this (why they got it wrong not *that* they got it wrong – Amazon is cheaper because it cuts out wholesalers and retailers and their employees and the employment cost affecting *not just* the county in which has a warehouse *but also* the neighbouring counties. So the county which houses the Amazon warehouse gains – compared to not housing it – by enough to justify tax breaks, while the neighbouring counties lose retail jobs without the offset of gaining Amazon warehousing and delivery jobs..

  6. Ideally communities would have a tax and regulatory environment favorable to commerce in general rather than try to create special deals for individual companies.

  7. The proposition should be testable in Europe – do the countries that receive the most EU subsidies ( convergence, rural, agricultural ) create jobs, destroy jobs, or it stays about the same?
    Based on outmigration from those countries, there is certainly not an increase in jobs

  8. TommyDog, your ideal is impossible as, in InstaPundit’s words, it presents insufficient opportunities for graft

    A complicated tax and regulatory regime with multiple preferential rules allows politicians and bureaucrats to feast on our blood.

  9. @ Bongo
    Your conclusion is a complete non sequitur. Migration does not reflect the increase or decrease in jobs resulting from EU subsidies but the *perceived* advantage of moving to a country with higher living standards. Italy would be even worse off without all the olive oil subsidies pocketed by the Mafia since some of the Mafia’s income is spent within Italy.

  10. Even if an Amazon plant did nothing about macro statistics, it might put the existing workforce to use more efficiently, which would be a good thing, though not worth “investing” taxpayer loot, versus making Amazon pursue efficiency on its own account.

    Ducky – Yes, nearly all American ballpark projects tout an economic boom driven by sport. The best-funded projects later tally up all the economic activity within 1 mile of the stadium and attribute it to the club.

    Kevin Lohse – Indeed the article’s thesis seems to be against subsidies to Amazon on the basis that they will undercut welfare (which is not an “investment” as there is no anticipated rate of return, except votes). “Investment…in infrastructure” is the sound of looters trying to sound like bankers. Pelosi told us that unemployment payments were the “most efficient” way to inject money into the economy. No; they pay you for failing to work last month, whereas what Trump’s doing right now pays you if you work harder next month.

  11. I think Bongo is on to something. If these guys at EPI are arguing that firms should not receive subsidies,then shouldn’t that logic, no, that EVIDENCE, also be applied industry -wide or region-wide? Why waste money bailing out ‘strategic’ industries? This seems to be the message from EPI, isn’t it lads?

  12. Fred. You are largely correct, but some places are less extreme than others and thereby produce better opportunities for their residents.

  13. The reports conclusion seems sensible. Policymakers should spend taxpayers money on providing services for taxpayers not subsidising multi billion multinational companies. Er… isn’t that why politicians are elected?

  14. “Ideally communities would have a tax and regulatory environment favorable to commerce in general rather than try to create special deals for individual companies.”

    You wouldn’t need this stuff if you had LVT as there would be additional incentives built into lower tax to put businesses like Amazon (or factories or movie productoins) into cheaper places.

  15. EPI? Rilly?

    ‘Ten actions that hurt workers during Trump’s first year: How Trump and Congress further rigged the economy in favor of the wealthy’

    EPI.com

  16. Are we talking warehouses or are we talking fulfilment centres?
    Not quite the same. Warehouse benefits from storing stuff by the pallet and by type.
    Fulfilment centre benefits from storing on shelving and not by type. Stick a 11 inch cuddly toy on shelving next to a kitchen appliance with a football next to them on the shelf and next to that being a DVD.
    Picker is told where to go and what to pick, the fact its different speeds up the picking process (try it at home).

    Part of the problem amazon have is staff numbers, getting a thousand people from one small area is not easy. Rugeley centre is about 20 miles from Birmingham and recruits from nearby places including Birmingham.
    So while it is expected a fulfilment centre will increase jobs in an area, that area can be 400 plus square miles. Say 1500 jobs in 400 square miles, would the local towns and cities notice a change in employment rate?
    There will be one, have just got 1500 concentrated in one building – just not necessarily noticeable on any scale outside the building.

  17. It appears to be beyond Zipperer’s comprehension that opening a massive fulfillment center would be worth a city investing in (via tax breaks). One of Amazon’s centers has opened in Central Ohio (New Albany) and what it provides is a revenue stream to said city… Because (outside of income tax on residents) cities receive most of their tax revenue from payroll taxes levied on employees of resident businesses. If the company generates a profit of $100,000 within the city, they’re paying the city $2,000 in income tax. If that same company has payrolls of $500,000, that same city picks up $10,000 in income tax.

    The city is buying increased future tax revenue generated from increased payrolls, at the expense of granting the company a far less valuable tax break on their corporate taxes. The company gets what it wants (lower corporate taxes), the city gets what it wants (an increased tax revenue base) and the citizens get what they want (a greater number of jobs to choose from).

    Zipperer also seems oblivious to the possibility that workers can benefit even if overall employment doesn’t grow. If Amazon offers $1 per hour more than anyone else, which lures 1,000 already employed people away from the present jobs, the 1,000 walk away winners, as their wages have increased.

  18. Sissons&Brown published a study of Enterprise zones in 2011. Their conclusion was the tax breaks had no effect either way that they could measure.
    But they still brought benefits because planning had been liberalised.
    So Zipperer is about 7 years late with his analysis.
    It’s not normally like the USA to be late for things.

  19. Bongo – they haven’t caught on to the fact the cold war ended over 2 decades ago yet. Oh and they think they won in Afghanistan and Iraq, funnily enough the locals who fought against the invaders think the invaders lost.
    So yes can take a while for the US to catch up.

  20. Hey, every time we suggest the wogs start paying for their own security all we get is whining. Someone’s got to protect your sorry asses, and as usual it is us. Not because we want to, mind you, but simply because you wouldn’t have it any other way. It’s one of the things that makes a wog a wog.

  21. “This does therefore mean that closing a factory – due to, say, increased trade – doesn’t lower the number of jobs in a county either.”

    That’s a bit of a stretch.

  22. @ DtP
    The reason why De Gaulle insisted on having an Independent Deterrent was that the Yanks joined in too late in each world War. If you look at some real history – as distinct from Hollywood – you might just notice that the USA entered WW I three years late and WW II more than two years late: in both cases *after* there was no chance of Germany winning, just a question of whether it might draw.
    One can sympathise a teenie-weensie bit with Roosevelt because in 1939, the USA didn’t have the ability to fight Germany or Japan, let alone both but a few of his actions were despicable, such as demanding that the UK pay the extortionate price that France had, in desperation, offerred for poor quality second-hand ships or he would deliver them to Hitler.

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