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State and Local Officials in Ohio Provided Millions of Dollars in Subsidies to Amazon for Jobs That Would Have Come Here Anyway

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ILLUSTRATION BY STEVE MILUCH
  • Illustration by Steve Miluch

On a recent Wednesday morning, as Alexa played a piped-in stringed version of U2's "All I Want is You" in front of a display of Amazon shipping boxes, several dozen Northeast Ohio leaders gathered to celebrate the official opening of Amazon's new 855,000-square-foot fulfillment center in North Randall.

The ebullient politicians praised Amazon for creating more than 2,000 $15-per-hour jobs at the former Randall Park Mall, a moribund site that sat crumbling from 2009 to 2014 before it was demolished and then developed into an Amazon warehouse last year. They also praised Amazon for opening two more warehouses in Northeast Ohio, one in Euclid on the site of the former Euclid Square Mall that will employ 1,000-plus people, and one in Akron on the former Rolling Acres Mall site that will employ 1,500-plus people.

Congresswoman Marcia Fudge's comments summed up the mood of the assembled crowd, which later toured the massive warehouse and got a firsthand look at Amazon's robotics technology.

"We have to ask ourselves, what is the cost to not have 2,200 jobs? To have an empty mall site?" she asked. "Amazon is making an investment in our community, and it's a pleasure to be doing good things. I just came from Washington, so it's refreshing to be here with you all."

Those job numbers are touted as the defense and explanation for the extravagant public subsidies the state and local cities have handed out to the company owned by the richest man in the world. Literally, as Fudge said, "What is the cost to not [have them]?"

This year, the Ohio Development Services Agency awarded Amazon state tax credits worth $7.8 million over 10 years for the North Randall facility, $3.9 million over 10 years for the Euclid facility, and $7.1 million over 10 years for the planned Akron facility. Amazon also received $8.5 million in grants from Jobs Ohio. Finally, the company received 75-percent local property tax abatement in North Randall, and 15-year, 100-percent tax abatement in Euclid.

The answer to Fudge's question, many critics argue, is that there would be no cost, and no question, because Amazon would have located the jobs here anyway, without subsidies, in order to fulfill its objective of offering one-day shipping to Prime customers.

"The thing worth focusing on here is: Why is Amazon receiving tax breaks at all?" says Zach Schiller, research director at Policy Matters Ohio. "If you want to provide next day delivery or maybe even sooner than that, you can't do that from warehouses located hours and hours away. For Ohio to provide a penny of tax breaks for them is a penny ill-spent, because these facilities have to be located in Ohio ... the state of Ohio should not just be subsidizing any company that comes in and asks for a tax break. We have limited resources, an opioid crisis, and public education that is insufficiently funded, so we can't provide for those if we give away all our money through tax breaks."

Edward "Ned" Hill, a professor of economics at the Ohio State University who spent decades in Northeast Ohio while teaching at the Levin College of Urban Affairs at Cleveland State University, says that the tax subsidies for Amazon are questionable because it's not clear that the jobs were ever truly at risk. "Amazon did a good job of saying, 'If you don't give us subsidy to put the pack and ship centers here, we'll go somewhere else,'" he says, adding that Amazon has extracted over $1 billion in tax breaks from states across the country.

"But if you look at the centers, they're in densely populated areas, and they would have gone there anyway," he says. "Amazon did a superb PR job of shaking down the states, and Ohio was one of many."

Public subsidies

Almost overnight, Amazon has become one of Ohio's largest employers, now ranking 25th in the state with more than 11,500 employees. (The company's ranking will only grow once the Euclid and Akron fulfillment centers are fully up and running). Given that the company pays $15 per hour (up from an average of $13.28 one year ago, and significantly above the state minimum wage of $8.55) and is investing millions of dollars into vacant properties in distressed areas, it's not a stretch to say these jobs will help our economy. (The irony that the Seattle-based online giant played a role in the death of those malls it is now occupying is not lost on many.)

Nonetheless, the prime reason (pardon the pun) Amazon built its warehouses in Northeast Ohio was so that it could offer one-day shipping to Prime customers. Until recently, the company offered two-day Prime shipping to its customers in Ohio by sending packages from warehouses in other states. However, in April 2019, Amazon announced that it was making one-day shipping the standard for all Prime customers, and the company was expected to spend $800 billion during the second quarter to improve its warehouses and delivery infrastructure. The company is building its new fulfillment centers in Northeast Ohio as part of a nationwide push.

For its part, Amazon says it was simply taking advantage of tax incentive programs that are already being offered by the state of Ohio. Spokesperson Andre Woodson said in an emailed statement, "Incentives are taken into account when evaluating the total cost of operations, but the majority of incentives we pursue for fulfillment centers are statutory — they are available 'as of right' to companies that qualify, and are based on performance metrics (i.e. job creation)."

Yet, according to Schiller, "Ohio's job creation tax credit has what's called a 'but for' requirement, which means that it's only supposed to be provided when 'but for' this it would go out of state. They're required to explain what other states they've been trying to get help from or they might go to, because the state of Ohio should not just be subsidizing any company that comes in and asks for a tax break."

Matt Englehart, a spokesperson for Jobs Ohio, disputes the notion that the Amazon jobs were not competitive, saying that the tax incentives were necessary in order to attract them. "We needed to remain competitive with other states," he says. "We're bringing jobs to communities where they're needed." However, Englehart did not address Schiller's criticism that Amazon would have located here anyway, because it needed to be in Ohio to offer one-day Prime shipping.

According to Hill, the relationship between the state and Amazon goes back to the Kasich administration, which gave the company a massive $77 million tax break for locating its data centers in central Ohio and creating about 1,000 jobs. While the data center jobs could have gone elsewhere, Hill says that Amazon's "preexisting relationship" with the state helped them win even more incentives. "In effect, they're providing subsidies to Amazon which are giving them an advantage over retail jobs, which is blatantly against free market principles," he says.

As for local tax abatement, Hill also debates whether that's justified. Amazon selected the malls for their square footage and proximity to population centers and highways, which make them unique sites that are hard to replicate. Yet the cities of Euclid and North Randall wanted Amazon badly. "It's traditional footloose economic development politics at work," Hill says. "The cities are dying to see something happen on these sites — not only is it job creation and a nice ribbon cutting for the mayor, but they can get rid of a piece of albatross real estate. They don't know if the company is lying about going somewhere else or not, but they'd rather not take the chance."

North Randall mayor Dave Smith did not return a phone call seeking comment. Jonathan Holody, director of planning and development for the city of Euclid, said in an email that Amazon took advantage of the city's longstanding tax abatement policy: "The new facility is located in an existing CRA (Community Reinvestment Act) area that provides 100% abatement on new property taxes for 15 years for new construction, so Amazon received that benefit."

Holody also says while 15-year, 100-percent tax abatement may seem like a lot, Amazon workers will also pay income taxes that are shared by the city and the schools. "Right off the bat, the project eliminated a major blight in our community," he says. "It was a very visible sign of reinvestment in the community by Amazon. In addition, the direct benefit is the income taxes that the city and schools receive from Amazon. It's a huge boost to local governments."

He adds that Amazon is attracting new development, citing the fact that this eastside suburb is experiencing the highest levels of commercial permit activity in recent years. "It helps raise attention and put our city on the radar for other people looking for a place to locate their businesses," he says. "Amazon's business is logistics — for them to choose Euclid reinforces what we're saying, that it's a great location, it's centrally located, with proximity to regional workforce and great access to region's freeway infrastructure and public transportation."

Although Euclid's tax abatement policy has been in place for decades, Holody believes it may be time to give it another look. "With improvements in the industrial corridor, with the changing market and increased interest, it might make sense for Euclid to look at whether or not abatement is appropriate, or still needed to continue to induce development," he says. "But other cities are being aggressive with incentives, and it's also possible that abatement is still necessary."

Amazon touts its local school partnerships — at the PR event, the company presented a $20,000 check to the Warrensville Heights schools for STEM education — yet commercial tax abatement can cost school districts much-needed revenue. Euclid Schools are asking voters to approve an 8.7 mill, 10-year emergency operating levy on the Nov. 5 ballot, an expansive levy that follows sweeping cuts that were made after a similar levy campaign failed last year.

According to the schools' website, "As a result of the property tax abatement [for the Amazon fulfillment center], the district will not receive approximately $1,265,000 in property taxes annually for the next 15 years." However, Euclid is one of the few cities in Northeast Ohio that shares income tax revenue with its schools, and the district will receive about $435,000 per year as a result.

Both the Euclid and Warrensville Heights schools have struggled on state report cards for many years, though Warrensville saw improvements on the most recent state report card. Euclid earned a D on the report card, with a performance index of 63.856, while the Warrensville Heights schools raised their performance from an F to a C with a performance index of 67.871.

Good jobs

In response to nationwide public pressure, Amazon has taken steps toward creating good jobs that lift its workers out of poverty and offer them opportunities for advancement. Last year, the company raised wages for warehouse workers to $15 an hour, or $31,200 per year for full-time workers. This was due in part to the Fight for $15, a political movement advocating for the federal minimum wage to be raised to $15 per hour. Previously, the average worker earned $13.68 per hour or $28,454 per year. Amazon also says that 90 percent of its warehouse workers are full-time employees who receive health care, 20-week paid parental leave, and pre-payment of tuition for courses in high-demand fields.

Yet critics say that Amazon can and should do more to create high-quality jobs that allow its workers to support themselves and their families. Schiller points to a 2017 Policy Matters report showing that of 6,000 Amazon workers in Ohio, at least 1,430 were getting assistance under the Supplemental Nutrition Assistance Program (SNAP), according to the Ohio Department of Job and Family Services (unfortunately, more recent data is not available). Although this was before the wage hike, Schiller says that the number receiving food aid is still likely unacceptably high.

"As much as it's a positive thing that they've increased their minimum to $15 per hour, for that to become a sort of paragon of what the future of employment is, that is for me a pretty forbidding and negative development," he says. "While these are better than some jobs, I still would not consider them good jobs, and that's what's wrong with what they're saying."

"For me, it's an unacceptable state of affairs when the richest man in the world is paying levels that are more than what you need to apply for food assistance, but not by a whole lot," he adds.

PHOTO FROM FLICKRCC
  • Photo from FlickrCC

For its part, Amazon says that previously reported figures on SNAP eligibility can be misleading because they include people who only worked for Amazon for a short period of time or chose to work part-time. "SNAP eligibility is mostly determined by household size and not hourly wage," said Woodson. "We encourage anyone to compare our median pay and benefits to other retailers and major employers. All Amazon employees — full-time, part-time, temporary and seasonal — effective Nov. 1, 2018, receive a $15 per hour minimum wage. Specifically, hourly associates working in our North Randall fulfillment center make between $16.50 to $17.95 an hour — plus opportunities for over-time, which pays time-and-a-half and other monetary benefits. This compensation is in addition to our benefits package which includes comprehensive health, vision and dental insurance, a 401(k) with a 50-percent match, generous parental leave, and training for in-demand jobs through our Career Choice program for all full-time employees working in fulfillment centers across the U.S."

"We have hundreds of full-time roles available; however, some prefer part-time for the flexibility or other personal reasons," he added.

In recent years, dozens of news stories in national publications like the New York Times, Newsweek and Time Magazine have reported on the alarming working conditions at Amazon warehouses. These stories have cited British workers urinating in trash cans because they didn't have time for bathroom breaks, workers in Stoughton, Massachusetts forced to work on Thanksgiving, and a Columbus worker who had a heart attack and did not receive medical attention for 20 minutes. He died, and Amazon later claimed it was a "personal medical issue."

Some news reports have also questioned the high number of EMS calls at Amazon facilities. In 2017, a reporter for Bloomberg who examined 911 calls at a facility in Licking County east of Columbus found that EMS workers were making at least once-daily runs to the Amazon facility in Etna, about 3.1 miles away, and that their resources were "under strain" as a result.

In March 2019, a Daily Beast article, "Colony of Hell: 911 Calls from Inside Amazon Warehouses," reported on an apparent rash of suicide attempts at 46 Amazon warehouses in 17 states: "Amazon, founded by the now-richest man in the world, has long faced criticism about working conditions at its warehouses: the high-pressure pace, the stultifying boredom, the timed bathroom breaks, and the digital surveillance that monitors performance ... The 911 calls and police reports collected through open-record requests are not evidence that Amazon staffers experience suicidal episodes more often than other American workers, in or out of a warehouse — but they do offer a visceral, real-time glimpse of employees on the edge."

A log of 911 calls received from the North Randall police department after Policy Matters placed a public records request reveals that there were 233 EMS requests at the North Randall facility between Sept. 8, 2018, and July 30, 2019. That amounts to more than two every three days in the first 11 months of Amazon's operations. The calls were for medical issues including chest pain, shortness of breath, dizziness, foot and hand injuries, and high blood pressure. There were also a number of seizures, heart attacks and strokes. Additionally, during this period, there were 10 suicide attempts. While nothing conclusive can be drawn from this data, it provides a glimpse of the sometimes harsh and harrowing reality of working in an Amazon warehouse.

Woodson didn't respond specifically to questions about the high volume of EMS calls, but said the company is committed to safety: "The physical and mental well-being of our associates is our top priority, and we are proud of both our efforts and overall success in this area. We provide comprehensive medical care starting on day one, 24-hour-a-day free and confidential services, and various leave accommodation options covering both mental and physical health concerns."

Woodson also said that Amazon invests heavily in safety training, inspections and ergonomic assessments, and that associates are encouraged to report safety concerns and suggestions. Further, he addressed the concerns about working conditions by saying that Amazon's policy is that employees don't work more than 3.5 hours without a designated break off of the floor. The standard shift for fulfillment center employees is four days on, three days off. The shifts are 10-hour shifts with either two thirty-minute breaks, or two 15-minute breaks and a third 30-minute break. Employees are able to take short, paid breaks any time throughout their shift. The North Randall fulfillment center takes two 30-minute breaks per shift.

Amazon's warehouses around the country have taken heat for their safety issues. A recent report from the New York Committee for Occupational Safety and Health (NYCOSH) found that the injury rate at the 2,000-worker Staten Island warehouse is nearly three times the national average for warehouse workers. The Columbus incident in which a worker did not receive medical attention for 20 minutes after suffering a heart attack was among a series of accidents and fatalities that have led to Amazon's inclusion on the National Council for Occupational Safety and Health's 2019 Dirty Dozen list of the most dangerous employers in the United States.

Bright spots

One upside to Amazon's growth in Northeast Ohio is that wages may go up in the distribution sector, Hill says. He cites the fact that wages for warehouse jobs in Central Ohio went up after Amazon opened its fulfillment centers there, as other companies tried to compete in a tight labor market. Amazon's entry-level $15 per hour jobs with benefits are good opportunities for lower-skill workers, he says.     

"The question becomes, good jobs for who?" Hill says, arguing that while Amazon may experience a lot of attrition among new hires, those who succeed may find opportunities there. Furthermore, he prefers to let the private market sort out which jobs are good jobs. "There's nothing worse than a highly paid tenured professor telling you your job sucks," he quips.

However, a 2018 report by the Economic Policy Institute found that "when Amazon opens a new fulfillment center, the host county gains roughly 30 percent more warehousing and storage jobs but no new net jobs overall, as the jobs created in warehousing and storage are likely offset by job losses in other industries."

Another upside is that Amazon's Northeast Ohio warehouses are also located on bus routes, which makes them accessible to people who don't have cars, Hill says. And of course, given Amazon's investments in training and education for its workers, some of them could end up getting better-paid, more highly skilled positions in the future.

Amazon will continue to move up the food chain of Ohio employers, yet Hill doesn't expect the company to add net jobs to the state's economy. "They're swapping with retail jobs," he says, indicating that as Amazon continues to grow, traditional brick and mortar retail will decline. "They might be somewhat higher wage and more may be full-time, but they're not really that different."

It's also likely that sometime in the not-too-distant future there will be fewer, higher-skill jobs and more robots at the warehouses. "The average wage will go up, but you'll have a very different kind of employee," he says.

Schiller says that the $15 per hour jobs that Amazon is bringing to Northeast Ohio still only allow working families to barely scrape by. While Amazon jobs pay about 150 percent of the federal poverty level, a single-parent household of three really needs to earn about 200 percent. The fact that local and state politicians are cheering Amazon's arrival points to the lackluster economy.

"We have poverty greater than it was 10 years after this longest-ever recovery" despite a near full-employment economy, says Schiller, citing recent Census data.

Boyd McCamish, organizing director for the Central Region of Workers United, says elected leaders need to stop congratulating themselves and begin to grapple with what Amazon really means for the state's economy, where inflation-adjusted wages are lower than they were in 1979, according to Policy Matters.

"Lots of people in the statehouse like to pat themselves on the back about how much Amazon or the distribution business generally is bringing to Ohio ... but the giveaways, ostensibly because they pay $15 an hour and offer benefits, just tell you what kind of a grip Amazon has on our economy," he says. "Until we can get companies like Amazon and Walmart to play by any rules but their own, things are going to continue to deteriorate."

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