From an $18 hourly wage to the 'new factory town,' Amazon is taking the lead on lifting up America's working class

bwinck@businessinsider.com (Ben Winck) 

© Getty Amazon warehouse in Brieselang, Germany. Getty

Amazon's rapid expansion means they have a chance to create a better economy for working-class Americans.

It plans to add 125,000 more US jobs, and to open 100 new facilities in September alone.

The firm's huge hiring plans, higher wages, and new hubs have the scale that could change the economy for countless Americans.

While the US continues to grapple with COVID, Amazon is busy molding the post-pandemic economy. Early signs and historical precedent suggest it could improve work for millions of Americans.

Amazon employed 950,000 US workers as of late June, or one in every 153 American workers. It plans to add more than 125,000 more payrolls, as well as open more than 100 more facilities in September alone. More significantly, it plans to pay people more and to create jobs in areas where they are sorely needed.

Amazon's leadership on wages recalls that of Henry Ford's action to lift his minimum wage in 1914, as Insider's Hillary Hoffower and Allana Akhtar previously reported. It's a goal shared by the Biden administration, which has repeatedly stressed it wants to build the economy "from the bottom up and middle out."

Amazon is his unlikely partner in this effort.
Setting the new wage floor

While the federal minimum wage remains $7.25 an hour, the retail titan is setting its own, higher minimum.

The company set a $15 minimum wage in 2018, and it quickly prompted other employers to either match this rate or lose workers.

One Miami chef told The Washington Post that higher pay in Amazon warehouses made hiring in a strenuous kitchen more difficult. Larger businesses including Levi's and Under Armour have said Amazon's rates forced them to rethink their own wages. It is borne out in academic studies. Amazon's hike raised average hourly wages by 4.7% at nearby employers, according to researchers at the University of California, Berkeley and Brandeis University.

That bounce is set to repeat itself, with Amazon's latest hiring boom touting an average starting wage of $18. While Democrats failed earlier this year to lift the minimum wage for the first time in 20 years, Amazon's expansion is shifting the de-facto floor above the party's $15 target.

"I don't think people appreciate the extent to which Amazon puts a wage floor in a community," Tum Duy, chief economist at SGH Macro Advisors, wrote in a Tuesday tweet. "It's the first thing employers think about when a new Amazon facility arrives in town."

Building the next-generation 'factory town'

By dramatically expanding its footprint, Amazon could form a new kind of "factory town" that would further lift the country's working class, as Conor Sen, an economics columnist at Bloomberg, wrote Thursday. "Maybe these highway warehouse communities with jobs that pay increasingly respectable wages are what the future of the working class looks like."

The phrase "factory town" recalls those that dot Michigan, connected to automotive giants Ford, General Motors, and Chrysler, which molded the state in the early 1900s as their factories became economic hubs and birthed new cities. Where the industrial titans brought jobs, workers and other businesses followed. Amazon's huge warehouse plans offer a 21st-century parallel.

Data shows Amazon hubs already powering stronger economic growth. In Amazon's top 10 metro areas, job creation averaged -0.4% in the three years before the company's entry, CNBC reported in 2018, citing Morgan Stanley research. In the three years after its first facilities opened, local job growth averaged 1.9%.

Some cities saw even larger jumps. In the Phoenix area, job creation rose to 2.5% from -6.3%. The Riverside-San Bernardino-Ontario region of California saw growth of -0.8% surge by 8.5% after Amazon opened several warehouses and sorting facilities.

The booms also extended beyond Amazon's own employees. The cities' transportation, warehousing, and utilities sectors - the last of which includes no Amazon hires - saw job growth outperform by 3.6%, according to Morgan Stanley.

To be sure, Amazon jobs aren't without their well-publicized downsides. Stories of overworked employees, harsh conditions, and safety concerns abound. The company has also been accused of quashing a unionization effort.

Amazon has said it aims to improve its working conditions, but by sheer force and scale it is putting its thumb on the scale of the blue-collar economy.

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