Guest Opinion | Amazon: A 21st Century Example of Enlightened Business…NOT

— by David Turnoy —

Amazon: the prototype company of the new economy, the story of a young entrepreneur capitalizing on the growth of the Internet, capitalism and competition at its finest, right? Not exactly. There is a dark, underside to the phenomenal growth of this company, and only when enough consumers understand this can any substantial pressure be applied that might start to change the practices you are going to learn about.

Let’s start with the way Amazon treats its workers. Amazon has about 40 fulfillment centers (massive warehouses) in the US and about another 40 around the world. These facilities are gated, guarded, and secretive. Most of Amazon’s 100,000 employees are engaged in unpacking items, coding and storing them, picking them off shelves to fill orders, and packing and shipping the orders to the hundreds of millions of Amazon customers. Hand-held computers not only direct employees around the immense grounds of the warehouse (often more than 16 football fields big, the biggest being 28 football fields long), these computers also time how long it takes employees to fulfill each task. Managers review these statistics and are empowered to fire those exceeding their allotted times. An investigative reporter who took a job as a picker in an Amazon-contracted warehouse found that only if she didn’t hesitate, get lost or take a drink of water and also walk as fast as she could (or even jog) would she reach her target in time. Amazon employees who shelve items must place 290 pieces per hour; the pace is relentless. Managers are constantly barking at employees to pick up the pace.

Amazon has a point system for rating the time performance of all employees. If you are one minute late for your shift, you are assessed a half-penalty point; if this happens during your first thirty days, you are fired. If you are an hour late, you get a whole point assessed. Missing a shift is 1 ½ or 2 points. Yet sometimes employees are only told at midnight that they are required to come in the next day and must arrange daycare or miss their shift. Once you reach 6 points, you are fired. Being late applies not just to the beginning of the day’s shift, it also applies to returning from lunch and breaks. But before employees can even go to their lunch or breaks, they have to pass through a metal detector, which can easily take half their lunch or break time. They also have to do this at the end of their shift, and a Supreme Court case has upheld Amazon’s right to require that this waiting be done on the employees’ own time, not on Amazon’s. Besides this scanning, Amazon is so afraid that its employees are thieves that workers cannot even bring in their own candy or gum; if they do, they will be fired as thieves. This is also the reason Amazon has 500 visible cameras in every nook and cranny of its warehouses as well as another 500 hidden cameras.

Ah, but this is the price employees pay in order to get paid high wages, you argue. Really? Amazon employees are one step above McDonald’s workers, making $10 to $12 per hour. They can make time and a half for overtime, but overtime is mandatory. I interviewed a former Amazon employee who worked at the San Bernardino plant for five months, and he told me that employees there work 10 hour shifts, five to six days per week, and they end up averaging $14.97 per hour. But most employees don’t last very long; 97 out of 100 don’t last 90 days. This isn’t because of employee performance, it is because Amazon workers are contingent or temporary workers subject to the whim of the employer. When sales slack off, workers are let go; when sales pick up again, workers are brought back on but are forced to work overtime and with no notice. For instance, in San Bernardino, Amazon hires, trains, and fires 2,000 workers in each of the first two quarters of the year, 3,000 workers in the third quarter, then hires everyone back for the fourth quarter so that 8,000-10,000 are working during this busiest quarter of the year when Amazon makes the most money.

Amazon workers know that if they resign, they can return in 60 days. Even if they are fired, they can return in six months. Amazon hires most of its workers through temp agencies so that the workers are independent contractors rather than Amazon employees, which means no health care, no vacation time, no scheduled raises, no promotion track, no path to permanent or full-time work, no regular schedule, and no union.

One of the most amazing examples of the attitude of Amazon toward its workers is the fiasco that took place in the summer of 2011 in Pennsylvania. During a heatwave, temperatures inside an Amazon cement warehouse reached 114 degrees. Instead of slowing the pace or installing air conditioners, Amazon hired paramedics who were parked in ambulances outside to tend to fallen workers. Those employees who were unable to resume working were sent home or taken out on stretchers and wheelchairs to be transported to hospitals.

Why do people accept working in such a precarious situation? Amazon makes certain to set up shop in some of the areas of highest unemployment where workers are desperate for a job. If it’s this job or no job, what choice do people have? In fact, Amazon makes an effort to hire “workampers”, modern day migrants unable to get permanent jobs who travel around in RV campers to take any temporary jobs they can get. The investigative reporter mentioned earlier notes that there were hundreds of these workers at her location. Amazon advertises its warehouse jobs on websites frequented by workampers. With hard-up job applicants waiting in line for every Amazon job opening, the constant turnover of employees due to oppressive conditions and ruthless work requirements is not a problem for Amazon.

And of course the foregoing is the story of only the worker bees at Amazon. Treatment of the white collar employees was recently reviewed in an investigative piece published in the New York Times, available at https://www.nytimes.com/2015/08/16/technology/inside-amazon-wrestling-big-ideas-in-a-bruising-workplace.html?_r=0<Amazon.docx>.

Now let’s consider the way Amazon conducts its business. Jeff Bezos started Amazon in 1995 as an online bookseller. It has grown to where it sells 40% of all new books, and 2/3 of all e-books. Amazon even owns the Kindle, the biggest-selling device for reading e-books. But book-selling now makes up only 7% of Amazon’s total business, as Amazon has moved into selling every product imaginable. Amazon is now the largest online marketer in the world, selling more than the next nine US online retailers combined. What has enabled Amazon to reach such market dominance?

One of the methods is old-fashioned underpricing to squeeze out competitors. Amazon has used its deep-pocket financing and low prices to force hundreds of America’s independent bookstores to close. Amazon outpaced the second-largest bookstore chain, Borders, to where the latter succumbed to bankruptcy in 2011. Even the largest chain, Barnes and Noble, has lost millions of dollars, closed dozens of stores, and downsized other stores. Every one of these closures has meant loss of jobs and depletion of the economic and cultural vitality of the communities previously served by these stores.

Another ploy used by Amazon has been the subsidizing of Amazon’s sales with special tax breaks for the past twenty years. All but three states collect sales taxes, but Amazon, using its status as an online merchant, has been avoiding collecting sales taxes, thereby enabling it to further lower the prices consumers pay. A 1992 Supreme Court ruling stated that if a retailer had no physical presence in a state, it need not collect sales taxes. Bezos claims his only facility is the corporate headquarters in the state of Washington, even though Amazon has huge warehouses in about half the states, but Bezos claims these warehouses are independent contractors. In a state where the sales tax is 8%, Amazon gets a subsidy of 8 cents on every dollar of its sales, which is more than the entire profit margin of most independent shops. This has created an advantage of several billion dollars per year which has fueled Amazon’s explosive growth. Not only has this pushed many local shops out of business, it deprives communities of the sales tax revenues they would otherwise have received to be used for schools and other public services.

During the past couple of years, 21 states have decided the previous sales tax scenario was not fair and began imposing sales tax requirements on Amazon. So Amazon has moved on to another tactic, requiring states that want the jobs its warehouses provide to offer incentive grants or tax breaks to Amazon. Governors are now giving millions of their taxpayers’ dollars to Amazon in exchange for getting warehouses in their states. And Amazon further dodges its tax obligations by funneling a major portion of its global revenue into Luxembourg, where it pays much lower taxes than in the US, plus Amazon has put away $2 billion in tax-free cash in Luxembourg.

Amazon has used its massive power to purchase competitors. Upon entering a particular market, Amazon will attempt to buy up the competition. If a competitor refuses to sell, Amazon then underprices the competitor so badly that the competitor loses money and is forced to sell. In addition, the practice of “showrooming” is hurting local businesses. Consumers visit a local business, check out the products, use their smartphones to scan the barcode of a product they want, then buy it from Amazon at a price lower than the local business’s wholesale price, sometimes even receiving a rebate from Amazon for doing this.

Amazon even shows no mercy to companies from whom it gets its products. Once Amazon has established a virtual monopoly in a particular market, it then turns on its suppliers and demands a larger discount. This is especially rampant in the book industry, where Amazon squeezes the supplier until there is no profit for the latter. Medium-sized and small publishers are especially vulnerable.

As you can see, Amazon’s business practices are monopolistic and motivated by greed..
Is this the future of American and world business? Is getting a product at a slightly lower price for consumers worth these disastrous impacts on individuals and communities? The only way this will change is for consumers to spend their dollars elsewhere. Buy as much as you can locally, and if you have to shop online, as many of us in the islands need to do, use sites other than Amazon. Amazon has to learn that it must act ethically and treat its employees humanely if it is to continue to be a profitable business.