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Shifting retail buying patterns doesn’t create new jobs

Behavior-changing retail is great for people who appreciate the convenience. I sure do.

When a company worth $200 billion decides to build a warehouse on land owned by billionaires, you know there will be subsidies. Today’s example comes from Shakopee where Amazon is planning to build a distribution center on land owned by the Pohlad family.

Amazon’s very good at what they do. They know how to put stuff in boxes and get it to your door quickly and reliably better than anyone. It’s really behavior-changing for those who’ve become Prime members where you get free 2-day shipping on purchases for $99/yr.

Behavior-changing retail is great for people who appreciate the convenience. I sure do. But, let’s not pretend that it creates new jobs. When I buy paper towels on Amazon, I clearly didn’t buy them somewhere else. I still use the same amount of paper towels as I did before, so there was no net increase in sales. It’s just a shift from purchasing at one store to another.

Because of this, spending $5,000 per job to “create” 1,000 “new” jobs is really a case of spending tax dollars to accelerate a shift of Minnesota’s retail jobs to one company based in Seattle. It’s certainly good for Amazon, but I don’t see how there will be a net gain in jobs from shifting where people buy the same stuff they’re already buying from one retailer to another.

In fact, it seems possible that we’ll end up with fewer jobs in retail after this since Amazon is so efficient at what they do. For example, Target’s a very efficient company by retail standards, but Amazon has $20 billion more in sales than Target with nearly 200,000 fewer full time employees last year. Amazon doesn’t have many cashiers or people restocking shelves.

Here are the winners and losers from this type of subsidy.

Winners:
Amazon, due to corporate welfare benefits.
The Pohlad Family, due to corporate welfare benefits.
People who live near Shakopee who can work in Shakopee rather than commuting elsewhere.
People who think the income and wealth gaps in America aren’t large enough already.

Losers:
People around the state who get less hours at the retail store they work at today.
Taxpayers who subsidized the corporate welfare deal.
People who prefer jobs with benefits.

Neutral:
People who use Amazon, and would see the same benefits from having a local Amazon warehouse with or without corporate welfare expenditures.

We should be mature enough to not subsidize “economic development” projects in one city that have no net benefit for the state, but we’re probably not.

This post was written by Ed Kohler and originally published on The Deets. Follow Ed on Twitter: @edkohler.

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Comments (5)

  1. Submitted by Paul John Martin on 05/18/2015 - 11:10 am.

    The Arm-Twisting Power of the Wealthy

    unfortunately adds another twist:
    Winners if we say No Thank you in Minnesota: the folks in Eau Claire or Sioux Falls who say Yes Please.

  2. Submitted by Connie Sullivan on 05/18/2015 - 11:35 am.

    Just as with pro sports stadia, the big boys have cities and counties and states in a frantic, competitive scramble to “land” a distribution center [or stadium] before someone else does, via the corporate welfare that this article so nicely captures. So, everyone spends tax dollars for the same level of jobs as existed, to the benefit of a large corporation or two.

    How we let ourselves get into this competition, and how we get out, is the interesting question. For now, it’s the old mantra, “everybody’s doing it.”

  3. Submitted by Steve Titterud on 05/18/2015 - 11:56 am.

    Well said !!

    It seems ANY kind of nonsense can be promoted by merely claiming it creates “jobs, jobs, jobs” – whether true or false seems beside the point.

    An implication of this is that in public debate, opponents of projects with such claims are expected to provide weighty or out-sized arguments against – more than equal to those of the proponents, who need only to continure blaring their mantra into the bullhorn.

    In other words, the illusion created by “jobs, jobs, jobs” seems somehow to tilt the table. This is shown most clearly in how our state legislature considers such matters.

    The Twins’ and Vikings’ stadiums (or is it stadia?) and those sulfide mining projects up north come to mind.

  4. Submitted by Dennis Tester on 05/19/2015 - 01:51 pm.

    The truth is,

    Target and Best Buy are bristling at the idea that their major competitor is moving into their backyard. It’s a thumb in the eye to those retailers who lobbied to get an internet sales tax imposed to hurt Amazon by causing their customers to pay more for the privilege of shopping online, thereby hurting their sales.

    So now 2-day shipping will improve to overnight shipping and Amazon customers won’t mind paying the sales tax because they’ll be able to get their purchases delivered faster.

    This has nothing to do with “jobs-jobs-jobs.” This has to do with enhancing consumer choice for retail customers and increased sales for Amazon. The only losers in this are Target and Best Buy.

  5. Submitted by Peter Fleischhacker on 07/21/2015 - 07:54 am.

    The title is false

    Lots of people are able to use Amazon in the marketing of a world of products. Anyone can do it and you get paid every two weeks, sounds like a job to me.

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