Amazon’s plan to build its biggest warehouse ever on Boxwood Road outside Wilmington, on the site of a General Motors plant that closed in 2009, makes for a sobering case study of the changes that have overtaken the U.S. industrial economy.
General Motors, at its peak in 1979, employed more than 600,000. Amazon, in its Dec. 31 annual report, says it employs just under 800,000. But the jobs aren’t the same: GM built cars and trucks, and paid well. Amazon ships stuff, much of it made abroad, and is all about cutting costs.
GM paid its 1,000 workers at the former auto plant a minimum of $26 an hour, and its workers collected close to the average household income in the region, with some making far more in overtime and management pay. Amazon is promising $15 an hour to most of its 1,000 workers, which is now half the regional income.
The Amazon bosses on site will be paid less than GM workers used to, counting inflation, according to Amazon’s application for $4.5 million in upfront state aid for the 5½-story, $250 million, fulfillment center. The money for the robotics-heavy warehouse was approved unanimously by the state development finance council last week.
Here’s another comparison where “modern” doesn’t mean more:
The GM property paid nearly $1 million a year in property taxes to the local Red Clay Consolidated School District. The company building the warehouses got that reduced to around $250,000. New Castle County used to collect around $300,000 in GM property taxes a year; now it collects around $75,000.
“I OK’d [the reassessment] based on the belief we have to get this property moving,” Matt Meyer, the New Castle County executive, told me.
The county’s unemployment rate is under 3%. Does the area really need a thousand more $15-an-hour jobs? Will many of the workers come from out-of-state, as they do for Amazon’s existing warehouses in Middletown, Del., and its original warehouse in New Castle, Del., which dates to 1997?
“We need economic opportunity for everyone,” Meyer said. “And they are building one of their highest-tech facilities here. And when you build high tech, people get ideas to build more new things.”
It’s not just the GM site. The Bethlehem Steel mill in Sparrows Point, Md., outside Baltimore, is now mostly a warehouse shipping (“logistics”) complex. There are similar plans for the old U.S. Steel Fairless Works in Falls Township, Bucks County, the old Budd Co. works in Northeast Philly, Claymont Steel on the Pennsylvania line, and maybe the Schuylkill refineries.
There are, to be sure, new cell therapy and robotics and data scientist jobs in our more high-tech economy. But even when they can’t land more scientists or engineers, local officials don’t grieve when warehouses go up: There are more taxes to collect, even from low-wage jobs, than from shuttered factories or vacant lots.
The new facility’s 1,000 workers would be half the number Amazon employs at its older center in Middletown -- though the Wilmington center will be three times larger, thanks to automation. The site will also have a payroll topping $30 million, enabling Delaware to collect up to $1.5 million in state income taxes.
Though it claims to be the “Home of Tax-free Shopping,” Delaware imposes a gross-receipts tax on retail merchants. Delaware’s tax typically skims 0.75% of sales, which merchants can pass to consumers in the form of higher prices.
The tax would level the playing field a bit between Amazon and the physical retailers at the Concord Mall on Route 202 just south of the Pennsylvania line, where Sears is closing this spring.
Except there’s a tax break for that tax, too: The New Business Facility Tax Credit shaves 90% off of the gross-receipts tax in the first year of a new retail building or warehouse, tapering over a period of 15 years, said state finance spokesperson Leslie Poland. The tax break has trimmed $1 million to $2 million from Delaware state revenues in each of the last five years.
“There is something off here,” says Nathan Jensen, a professor who studies state and local government aid to Amazon and other companies at the University of Texas at Austin, reviewing Amazon’s Delaware campaign.
It’s unusual for big companies like Amazon to collect taxpayer cash upfront like this instead of massive tax breaks over time, the way New Jersey does. And the Amazon cash award amounts to 36% of the grant money that Delaware plans to give away for the year, Jensen notes. So “this is a bigger incentive than it looks on the surface.”
Jensen was surprised that Amazon sent Holly Sullivan, who headed the high-profile “HQ2” competition, in which Philadelphia and dozens of rivals offered Amazon billions in subsidies, to meet state officials. (Sullivan refused questions from the media and public.) He asks: “Why bring the top folks for an automatic incentives deal?”
He was also surprised the company checked the “No” box when asked if it faced business litigation: “Of course, Amazon has tons of litigation.”
Bottom line: “I can’t decide if this is a more careful strategy. Or a more aggressive one. Or both.”
Amazon’s boss, Jeff Bezos, has a personal tie to Delaware. After the communist takeover of Cuba, when the state seized his father’s small business in Santiago and turned his school into a socialist academy, the CEO’s future stepfather, Miguel Bezos, was evacuated with other refugee children (their parents had to stay) to Wilmington, where he and dozens of other boys were given shelter by Catholic Social Services and enrolled at Salesianum School.