After a vast and dramatic competition with many other cities, New York made a deal to attract half an Amazon headquarters. The city and state offered a $3 billion package. Governor Cuomo and Mayor DeBlasio were very proud.
The deal abruptly died. It is extremely hard to determine the actual details. It is also hard to determine what actually went wrong.
Those who were in favor of it, and who loudly bemoan its passing, claim it would have produced $27 billion in tax revenue, far outweighing the $3 billion in subsidies and benefits, and it would have brought in 25,000 jobs.
The not entirely verifiable tale of the demise of the deal is that certain New Yorkers displayed insufficient gratitude. In recent decades, Americans have developed a sort of medieval obsequiousness, bowing to "job creators" as if they're local dukes and earls, dispensing largess or cutting off our heads upon their whims. Certainly, that was the attitude displayed by the mayor and governors pleading and coaxing Amazon's favors. But when the deal was done, certain locals began to scream. Where would the housing, the transportation, the schools, police, and fire stations come from to support the facility and the new employees? What about Amazon's anti-union stance? How could the city and state put up $3.5 billion to subsidize a company that had just become America's second trillion-dollar enterprise?
Alexandria Ocasio-Cortez, naturally, was the most visible cheerleader of the demise of the deal. She did not criticize any of the details so much as support grassroots actions, whatever they were, saying, "Can everyday people come together and effectively organize against creeping overreach of one of the world's biggest corporations? Yes, they can."
It was a treat to watch some of the reactions. "Morning Joe," on MSNBC, is hosted by Joe Scarborough, who used to be a Republican congressman. His revulsion to Trump and all things Trump has led him to leave his party, become an Independent, and move ever further left and to surround himself with semi-liberals, including his cohost Mika Brzezinski, who is now his wife. But, in this matter, everyone let their inner pro-money dogs out, and started barking that Ocasio-Cortez didn't understand economics. The 25,000 jobs would have a multiplier effect. The taxes the company paid would far outweigh the costs.
It may well be that in this specific case, the specifics would have been beneficial. Certain things about it—some never examined—seemed very wrong.
Like the claim that those 25,000 jobs were going to be really, really good jobs!—with salaries averaging $150,000. That conjures up a swath of millennials, some up in the $300,000 range, some, perhaps down at $100,000, but, all told, everyone doing very well. These are the kind of people everyone wants for their cities.
It seems a little weird, since I envision Amazon workers as very much like UPS drivers, except they don't have a union, and they're trapped inside giant warehouses, with forklifts and go-carts instead of trucks, searching out products, packing them, and sending them to the loading docks, required to deliver a certain number per hour as computers clock their productivity. Do people like that make $150,000 at Amazon?
According to Glassdoor.com, a "Warehouse Associate" at Amazon makes $13 an hour. With a 40-hour week and 50 weeks a year, that's $26,000. According to Indeed.com, an Assistant Manager makes $37,000 a year, and an Area Manager $62,000. A Software Engineer 1 makes $99,000. Software Engineer II makes $116,000. There are a couple of job categories that get up in the $150,000 range. But the median income of an Amazon employee in 2017 was just $28,446.
The median income at UPS is nearly double that. Amazon has no unions and works very hard to keep things that way. UPS has a union.
How then will the salaries at the new New York campus average $150,000?
Oh, what a tricky word "average" is. Here's the standard illustration of how it works: There are 10 people sitting in a restaurant, each with a net worth—for simplicity—of $10,000. So the "average" net worth of everyone in the restaurant is $10,000. Jeff Bezos, net worth $133 billion, walks in. The "average" net worth of the 11 people instantly soars to $12 billion!
The only way to imagine 25,000 jobs at Amazon with an "average" salary like the one promised is if Amazon comes up with a similar trick. You could, for example, have the median employees making $30,000 and 100 executives at $35,100,000 each, or 10 super-executives making $351,000,000 each.
At the same time that the deal crashed, another story came out. In 2018, Amazon made $11.2 billion in profit. That's not gross, not revenue, that's profit. And paid zero federal income tax.
Is that an aberration? An anomaly? No. According to a February 17 story in the Chicago Tribune: "From 2009 to 2018, the company earned roughly $26.5 billion in profit and paid approximately $791 million in federal taxes, for an effective federal tax rate of 3 percent."
The race to the bottom to pay our overlords ever more for the opportunity of making money from us must stop. The attitude that we ought to be grateful to them for allowing us to do them favors, like not paying taxes, must stop. The opposition to this deal may have been wrong in detail. But it is right in principle.