CRI Focus Areas


Is Amazon amazing?

11/28/2018

Amazon recently announced the addition of 500 jobs at its Fulfillment (distribution) Center in Middletown, bringing the total of year round jobs at the site to 2,500. Is this commitment amazing?   On a macro level it is not. Over the past five years Amazon has been one of the fast growing companies in the world. Amazon currently has almost $90 billion in net sales from over 20 million products provided by 21,000 sellers. A stunning success.   Yet from a micro perspective, isn't Amazon's investment decision in Delaware amazing? As stated frequently by the Caesar Rodney Institute, Delaware does not have a Right To Work law, has poor quality public schools, high electric rates and high business taxes.   When examined from the self-interested perspective of Amazon corporate, the company's decision to expand further in Delaware is not amazing in the least.   Let's look at Delaware from Amazon's viewpoint.   First, the Amazon Middletown facility received almost $8 million in grants from Delaware taxpayers. In addition it was given an annual $1 million property tax exemption through the year 2022.   Second, the lack of a Delaware Right To Work law is of no consequence to the Middletown facility as most of the 2,500 jobs are classified as temporary. The workers are not employed by Amazon, but by Integrity Staffing, a temp agency. Unions have not yet found a viable way to organize temp jobs.   Third, the low quality of Delaware's public schools is not a major impediment as the Amazon temp jobs require only a high school degree or a GED and are labor intensive (e.g., carry up to 49 pounds, walk up and down stairs).   Fourth, while Delaware's industrial electric rates remain 32% above the nation, the Middletown facility's rates are reduced. By locating in incorporated Middletown, Amazon avoids being assessed the half a billion dollar Bloom Energy surcharge being imposed on Delmarva Power ratepayers outside of incorporated areas.   Fifth, although the state has increased its Gross Receipts Tax rate on average by 34% and is discussing another 10% hike, Amazon is not in an industry subject to Delaware's GRT.   Finally, by locating in Middletown Amazon avoids the restrictions of the New Castle County Unified Development Land use code and should the Federal government allow taxes on Internet retail sales by the location of the seller, in Delaware Amazon will enjoy a retail sales tax of zero.   So, when examined logically, Amazon's investment in Middletown makes perfect sense. And the state and local officials who executed to arrangement are to be congratulated.   The reality remains, however, that temp jobs paying $24,000 a year with limited benefits compare poorly with the average job in Delaware that pays $53,000 a year. Certainly the Amazon Fulfillment jobs can be an important stepping stone, but they can't be the cornerstone of a viable Delaware economic development effort.   Dr. John E. Stapleford President Caesar Rodney Institute  




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