Speaker 1: Shakopee is a quaint city in Minnesota. It's only about
Speaker 1: thirty minutes from Minneapolis, but it feels like a small town.
Speaker 1: It has a fifty style main street lined with shops, pubs,
Speaker 1: and cafes. Customers pop in and out, and the occasional
Speaker 1: freight train rumbles by. Like any city, Shakopee wants good
Speaker 1: jobs for its residents. Historically, its main employers have been
Speaker 1: a malt plant serving the beer industry, and nearby Mystic
Speaker 1: Lake Casino. Then in a big company arrived in town.
Speaker 1: I really I think Amazon coming to down is a
Speaker 1: good thing. I think the city made the right column.
Speaker 1: As you just heard, the company in question is Amazon,
Speaker 1: the world's biggest online retailer. In Amazon opened a giant
Speaker 1: warehouse in Shakopee. It hired a thousand people to work
Speaker 1: there in this town of about forty people. But whether
Speaker 1: Amazon's arrival has been a good thing for Shakopee has
Speaker 1: has divided the town. I think overall, to benefit you
Speaker 1: have to invest money to make money, and overall, in
Speaker 1: the long period that Shackoby will be much better. That's
Speaker 1: Duane worm Restriction, who owns a jewelry shop in town
Speaker 1: and What he's referring to there is that Shackoby give
Speaker 1: Amazon something in return, about three million dollars in tax
Speaker 1: breaks over nine years. That's what some people don't agree with,
Speaker 1: like Matt Layman, who owns a local auto repair shop.
Speaker 1: He's also a Shackopee City councilman. Here he is talking
Speaker 1: about Amazon CEO Jeff Bezos. This guy's hobby is to
Speaker 1: put spaceships in the outer space. Okay, he just bought
Speaker 1: out seven million dollar housing in Washington, d c. Um,
Speaker 1: what kind of financial assistance is it that you need?
Speaker 1: The DC mansion was actually twenty three million dollars. But
Speaker 1: you get the point. Right now. There's a debate raging
Speaker 1: across the country over how to create more American jobs.
Speaker 1: President Trump says this is one of his top priorities.
Speaker 1: It seems like every day he's congratulating or taking credit
Speaker 1: for a company that announces plans to employ more U
Speaker 1: S workers. Amazon was among the companies that announced new
Speaker 1: staffing plans just before Trump was sworn into office. The
Speaker 1: company said it would hire one hundred thousand people over
Speaker 1: the next eighteen months. And for the cities competing to
Speaker 1: win these new jobs from Amazon and other big corporations,
Speaker 1: they're going to need to deal up quite a bit
Speaker 1: and tax breaks and other kinds of subsidies. These are
Speaker 1: the kinds of subsidies that are dividing Shackoby at this
Speaker 1: very moment. Hi, I'm Akio and I'm Spencer Soper, and
Speaker 1: this weekend Decrypted, We're going to be asking some tough
Speaker 1: questions about the jobs Amazon is creating in return for
Speaker 1: these big incentives. One report estimated that these tax breaks
Speaker 1: could be more than a quarter of a billion dollars.
Speaker 1: That's a lot of money that could have gone into
Speaker 1: repairing roads and building schools, then instead, put it one way,
Speaker 1: ended up subsidizing the growth of what was already one
Speaker 1: of the world's largest companies. We'll also look at the
Speaker 1: impact Amazon's new warehouse has had so far in Shacopy
Speaker 1: to get a sense of whether these subsidies have had
Speaker 1: positive ripple effects across this Minnesota suburb. Yeah, whether the
Speaker 1: subsidies have been or ultimately will end up being worth
Speaker 1: that investment. You'll be hearing from the residents I met
Speaker 1: in Shakope, as well as people living in San Marcos, Texas,
Speaker 1: which is another city with a new Amazon warehouse. That's
Speaker 1: me in the shack of Pee car repair shop owned
Speaker 1: by Matt Lahman. On top of running his business, Matt
Speaker 1: has served on the Shakopee City Council since two thousand
Speaker 1: and two. He took a break to puff a few
Speaker 1: Marlboroughs and chat with me about the new Amazon warehouse.
Speaker 1: He's wearing a baseball cap, beard and glasses. Various cities.
Speaker 1: I suppose we're negotiating with Amazon on sweetheart deals to
Speaker 1: try to convince them which city to go to. Apparently
Speaker 1: we gave m a sweetheart deal that they can't refused.
Speaker 1: Matt voted against offering incentives to Amazon. The wages that
Speaker 1: they pay you basically have incentivized below livabola jobs. Well,
Speaker 1: I started out to be ten twelve bucks an hour.
Speaker 1: I see now that they're slowly moving their wages up
Speaker 1: because they can't get no help. Um, which I guess
Speaker 1: it's a good thing, but but even at that, they're
Speaker 1: not livable way just to where somebody working there can't
Speaker 1: afford to actually buy a house make the payments. Local
Speaker 1: governments use the tax revenue that they collect from residents
Speaker 1: and companies to pay for things like schools and libraries.
Speaker 1: Parks and emergency services. They also have agencies whose job
Speaker 1: it is to talk to companies and convince them to
Speaker 1: set up their operations in your town, to create jobs
Speaker 1: in your area. And the most shall we say, persuasive
Speaker 1: tool they have is to offer tax breaks. But here's
Speaker 1: the tricky part. Let's say Amazon wants a new warehouse
Speaker 1: somewhere close to Minneapolis, where the company has a lot
Speaker 1: of customers and it needs another facility to keep up
Speaker 1: with rising demand. The question becomes where to build it.
Speaker 1: Unlike Matt Lane men the councilman we just heard from,
Speaker 1: there are a lot of people who really want Amazon
Speaker 1: to pick their town. So a community like Shakope ends
Speaker 1: up having to fight, sometimes against neighboring towns for Amazon's
Speaker 1: business in a really competitive situation. It basically turns into
Speaker 1: an auction where cities fight each other to give Amazon
Speaker 1: the most lucrative packages they can muster. And it's Amazon
Speaker 1: and all these other big companies that end up benefiting
Speaker 1: from these bidding wars. All of this is based on
Speaker 1: the idea that the city's investment will pay off over
Speaker 1: time from the boost a new company will give to
Speaker 1: the local economy. And if that isn't what ends up happening.
Speaker 1: It can be hard to justify the deal. Now you
Speaker 1: think that some of the people who would be the
Speaker 1: most strongly opposed to having Amazon in town would be
Speaker 1: people running local business. Is this classic narrative of these
Speaker 1: multinational corporations killing mainstream merchants. Interestingly, I met a few
Speaker 1: business owners in Shakopee who do think the gamblon Amazon
Speaker 1: is working. Like Dwayne we heard from earlier, he's had
Speaker 1: a jewelry shop downtown for the last thirty five years.
Speaker 1: But I think what I've noticed in the last even
Speaker 1: with Amazon coming in, I think that you know, most
Speaker 1: people are working, and uh, you know, there's a lot
Speaker 1: of jobs out there that can be more selective. So
Speaker 1: I think that's kind of helped the pool a little bit.
Speaker 1: Around the corner from the jewelry shop is Bill's Toggery,
Speaker 1: immen's clothing store. It's been there for eighty years. I
Speaker 1: stopped buying a Tuesday morning. The place was bustling. People
Speaker 1: were buying dress shirts, browsing for work boots, picking up
Speaker 1: clothes from the tailor. And the best part is what
Speaker 1: they did develop and the tax break they didn't give
Speaker 1: them to develop that area, created a few more flats
Speaker 1: for other businesses that have our be built up. So
Speaker 1: that's another local businessman feeling upbeat about Amazon. So just
Speaker 1: their business alone has allowed it for I think at
Speaker 1: least three other businesses to come in around them. A
Speaker 1: ripple effect, yes, and which is a good thing for
Speaker 1: our time. This is what economists called the multiplier effect.
Speaker 1: There's actually been a lot of research done on the
Speaker 1: impact of new jobs that come to a city, and
Speaker 1: it's this research that convinces local officials to deal out
Speaker 1: tax breaks to attract new businesses in the first place.
Speaker 1: It goes like this, Even if Shakopee isn't making its
Speaker 1: investment back directly from the workers Amazon is hired, the
Speaker 1: building of the warehouse has stimulated other economic activity nearby.
Speaker 1: And Shacopy isn't the only town that has seen this happen.
Speaker 1: Take San Marcos in Texas. Last year, Amazon opened a
Speaker 1: warehouse there. It's spent a hundred and ninety one million
Speaker 1: dollars on construction and equipment and side, and it hired
Speaker 1: three thousand people. In exchange. San Marcos promised Amazon twenty
Speaker 1: one million dollars in tax breaks over fifteen years but
Speaker 1: Sam Marcos says Amazon's warehouse was just the first step
Speaker 1: in a bigger economic development plan. If you look for
Speaker 1: it on a map, San Marcos is about halfway between
Speaker 1: Austin and San Antonio. That's three point five million people nearby.
Speaker 1: It wants to position itself as a shipping hub for
Speaker 1: companies selling goods to all the people in those cities.
Speaker 1: Besides the impact, of course of jobs and investment, you know,
Speaker 1: having that brand name, having uh, you know a company say, well,
Speaker 1: it's been vetted by Amazon, it's certainly worth looking into
Speaker 1: for our operation. Um that that's a huge win for us.
Speaker 1: That's Adriana Cruz, who heads the Greater San Marcos Partnership,
Speaker 1: an economic development agency serving the region. She also it's
Speaker 1: something interesting about the kinds of jobs Amazon was bringing
Speaker 1: to San Marcos. Earlier in the show, we heard Matt
Speaker 1: Lehman and Shakopee say that Amazon's jobs didn't pay a
Speaker 1: whole lot, but Adriana said that in San Marcos were
Speaker 1: retail and service jobs are the biggest industries. There is
Speaker 1: a bonus for the people Amazon hires. The benefits begin
Speaker 1: day one that includes medical for a one K career
Speaker 1: choice tuish and reimbursement benefits. That's something you can't really
Speaker 1: count on in the retail business. A lot of people
Speaker 1: work part time or their job doesn't come with healthcare
Speaker 1: in sick days. For our community and for the community
Speaker 1: surrounding us, we felt it was it was a good,
Speaker 1: you know, way to diversify our industrial sector, you know,
Speaker 1: and enter the e commerce and logistics area. All of
Speaker 1: that's evaluated as we take this before our our council.
Speaker 1: You know, we thought this is going to be for
Speaker 1: you know, a segment of our population and employer of choice.
Speaker 1: So this brings us to our next question, what kind
Speaker 1: of jobs is Amazon offering? The main criticism here is
Speaker 1: that Amazon pays about twelve dollars an hour for warehouse jobs. Yeah,
Speaker 1: these are jobs like walking around a huge warehouse to
Speaker 1: gather things that Amazon customers have ordered, packing them in boxes,
Speaker 1: and stilling all of the new incoming inventory. The pay
Speaker 1: and Benny's make it a step up from flipping burgers
Speaker 1: for minimum wage, but it's still about half the median
Speaker 1: hourly pay for those working in car manufacturing. High paying
Speaker 1: manufacturing jobs are the big jackpot for economic development agencies.
Speaker 1: That means factory workers have a lot more money to
Speaker 1: drop in the local economy, whether it's the restaurants and
Speaker 1: bars you're frequent at the end of a shift, or
Speaker 1: the local doctor you go see when you catch the flu.
Speaker 1: But when you get paid a lot less as an
Speaker 1: Amazon warehouse worker, you also have a lot less money
Speaker 1: to spend. And because of that, attracting low wage jobs
Speaker 1: doesn't help your economy the same way attracting higher paid
Speaker 1: work does. Amazon should not be subsidized at all. Taxpayer
Speaker 1: should stand back on what the dynamics of the market
Speaker 1: in retailing play out. That's Greg Leroy, and he says
Speaker 1: you can't even compare the jobs Amazon with the manufacturing job.
Speaker 1: Although to be fair, it's not like Shakoby had the
Speaker 1: choice of whether to invite a factory or an Amazon warehouse.
Speaker 1: Right factory jobs are disappearing across the country. Greg would
Speaker 1: even argue Amazon isn't really creating jobs at all, it's
Speaker 1: just shifting them over from department stores and big box
Speaker 1: retailers like Walmart. The broader issue here is there's a
Speaker 1: market change going on driven by a business model. Amazon's
Speaker 1: very aggressive market share business model in which it is
Speaker 1: growing at the expense of other retailers. You know. The
Speaker 1: headlines are full of closures by the Limited and Sears
Speaker 1: and Kmart and Macy's and lots of regional and local
Speaker 1: chains as well. Greg is the executive director at Good
Speaker 1: Jobs First. It's a watchdog group that tracks the results
Speaker 1: of so called job creation deals like the ones Amazon
Speaker 1: is negotiating. If Macy's and Sears and km Ard are
Speaker 1: going to shrink and Amazon is going to grow, that's
Speaker 1: the market. It's not like there's some poverty alleviation mission
Speaker 1: going on here. The group put out a report last
Speaker 1: year that said Amazon received more than a quarter billion
Speaker 1: dollars in tax breaks to fuel its warehouse expansion over
Speaker 1: a two year period. They say Amazon shouldn't get tax
Speaker 1: breaks because it has to build these facilities anyway, and
Speaker 1: his little choice somewhere they should go. You and I
Speaker 1: do not have more money with which to shop. This
Speaker 1: is not net growth in retailing. It's churn in retailing
Speaker 1: between different companies and different business models. We have Macy's
Speaker 1: and Sears and Kmart getting displaced by Amazon. Again. It's
Speaker 1: all retailing, and it's all about shopping. It's just a
Speaker 1: different way to shop. But it's the same amount of
Speaker 1: buying power available with which to shop. Of course, the
Speaker 1: counterpoint to all of this is the people who actually
Speaker 1: take the jobs at Amazon brings to towns like Shakopee
Speaker 1: and sam Marcos. Spencer, you talked to one of these workers. Yeah,
Speaker 1: his name was Derek Peters, and he's a veteran. He
Speaker 1: served more than four years in the army, including more
Speaker 1: than a year in Iraq. I come from a military family.
Speaker 1: My grandfather was in the army. My father was in
Speaker 1: the army, and I had a brother who had joined
Speaker 1: West Point and I had to deploy to Iraq, and
Speaker 1: so I was able to, you know, see from his
Speaker 1: letters and emails home, the experiences that he was having.
Speaker 1: I was able to see, you know, what he was
Speaker 1: doing for our country and also what he was doing
Speaker 1: for him as an individual and a leader, and so
Speaker 1: so compelled to join the army. San Marcos has a
Speaker 1: lot of veterans in its workforce because it's just a
Speaker 1: couple of hours away from forth Hood, which is one
Speaker 1: of the largest military bases in the world, and last year,
Speaker 1: Amazon committed to hiring twenty five thousand veterans and their
Speaker 1: spouses over the next five years. Derek started working with
Speaker 1: Amazon as an intern while he was completing a master's
Speaker 1: in business administration. He said, it was tough finding work
Speaker 1: after the recession of two thousand eight, and so one
Speaker 1: of the things I hadn't anticipated was how hard it
Speaker 1: was going to be because of the recent recession to
Speaker 1: find an opportunity available. And I probably applied UH to
Speaker 1: fifteen different companies, probably was interviewed by ten and what
Speaker 1: I kept hearing from recruiters was, Hey, we like you,
Speaker 1: but we can't take a chance on your background because
Speaker 1: you're making a career switch, right and they say, But
Speaker 1: then he got a call from Amazon. I ended up
Speaker 1: getting a project that I worked on around conveyance and
Speaker 1: material handling UH and I didn't have a background in this,
Speaker 1: and so I was really kind of surprised that they
Speaker 1: would they would let me do this. I was able
Speaker 1: to successfully complete the project, but really just fell in
Speaker 1: love with with the company, with how they let me
Speaker 1: come in and and add value in any way I could,
Speaker 1: how they valued my military background. Today, Derek is an
Speaker 1: assistant manager at the warehouse in San Marcos. He was
Speaker 1: part of the team that helped open the facility last year,
Speaker 1: so there's no question that Amazon is employing lots of people,
Speaker 1: even if at least some of those jobs with Amazon
Speaker 1: might be merely replacing positions that existed at other retailers.
Speaker 1: And hearing from Derek and hearing from the local businesses
Speaker 1: and Shakope, it sounds like Amazon's presence has been a
Speaker 1: pretty good thing zooming out from these two towns, though,
Speaker 1: and looking at this whole practice, the cities and states
Speaker 1: trying to outbid each other with bigger and bigger subsidies,
Speaker 1: it makes you wonder if it's a good thing for
Speaker 1: the country over time. Because for America as a whole,
Speaker 1: it doesn't matter if this new warehouse goes to this
Speaker 1: or that suburb of Minneapolis, as long as it's within
Speaker 1: the United States. But there's still competition between cities and
Speaker 1: states within the US, which enables companies to pit them
Speaker 1: against each other. It's similar to professional sports teams playing
Speaker 1: cities against one another for the nicest stadium in the
Speaker 1: best terms. And this is not just Amazon, it's basically
Speaker 1: every company that can afford to make these flexible decisions
Speaker 1: about where to build new operations. Because of this, American
Speaker 1: taxpayers end up poor. It's essentially transferring all this money
Speaker 1: that could have been spent on schools and public parks
Speaker 1: or just funded tax breaks for US actual individual residents,
Speaker 1: and enriching these companies, many of which are already doing
Speaker 1: quite well. Like Amazon. It's one of the biggest success
Speaker 1: stories of our generation, and that success has made CEO
Speaker 1: Jeff Bezos an incredibly rich man. He's the third wealthiest
Speaker 1: man in the world, behind Bill Gates and Warren Buffett,
Speaker 1: with the net worth exceeding seventy billion dollars. It's also
Speaker 1: made a lot of money for Amazon shareholders. Here's Greg
Speaker 1: Leroy again, there absolutely is an issue here of the
Speaker 1: sort of corporate rich getting richer or the corporate one
Speaker 1: percent getting richer. We looked carefully, for example, at fourteen
Speaker 1: states with programs that were theoretically open to companies of
Speaker 1: every size, but we found that seventy of the deals
Speaker 1: and of the money was going to big you know,
Speaker 1: usually multi state multinational companies. Even though these programs are
Speaker 1: theoretically open to small and local entrepreneurs, In reality, the
Speaker 1: vast majority of money is going to companies that have
Speaker 1: the most aggressive business strategies, and the and the tax
Speaker 1: consultants and the lawyers and the site location consultants to
Speaker 1: help them get those tax breaks. From the taxpayer's perspective,
Speaker 1: it'd be a whole lot cheaper if every city and
Speaker 1: state in America just suddenly agreed to stop offering these
Speaker 1: incentives and Amazon just randomly picked a new location out
Speaker 1: of a hat. At this stage, you may be wondering
Speaker 1: what's Amazon's position and all of this. We did ask,
Speaker 1: but the company decided not to comment. Number One, it
Speaker 1: makes no sense to me to subsidize a business whose
Speaker 1: CEO is one of the richest people in the country.
Speaker 1: That's Matt Lehman again from the shack Apee City Council.
Speaker 1: Remember Matt voted against the Amazon deal for his town,
Speaker 1: but it went through anyway. Since then, a new mayor
Speaker 1: has been elected and the town has adopted a new
Speaker 1: nineteen dollar an hour minimum wage for companies looking for
Speaker 1: similar tax breaks for job creation deals. Now are two.
Speaker 1: It makes no sense to me to subsidize a business
Speaker 1: whose workers will require additional taxpayer funded subsidies. How does
Speaker 1: that help the taxpayer? Okay, it doesn't. This is an
Speaker 1: important point. These additional taxpayer subsidies. Amazon's wages are low
Speaker 1: enough that parents of one or two children working at
Speaker 1: Amazon could be eligible for things like food stamps and
Speaker 1: housing subsidies. These benefits are calculated based on household income
Speaker 1: and number of people in the household, so young families
Speaker 1: would be likely to qualify. That's been a big part
Speaker 1: of the minimum wage debate that if wages are so
Speaker 1: low workers can't support themselves. Taxpayers supporting food stamps and
Speaker 1: housing assistance are essentially subsidizing the companies that benefit from
Speaker 1: this low wage labor. They don't want to see me
Speaker 1: take their hard earned money subsidize a business and then
Speaker 1: turn around and come back to them again and say, gee,
Speaker 1: because I subsidized as low paying business, I need more
Speaker 1: of your money to subsidize these workers houses, daycare, transportation,
Speaker 1: and social needs. Um. That's crazy, but even low paying
Speaker 1: jobs are better than no jobs at all. Right, There's
Speaker 1: another scarier scenario looming ahead of us, which is automation.
Speaker 1: Amazon already has forty robots deployed in warehouses around the world,
Speaker 1: including in Shackopine, and it's experimenting with a Seattle convenience
Speaker 1: store that doesn't have cash registers or cashiers. You know,
Speaker 1: but I don't think I'm buying this job killing narrative
Speaker 1: just yet. Yeah, Amazon defies that by deploying robots and
Speaker 1: hiring tens of thousands of people simultaneously. And these tax
Speaker 1: breaks usually have strings attached to make sure Amazon is
Speaker 1: honoring its hiring commitments. If it fails to maintain the
Speaker 1: jobs promised, it loses the tax break. Suspenser give us
Speaker 1: the final take for every economic development official listening to
Speaker 1: this show. Are Amazon's jobs worth a tax break? It's
Speaker 1: an interesting question that will keep playing out with Amazon
Speaker 1: and other companies, and the willingness of cities and states
Speaker 1: to doll outbreaks varies depending on the health of the economy.
Speaker 1: As the labor market titans, they can afford to be
Speaker 1: more finicky, and Amazon might encounter tougher wage requirements like
Speaker 1: the ones that were just adopted in Shakopee. We'll leave
Speaker 1: you with these parting thoughts from Matt. My job is
Speaker 1: not too help just one company. My job is to
Speaker 1: help the taxpayers out large, my constituents. My constituents would
Speaker 1: like to keep the money they earned. They don't want
Speaker 1: to give it to billionaires. And that's it for this
Speaker 1: week's episode of Decrypted. Thanks for listening. Tell us what
Speaker 1: you thought of the show, Record us a voice memo
Speaker 1: and send it to us at Decrypted at Bloomberg dot net,
Speaker 1: or you can write to me on Twitter I'm at
Speaker 1: Spencer Soaper and I'm at Akiso seven. You can subscribe
Speaker 1: to Decrypted on iTunes or wherever you get your podcasts
Speaker 1: and leave us a rating in a review. This helps
Speaker 1: us make our show better and it also gets our
Speaker 1: podcast in front of more listeners. And this month we're
Speaker 1: participating in a fun project on Twitter where we're recommending
Speaker 1: everyone our favorite podcasts with the hashtag tripod as in
Speaker 1: try a podcast. My favorite show aside from Decrypted is
Speaker 1: a Gimlet media show called Startup and I Like a Choir.
Speaker 1: It's a podcast put out by Madrona, a venture capital
Speaker 1: firm in Seattle. This episode was produced by Pierre Getkari
Speaker 1: Magnus Hendrickson, and Liz Smith. Emily Busso edited the print
Speaker 1: story running with this article, which you can read on
Speaker 1: Bloomberg dot com slash Technology. Alec McCabe is head of
Speaker 1: Bloomberg Podcasts and a special thanks to our reporter Shelley Hagen,
Speaker 1: who helped with research for today's show. We'll see you
Speaker 1: next week,