Jeff Bezos Shrugs, Low-Skill Workers Lose Big From Amazon Pullout Of NYC

Jeff Bezos Shrugs, Low-Skill Workers Lose Big From Amazon Pullout Of NYC

Contrary to leftist claims, when Amazon quits NYC, the real loser is not Jeff Bezos, but working-class New Yorkers, the very people that the left is supposedly fighting for.
Helen Raleigh
By

We learned recently that Jeff Bezos doesn’t like to be bullied. After many months of very public attacks from New York City’s unions, leftist activists, and progressive Democrats, Amazon broke up with New York City by announcing on Valentine’s Day that it had cancelled its $2.5 billion plan to build a second headquarters in NYC.

In its statement, Amazon says “a number of state and local politicians have made it clear that they oppose our presence and will not work with us to build the type of relationships that are required to go forward with the project we and many others envisioned in Long Island City.”

If you recall, in September 2017 Amazon announced it sought a location in North America to build a second headquarters. It promised to bring a $5 billion investment and to create up to 40,000 high-paying jobs in the winning city. Thus began the hot pursuit of Amazon from more than 230 municipalities in North America. After more than a year of courtship, Amazon announced last November that it would split its second headquarters between New York and Arlington, Virginia, and build an operations facility in Nashville, Tennessee. That announcement broke many hearts in those “losing” cities.

It’s Progressive to Oppose Work Now

What Amazon didn’t expect was the very public and aggressive backlash it received from NYC unions and a few Democrat politicians. Their main complaints are threefold: first, they felt sidelined in closed-door negotiations; second, they think NYC’s offering of $3 billion in tax incentives to lure Amazon unnecessary and a sell-out to big businesses because Bezos is the richest man in the world and he’s “greedy” for asking for corporate welfare; third, Sen. Bernie Sanders (I-Vermont) and many like-minded Democrats at the federal, state, and city level have attacked Amazon for its lack of enthusiasm in supporting the unionization of its workers and claim it intentionally pays workers lower wages in order to maximize profit.

Among all these complaints, only the first makes some sense. Aides to both New York City Mayor Bill de Blasio (D) and New York Gov. Andrew Cuomo (D) did negotiate with Amazon in secret. Thus, New Yorkers and most legislators didn’t find out any details until Amazon’s announcement. Of course, New York wasn’t the only city that did it this way. Almost all of Amazon’s several hundred suitors negotiated with Amazon behind closed doors, and they all claimed the secrecy was necessary for a competitive bidding process.

Such negotiations are antithetic to a democratic process and do disservice to the businesses, local governments, and communities involved. As in Amazon’s case, progressive Democrats and unions were able to mischaracterize a complex deal down to a one-punch line: a greedy rich man exploits New Yorkers for $3 billion. This line fits the left’s narrative of capitalism as a rigged system because it’s all about a rich and greedy few exploiting the working class. For months, they used this line to stir up popular resentment and pounce on Amazon and Bezos.

Childish Solutions for Adult Problems

After Amazon announced it abandoned its plan to build the second headquarters in New York, lefties like Rep. Alexandria Ocasio-Cortez, who have never created a single job, cheered for “defeating” the richest man on Twitter: “Anything is possible: today was the day a group of dedicated, everyday New Yorkers & their neighbors defeated Amazon’s corporate greed, its worker exploitation, and the power of the richest man in the world.”

As is often the case, AOC has a childish understanding of real-life problems, so she often comes up with childish solutions. A close examination of the deal between Amazon and NYC shows she and other opponents of the Amazon deal are ignorant of how tax incentives work.

According to the memorandum of understanding, Amazon would have received the following from New York State:

  • $505 million in a capital grant that reimburses for capital costs associated with office buildout (because Cuomo insisted on Amazon hiring union workers).
  • $1.2 billion in refundable tax credits under the Excelsior Jobs Program.
  • Both are incentive-based, meaning Amazon could only receive reimbursement and claim these tax credit if it met the job creation goal of 25,000 and capital investment of $2.5 billion according to an established schedule.

Amazon would receive no direct subsidies from New York City, but was eligible for two existing city tax breaks: $897 million from the city’s Relocation and Employment Assistance Program (REAP) and close to $400 million from the Industrial & Commercial Abatement Program (ICAP).

These state and city tax breaks add up to about $3 billion. All it means is that if Amazon made a $2.5 billion capital investment and created 25,000 jobs, New York City and state agreed to take $3 billion less in tax revenue from Amazon. In other words, should Amazon meet its stated goals, it gets to keep $3 billion more of the revenue it generates.

This means it could put more money back into the business to provide better services, offer more products, and hire more people with better pay. So now, after Amazon called quits, it’s a gross mischaracterization for AOC and others to claim that somehow New Yorkers saved $3 billion. No, there is no savings because New Yorkers don’t get to pocket money that hasn’t been created yet.

Just Punish New Yorkers, Why Don’t You

Not only is there no savings for New York after Amazon abandoned its plan, but also Amazon’s pullout means a great deal of loss for New Yorkers—25,000 employment opportunities (up to 40,000 when all is said and done), a $600 million infrastructure investment, $5 million for workforce development, a 600-seat new school, and, most importantly, an estimated $27.5 billion in state and city revenue over 25 years.

Surveys in NYC show 70 percent of black and 81 percent of Hispanic residents wanted Amazon in NYC. What’s especially notable is that Amazon’s proposed new campus would have been located near Queensbridge Houses, the nation’s largest public housing development. The deal between Amazon and NYC would have ensured that “residents in Queensbridge Houses will be guaranteed 100% access to these jobs and educational training in workforce development programs that will open the door to thousands of future jobs this partnership with Amazon will create.” But after Amazon’s pullout, residents in Queensbridge House’s newfound hope of upward economic mobility disappeared.

Among all the criticism against Amazon and Bezos, the most disingenuous is the claim that Amazon “exploits” its workers by intentionally paying them low wages in order to maximize its profits, while leaving them depending on federal welfare programs to survive.

Amazon is only the second U.S. company that employs more than 500,000 people. Its online retailing business model relies on more low-skill workers than do other typical tech companies. We don’t know how many of them were on various public assistance programs before they started working for Amazon. But we do know that the best way to help them to get out of poverty is work.

One thing Sanders, Ocasio-Cortez, and other government-defined wage proponents don’t get is that a job at Amazon that requires little skill and pay at $15 an hour (Amazon raised its minimum wage last year) is a starting point, not an end point, for many low-skill workers. For them, employment with Amazon, even at the lowest pay scale, provides a steady work environment, an opportunity to learn new skills, and to take the first step to climb out of the poverty trap and to ascend the economic ladder.

Thus, contrary to AOC and other leftist Democrat claims, when Amazon quits NYC, the real loser is not Bezos, but working-class New Yorkers, the very people that the left is supposedly fighting for.

Jeff Bezos Shrugs

Next year marks the 45th year since Ayn Rand published her final epic novel, “Atlas Shrugged.” In a fictional setting, the thinkers and the most productive people in society went on strike and “shrugged” off the weight of the world in protest of mistreatment and oppression from anti-reason politicians and moochers.

‘Atlas Shrugged’ is supposed to be a fiction, not a ‘how to’ guide.

Without these thinkers and producers, the world is a dark and miserable place, and ordinary people suffer the most. The miseries described in the book are a reality that millions, including myself, experienced in socialist countries throughout the 20th and 21st centuries.

America is getting dangerously close to that reality, because as Democrats lean to the extreme left, they have declared a war on today’s thinkers and producers. Ocasio-Cortez declares that a system that allows billionaires to exist is “immoral” and proposed a 70 percent marginal tax for the wealthy. Sen. Elizabeth Warren, a Democrat presidential candidate, plans to propose a wealth tax on the rich.

Sanders introduced legislation that would raise the estate tax to 77 percent on billionaires. Starbucks founder and former CEO Howard Schultz, another billionaire, has become Democrats’ Public Enemy No. 1 since he floated a potential presidential bid.

“Atlas Shrugged” is supposed to be a fiction, not a “how to” guide. If this kind of hostility continues, as Amazon showed us, the most productive among us may eventually call it quits and take their talent and resources elsewhere. Maybe Bezos already figured out an escape route when he invested in Blue Origin, a spaceflight company.

In all seriousness, any freedom-loving American should be alarmed. If we don’t want to live in a dark world where life is miserable, we must firmly and relentlessly push back on aDemocrats’ rhetoric and policies against the thinkers and the most productive among us.

Helen Raleigh is a senior contributor to The Federalist. An immigrant from China, she is the owner of Red Meadow Advisors, LLC, and an immigration policy fellow at the Centennial Institute in Colorado. She is the author of several books, including "Confucius Never Said" and "The Broken Welcome Mat." Follow Helen on Twitter @HRaleighspeaks, or check out her website: helenraleighspeaks.com.

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