Amazon’s recent hiring spree puts new focus on warehouse jobs and worker needs

Workers sort arriving products at an Amazon Fulfilment Center in Tracy, California August 3, 2015. REUTERS/Robert Galbraith - GF20000012804

E-commerce continues to grow in importance to the American economy, from representing the majority of all manufacturing shipments to a steady climb in share of retail sales. Yet e-commerce represents much more than how business and people order goods. It has enormous impacts for regional labor markets, the geography of jobs, and shifting demand for metropolitan real estate. This post is the first in a three-part series considering e-commerce through a spatial economic lens.

 Amazon’s recent announcements to create a second headquarters and fill 50,000 jobs at ten warehouses dominated national headlines, representing both an opportunity for thousands of workers and further confirmation of e-commerce’s ascendancy. Yet even with Amazon promising over 100,000 total new jobs by 2018 across all types of positions – from warehousing to software development – the hiring sprees are really a two-fold story: one of job creation and another of job destruction.

Just as e-commerce assumes a greater role in the macro economy, traditional brick-and-mortar retailers continue to shed thousands of jobs every month. In turn, industry analysts are debating whether the long lines at Amazon’s job fairs are powering more robust labor market growth or instead represent a sign of labor market weakness among the most vulnerable workers.

Continued monitoring of these labor market trends is crucial, and that begins with a better understanding of (1) the types of jobs involved and (2) how industrial employment is changing across different regions. Doing so can help workforce leaders, economic development officials, and workers themselves get a better sense of the skills needed and long-term career pathways potentially available in this space, where conversations must move beyond short-term job creation and instead turn toward pressing issues concerning on-the-job training, automation, and other labor needs.

While it is difficult to measure the full range of labor impacts from e-commerce giants like Amazon at a local (or even national) level, some analysts have started to develop more consistent statistical definitions and better gauge recent employment trends. In particular, two industries–General Warehousing and Storage and Electronic Shopping and Mail-Order Houses–tend to bucket several closely related warehousing and e-commerce activities quite well, as discussed in a recent study from Michael Mandel at the Progressive Policy Institute.

Across the country, these two industries already employ 1.2 million workers in Amazon-like warehouses and other establishments. Moreover, from 2010 to 2016, employment surged by 372,000 additional workers, representing a 48 percent increase. By comparison, employment across all private industries only rose by about 12 percent over the same span.

The fact that most of these jobs have relatively low barriers to entry also helps. Material movers, truck drivers, and stock clerks represent some of the most common occupations in those industries, and those workers tend to have lower levels of formal education: two-thirds have a high school diploma or less compared to 33 percent of workers across all occupations. With starting pay up to $14 an hour in some of Amazon’s warehouses, the compensation for many of these workers may appear low relative to all other occupations nationally, but are more competitive than the wages typically earned by other large, lower-skilled occupations like cashiers and cooks at about $10 an hour. And as demand for labor rises across the two industries, it should continue to place upward pressure on wages; the seasonal and temporary nature of these jobs can lead to fluctuations in hiring and pay, of course, but job openings continue to increase over time.

Ten Largest Occupations in General Warehousing and Electronic Shopping, By Employment and Educational Attainment, 2016

Chart2Source: Brookings analysis of Bureau of Labor Statistics data

Note: Levels of educational attainment are based on national cross-industry totals for workers ages 25 years and older

National figures, though, only reveal part of the story. Employment growth in e-commerce is also geographically diffuse.

Indeed, early assessments of e-commerce employment point to the importance of large metro areas in generating much of the recent growth. When it comes to warehousing and electronic shopping, facilities near more populated markets offer the benefit of serving both millions of regional consumers and direct connections to major hubs in global and domestic trade networks. Employers like Amazon appear to be no exception; among the ten warehouses as part of Amazon’s recent jobs push, all but one operate in the country’s 100 largest metro areas. The lone outlier is in Trenton, NJ, which itself borders the New York City and Philadelphia metro areas.

The 100 largest metro areas are centers of employment in general warehousing and electronic shopping. Their establishments collectively employed 820,000 workers in 2016, equal to more than 70 percent of the national total.[i] Even more significantly, as the map below illustrates, nearly all metros keep seeing their employment numbers grow. From 2010 to 2016, 89 of the 100 largest metro areas increased their employment, collectively by 286,000 workers (or 54 percent). Seattle, Indianapolis, and Phoenix rank among the fastest growing metro areas, which all feature Amazon warehouses and have more than doubled their 2010 employment levels in these industries.

Employment Change in Warehousing and Electronic Shopping, 100 Largest Metro Areas, 2010 to 2016

WarehousingMapv2Source: Brookings analysis of EMSI labor market data

Yet it is impossible to assess growth in e-commerce employment without considering the closures taking place within brick-and-mortar retail establishments. Derek Thompson at The Atlantic has put together clear assessments of what is happening here, and it is not a complete destruction of the retail sector. In fact, restaurant jobs are currently booming. But many of the retail industries that compete directly with e-commerce – namely Clothing Stores[i]; Book Stores and News Dealers; Department Stores; and Office Supplies, Stationery, and Gift Stores[ii] – are seeing significant losses in employment.

The size and geographic reach of these industries, totaling nearly 2.7 million workers across the country in 2016, means job losses can significantly limit local economic opportunity.

Together, the four struggling retail industries saw their national employment slip by 309,000 workers (or 10 percent) from 2010 to 2016. The 100 largest metro areas not only contain the most workers in these industries – nearly 2 million in 2016, or 74 percent of the U.S. total – but they also lost 174,000 workers over the same six-year span. Similar to general warehousing and electronic shopping, these changes have been widespread; in total, 83 of the 100 largest metro areas experienced losses in retail employment. Some metro areas like Detroit and Minneapolis have particularly struggled, losing about 10,000 retail workers each.

Employment Change in Four “Struggling” Retail Industries, 100 Largest Metro Areas, 2010 to 2016

StrugglingRetailMapv2 Source: Brookings analysis of EMSI labor market data

However, looking at the rise of warehousing and e-commerce alongside the decline in traditional retail shows that many parts of the country – on net – are seeing an uptick in employment. The 100 largest metro areas, for instance, realized a net gain of 112,000 workers when combining general warehousing, electronic shopping, and the four struggling retail industries described above. Once again, metro areas with a large e-commerce presence like Seattle performed quite well on net, as did other logistics hubs like Riverside and Louisville. In contrast, metro areas that saw enormous declines in traditional retail employment like Detroit did not make up enough gains in e-commerce or warehousing.

Top 10 Metro Areas, By Combined Employment Change in Warehousing, Electronic Shopping, and Struggling Retail, 2010 to 2016

amazon_retailchart1Source: Brookings analysis of EMSI labor market data

Bottom 10 Metro Areas, By Combined Employment Change in Warehousing, Electronic Shopping, and Struggling Retail, 2010 to 2016

amazon_retailchart2Source: Brookings analysis of EMSI labor market data

Policymakers are mostly bystanders to this combination of job creation and destruction coming from the private sector, but they do need to gauge the changing quality of jobs. Do e-commerce opportunities create local pathways to opportunity? Is there a tranche of retail workers whose specific skills won’t translate well to an e-commerce industry? And does automation mean employment gains today could be lost tomorrow?

Fortunately, local policymakers are well-positioned to take a lead. Ideally, tracking employment shifts should come with greater geographic precision, including a closer look into spatial trends at a sub-regional level. Likewise, it is crucial for policymakers – in collaboration with educational institutions and workforce development agencies – to view the skill sets needed and work activities carried out in a constantly changing marketplace and workplace. Sketching out a road map for skills acquisition and job training in the e-commerce era is essential.

[1] Calculations are based on Brookings analysis of EMSI labor market data for Electronic Shopping and Mail Order Houses (NAICS 45411) and General Warehousing and Storage (NAICS 49311).

[2] Note that most employment – and associated job losses – are concentrated in Family Clothing Stores (NAICS 44184).

[3] Calculations are based on Brookings analysis of EMSI labor market data for Clothing Stores (NAICS 4481); Book Stores and News Dealers (NAICS 4512); Department Stores (NAICS 4521); and Office Supplies, Stationery, and Gift Stores (NAICS 4532).