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Amazon skews demand for low wage employees

An interesting article appeared last week in Kaiser Healthcare News (KHN), a publication of the Kaiser Family Foundation. The article details a war for low wage employees in Erlanger, KY. (Erlanger, KY is a suburb of Cincinnati, OH.) While the article focuses on Erlanger, the same story plays out just about everywhere else in the US. It neatly explains labor shortages, as well as declining community college enrollment.

Businesses like the Villaspring of Erlanger (a nursing home) offer a $15 starting wage. The nursing home typically hires high school graduates to perform most of the work in the nursing home. Villaspring of Erlanger says it must offer low pay and few benefits because it relies on painfully low Medicaid reimbursements.

The trouble for Villaspring of Erlanger started when Amazon opened an air cargo hub in Erlanger. You see, Amazon also hires high school graduates, college graduates and just about everyone else. But unlike the Villaspring of Erlanger, Amazon does not rely on Medicaid for its income.

Business for Amazon is booming and has been in overdrive since the onset of the pandemic. The 600-acre air hub represents a $1.5B investment in Erlanger and has, for the most part, vacuumed up every available worker in the region. (Right now, unemployment in the region is about 3%.) Amazon offers starting wages of $18-$23 per hour, plus benefits and signing bonuses.

So, workers in the area’s low wage industries (including healthcare workers who are completely over COVID-19) have signed on with Amazon. Which is leaving fewer and fewer workers to fill essential positions, like those at Villaspring of Erlanger.

Low wage employees will leave essential jobs unfilled

Erlanger isn’t the only Kentucky community that’s seen its low wage employees gravitate to Amazon. Amazon also maintains a facility in Shepherdsville, KY, just south of Louisville. There, Amazon has two fulfillment centers that are always looking for workers. Competing against Amazon’s starting hourly wages of between $18 – $25, few other low wage employers can fill open positions.

And when you can make $37,500-$52,000 per year without a college degree, why would you go to school? But that’s Kentucky, right? Well, actually it’s also happening in and around Ann Arbor, where Amazon offers between $15-$22 per hour for various positions. Plus the $3,000 signing bonus, plus health insurance, paid time off, 401(k), parental leave, flexible shifts and paid tuition.

This is, in part, a consequence of Michigan’s abysmally low minimum wage. Amazon takes advantage of states where the minimum wage is low. (Kentucky’s minimum wage has been $7.25 per hour for more than a decade.) Where Amazon can pay significantly more than the minimum wage, it can guarantee itself a large pool of unskilled workers.

Stop creating ALICE households

And prospective employees want to know that they’re working in a viable employment situation. A recent item on CNBC described the impact that losing pharmacy technicians is having on pharmacies across the country. Pharmacy technicians do most of the work inside a pharmacy, but the pandemic has exposed a consequence of low wage work. Under stress, the lowest-paid workers burn out. Fast.

Many pharmacies offer COVID-19 (and other) vaccinations. Predictably, the demand has been overwhelming. As a result, pharmacies are experiencing critical staffing shortages because pharmacy techs are quitting in droves. I don’t need to mention that pharmacy technicians are low wage workers, do I? Nationally, pharmacy technicians earn about $16.25 an hour. In Washtenaw County, pharmacy techs earn about $15.25 an hour. (The next time your pharmacy is closed at 3:00 in the afternoon, don’t wonder why.)

I’ve written about the concept of an ALICE household – Asset-Limited, Income-Constrained, Employed. ALICE is a measurement developed by the United Way of household income. It describes households that generate economic activity at a level that is too low to permit upward mobility. People in ALICE households can subsist on their earnings, but they cannot improve their standard of living.

So, what constitutes a living wage? MIT has published a living-wage calculator since 2004. Using annually updated wage data, the calculator determines the required earnings for households of varying size in any area in the United States. For example, a single person with no children in Washtenaw County should be able to live on a salary of $32,500 per year. A single person with one child needs an annual salary of about $75,000. (The calculator is updated in the first quarter of each year, so these numbers are probably no longer accurate.)

Start by eliminating ALICE degrees

I have a suggestion for administrators at Washtenaw Community College. Earlier this year, the Administration agreed to raise the pay scale floor at WCC to $15. That means for any open position at the college, the minimum starting salary will be $15 per hour. (That’s about $1,300 below the MIT 2021 Washtenaw County living wage estimate, but that’s another matter.) My suggestion is that the administrators apply a similar standard to the degrees they’re turning out.

If a graduate cannot earn at least a living wage with a degree from WCC, eliminate the degree. Stop supporting occupational programs that generate subsistence wages. Stop supporting non-credit “workforce development” programs for occupations (and employers) that don’t pay a living wage in Washtenaw County. And start developing occupational programs that prepare students for high-wage, high-demand positions. (Like clean energy.)

That would require WCC to keep wage data on its graduates and make data-driven decisions about degree programs. (It should be doing that already, but that’s also a different matter.) It’s in WCC’s interest to do this. Actual wage data is a powerful incentive for people to enroll in occupational programs. Eliminating career ratholes in favor of high-wage, high-demand degrees is the best way to increase occupational enrollment in the Age of Amazon.

Photo Credit: Patrick Feller , via Flickr