Amazon is Bad for U.S. Economy

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The nonprofit Institute for Local Self-Reliance, which advocates for fair, sustainable local economies, has recently released a report that reveals how Amazon’s stranglehold on the U.S. economy has devastating effects for the job market.

Amazon has recently reached annual revenues of more than $100 billion. The report details how Amazon has radically changed the job market and redefined the way Americans shop.

Although Amazon has perfected the art of online retail over the years and is now synonymous with online shopping, there is some good news. All those shoppers that feel very confident with shopping at Amazon are bound to look at and buy from other online shops.

There has in fact never been a better time to open your own online store, either as an extension of your brick and mortar shop, or as an independent venture. Getting it right is tricky, but there are a number of things you can do to make sure your online store achieves the best results possible. You don’t have to resort to Amazon’s tactics of undercutting other retailers by selling products at a loss, or even offer a super-convenient Prime service.

Nearly half of the money spent online currently flows through Amazon, if goods sold through third party retailers on its site is taken into account. Retailers, both online and in brick and mortar stores simply can’t compete, and this leads to devastating consequences for retailers.

Amazon’s complete dominance has however had wider ranging consequences. The authors of the report point out that Amazon’s takeover of retailers also results in fewer new products being created, and fewer new businesses starting up. Many stores have closed down as a direct result of the growing popularity of online shopping. Amazon is held indirectly responsible for more than 135 million square feet of retail space becoming vacant.

The Institute for Local Self-Reliance estimates that 149,000 jobs have been lost due to Amazon’s business expanding. In a letter to shareholders, Amazon claims to have created 600,000 jobs when it opened its Marketplace. Marketplace allows third-party sellers to sell their goods on Amazon.

The consensus is that less people are needed to sell goods online than selling goods in the real world. Using Census data, the researchers estimate that brick and mortar retailers would need to employ 294,574 people to achieve the same sales as Amazon. In comparison, it is estimated that Amazon employs only 145,800 people.

In an article on the report, the Huffington Post notes that although Donald Trump talked about how American jobs shifted overseas due to factories closed up shop and moving abroad, this happened decades ago. Trump has failed to notice that Amazon poses a similar threat.

Amazon seems to be moving towards a future where few workers are employed and the company rather relies on on-demand freelancers and machines. This model is also affecting traditional package delivery companies such as the Postal service and UPS. Amazon’s development of alternate delivery methods could threaten the jobs of up to 1 million middle income, unionized workers at the U.S. Postal Service and UPS.

Interesting enough, Amazon relies on local tax subsidies to fuel its growth. According to the report, Amazon has received at least $613 million in subsidies since 2005. At the same time though, its online business leads to brick and mortar stores closing. This could ultimately deprive a locality of much needed property tax revenue.

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