Podcast #96: The Urban Effects of Amazon.com with Spencer Cox

The podcast this week is a conversation with Spencer Cox, a Geography PhD student at the University of Minnesota who is studying how amazon.com is changing the urban landscape in America. Cox has spent the last few years researching amazon, both its logistics and employment practices on the exurban fringe and the way that Amazon offices are reshaping central cities like Seattle. Cox also worked on a new report released by the Minneapolis-based Institute for Local Self Reliance, an think-tank that focuses on local economies. We sat down at the Kitty Cat Club in Dinkytown the other day to chat about his research, how Amazon is changing both labor markets and urban geography, and what the future of retail might look like in the US. I hope you enjoy the conversation.

[partial rough transcript below]

On Amazon.com in the 21^st century and their new warehouses:

Amazon has come on and really changed the entire game. Amazon’s impact on the industrial real estate market is almost single-handedly re-shaping the demand for warehousing space. There are fulfillment centers outside every major US city, huge 1.2 million square foot facilities. These are about five times larger than a Walmart distribution center.

Because these are so big they’re largely being built outside major urban areas and they serve about a 5-6 hour radius drive. Amazon is typically looking for locations that have the right employment base necessary to fulfill the labor requirements, which are huge. At one of the major fulfillment centers, there’s usually about 1000-1200 workers during regular time. And that doubles during peak hours, November to January, and that doesn’t include regular line workers.

On Amazon and the labor market:

The way that Amazon organizes their labor market, many of these jobs are part time. Outside the major fulfillment center, you can be flexed up an hour or flexed down and hour. you have three overlapping shifts than can get flexed up or flexed down. It’s quite dramatic. Like many other companies, Amazon uses a complex system of subcontracted and temporary work. At any particular facility, you’ll have a set tier of people that come on from a sub-contracted company with an in-house office. Here in Minneapolis, it’s Kelly subcontracting … And so you have the subcontracted workers, workers that that are ID’d by a white badge. And workers that have blue badges, and they all have different tiers and different rights. If you’re a white badge worker, you’re a temporary worker and you’re a dollar less an hour and you don’t get the same benefits as a blue badge worker. It produces a lot of internal ruptures between these workers.

 

On transit and commute patterns:

[The Amazon fulfillment center] is built out in Shakopee, but the majority of the workforce is coming from Burnsville, from Brooklyn Park, pretty long commutes that people are driving to get to this place. Because the hours are so varied and flexed, depending on the day they are working 24 hours, but with shifts that overlap. You don’t really get the community of works [and] no one hangs out after work.

Here [the center] is built in an industrial park that’s really separate from the actual community. Where they actually build these low wage jobs are in suburbs, in general, where suburban jobs have been placed in particular low wage assembly jobs, have largely been in working class white communities. And there’s big racial segregation within these suburbs.

On housing near the job centers:

There’s a majority migrant, african, or east african population of workers. It’s really interesting in how it plays out, you have these industrial parks where the low wage jobs are located and its really great for the tax base of the city of Shakopee. The issue has been when its come to developing the workforce housing for the community. They’re happy to separate the jobs from the city, but when it comes to developing any dense housing, it becomes a major social issue.

You’re commuting 25-30 minutes for a shift that could be 3 hours. You don’t know if you’re working 3 or 5 hours, and a majority of people coming in for those 3 to 5 hour shifts are looking for full time work, looking for something closer. But just the way that these kinds of higher density assembly and warehousing jobs are being built make it very precarious and difficult for workers from all parts of the city to work there.

 

On the automation of retail:

If we look at the last 30 to 40 years of automation, in the 1980s in particular that’s when firms started to really invest in information technology. They were investing into machines that could do routine manufacturing work . They’d take a job and make into a set of discrete steps that a robot could do. A lot of jobs had been turned into very discrete processes, in particular manufacturing and process jobs. And you had a huge investment in information technologies that automated a lot of that work.

The thing today is that machines aren’t very good at doing certain things, like grasping individual items, putting them into boxes, and stacking those boxes. Another thing also that automation is not great at is automating retail work. That requires the ‘hardware hank conversation’, where you talk to someone and develop some rapport, and they understand what your needs are and you do so through informal conversations. Those things had definitely not been automated in the last 30 years, and what Amazon is trying to do is develop a business model that will automate those kinds of activities and really increase the productivity, and mostly reduce the labor costs necessary to get a product into someone’s hands. They want to get into an aspect of the economy that had not yet been automated and develop the right technology to automate that job.

On the suburbs versus central cities:

There are two big trends that amazon is right at the heart of, the first one is suburbanization of poverty in the US as well as the suburbanization of low wage work. If you think about Amazon’s expansion into exurban locations, it’s also in a whole set of clusters of really low wage warehousing assembly jobs that are low-wage, low-skill jobs that still very central to our economy. These are increasingly being located, not in our urban cores, but in exurban locations.

There’s also been a trend in the suburbanization of low-income individuals instead of in the urban cores. And since the financial crisis, what’s happening in urban cores, if we look at Seattle and think about where amazon is located, it’s really interesting. There’s been a weird inversion in the last 10 years, where all of a sudden, drawing on the idea that propinquity and face-to-face communication somehow is innovative and develops new ideas. When Jeff Bezos decided to locate his corporate campus, he didn’t locate in the suburbs, he put it in downtown Seattle. And he said he built it in downtown Seattle because he wanted to build it close to where millennials want to live but also wanted to put it somewhere that would produce innovative new ideas. Seattle all of a sudden has a huge movement of not just Amazon, but you have Salesforce, Facebook, Google, Twitter, urban forestry… a huge relocation of corporate campuses into downtown hubs. They’re reproducing the city in an interesting way, and Minneapolis is starting to see this trend.