Welcome to Primeville, USA

Sep 20, 2021

I had planned to start this newsletter with the old quote about how history repeats itself, but it turns out that is a much more popular saying than I was expecting. I emphasize historical contexts in my upper-level courses because it helps frame our current conversations in a much bigger picture. My hope is that students recognize the issues we’re facing today really aren’t that new, Americans have been dealing with the same issues for decades, if not longer. If I had to pick one quote about history, maybe Quavo has the most appropriate one for today’s newsletter:

History repeats itself. So you might wanna pay attention.

A new editorial in Bloomberg by Conor Sen (@conorsen) caught my eye last week, but for all the wrong reasons. Conor recommends something that I have seen others advocate for before, but the recommendation usually doesn’t make its way into a Bloomberg editorial. He advocates for large warehouse operators (like Amazon) to stop building warehouses on the edges of towns and to instead create an entire town/society centered around warehouses. Save workers the troublesome commute and re-create the “company towns” of yesteryear, but centered on warehouses instead of coal mines:

What an absolutely awful idea. At a time when more people are quitting than ever before because they feel mistreated at work, the absolute last thing this labor force needs is to give more power back to businesses. The setup of the story paints an idyllic picture where workers don’t have to worry about long commutes thanks to their Amazon-built homes wired with the latest Echo technology. Don’t worry about attracting other private businesses to set up in Primeville. Who needs a grocery store when Amazon can set up a Whole Foods right down the block? Looking for a quicker shopping trip, Amazon can install a few of their cashier-less Amazon Go stores around town. Interested in checking out a new novel? Don’t worry, Amazon operates physical bookstores. Oh, you need to go see a doctor? Take advantage of Amazon Care for your online health services and prescription needs.

While the neighborhood is coming together, the picture looks an awful lot like one we’ve seen before. Remember how Quavo reminded us that history repeats itself? Conor Sen’s editorial advocates for a more bizarre form of a pure monopsony. Move over coal towns of the 1900s and welcome to Primeville, USA. If you don’t remember learning about coal towns in your American history class, I highly recommend this American Experience documentary. As your watch it, substitute the Amazon products listed above in place of the coal company and see if it’s not eerily similar:

The only thing missing in the original editorial is advocating for workers to be paid in a new form of Amazon credit (scrip) so that the workers can buy all their Amazon-affiliated products back from Amazon. If you’re thinking an Amazon warehouse isn’t big enough to support an entire town, think again. Amazon is the second-largest employer in the United States and builds massive warehouses that employ 1,000 to 1,5000 people. People have consistently increased the amount of shopping they conduct online, even as pandemic-induced restrictions have eased. Subscription services like Chewy or food delivery products like HelloFresh require even more warehouse space to continue serving their growing customer bases.

A monopsonistic market is one in which there are only a few businesses in an area hiring a particular group of workers. In the coal mining example, there’s a single coal company that hires coal miners. When workers don’t have many alternative job opportunities, that pushes more power toward the firm. This keeps wages lower than a competitive market would normally allow. At least Amazon has to compete with other businesses for workers when they set up their warehouses outside of already established cities. Amazon would have no competition in Primeville, USA. Unhappy workers would have to move to find alternative employment, but that assumes they even have enough money to afford a move, which is a major barrier for low-wage earners.

Amazon’s starting pay for warehouse workers is $18 per hour, but that’s because they’re in regions where they compete for workers. Working 40 hours per week at that pay rate, for all 52 weeks of the year, would put a worker at the 27th percentile in household income. Building a company town would likely result in more stagnant wages, not a thriving local economy built on competition. On top of that, warehouse work is a physically grueling environment where workers quit regularly and are subject to unpleasant working conditions.

So while Amazon hasn’t actually announced this as a plan, it seems like a good time to remind people that monopsony power already exists in a variety of forms. It’s gotten to be a big enough deal that President Biden has issued an Executive Order to curtail monopsonistic activity already in our current labor market. The very last thing workers need is to live in a place like Primeville, USA. It's unlikely to ever be a beautiful day in that neighborhood.