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Does Amazon Inflate Its Jobs Numbers To Score Local Tax Incentives?

Amazon has built an empire of distribution centers across the country with the help of local tax incentives due to its promise of jobs — but the execution of that promise is now in question.

Across its network of warehouses, which it calls fulfillment centers, Amazon has been using a variety of mechanisms to avoid laying off workers or paying its employees full-time wages as a method of keeping raw employment numbers high, Gizmodo reports.

Amazon founder Jeff Bezos

Gizmodo spoke to 13 current and former employees at different Amazon fulfillment centers and learned that as the e-commerce giant's vast supply chain has grown, demand at individual facilities has decreased, as has the labor needed to fulfill orders. Rather than lay off employees, Amazon has reportedly been cutting hours across its staff.

The practice of reducing hours and pay could be a way of keeping raw job numbers on the books in order to fulfill promises tied to tax incentives given by local governments to win Amazon's business, Gizmodo reports. 

For example, in exchange for placing an 855K SF fulfillment center in Baltimore's Tradepoint Atlantic development, Amazon received a $2.2M benefits package from a combination of state and local governments. Local officials said the benefits were a direct result of Amazon's promise to employ 1,500 people at the center. 

Amazon is playing out its incentives for jobs strategy on a much larger scale in its hunt for a second headquarters.

The most common tool Amazon uses when business is dragging at its fulfillment centers, Gizmodo reports, is Voluntary Time Off. This is an unpaid opportunity that managers offer employees when demand is slow and work is scarce. Some managers have reportedly resorted to pressuring and even coercing employees to take VTO rather than work on less busy days. VTO offers were also reportedly made through the peak e-commerce season of October through Christmas in 2017.

Employees told Gizmodo that requests for VTO often come in every day, sometimes multiple times per shift. In some cases, employees are turned away at the door without being given an option to work that day. Employees who refuse VTO requests are reportedly given work with more circuitous routes or outside of their training, making it difficult to hit productivity benchmarks — a quick path to termination.

Amazon has said its warehouse employees make an average of $15/hour, but employees who take VTO likely aren't hitting that number.  That average is buoyed by Variable Compensation Pay, which gives bonuses to employees based on the number of hours worked. Employees whose hours are cut from VTO or Unpaid Time Off, which is a different system, may see reduced or no bonus, according to Gizmodo.

Similar stories have played out all over the country, and not just at Amazon. Unemployment has been in decline for years, and the Bureau of Labor Statistics reported that it dipped below 4% nationally in May. But underemployment, largely made up of workers putting in fewer hours than they want, is considerably higher.

Warehouse practices may not result in any less enthusiasm for the white-collar Amazon HQ2, but if Amazon's raw job numbers conceal an underemployment problem at its distribution centers, municipalities and states may be forced to take a second look at their incentive packages for the e-commerce behemoth.