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‘Amazon Effect’ Is Hiking Pay and Fueling Land Rush in U.S.

Hire Dynamics CEO Larry Feinstein

Hire Dynamics CEO Larry Feinstein at a fulfillment center in Braselton, Ga.

On a recent weekday morning, a handful of job seekers were filling out applications at desktop computers in the Jefferson, Ga., office of Hire Dynamics, a staffing company with several locations across the South. All were there to tap the warehouse boom in Jackson County, about 50 miles northeast of Atlanta. Since 2015, at least 31 e-commerce fulfillment centers and other distribution depots have opened or are under development. The list of arrivals includes Amazon.comWilliams-Sonoma, and FedEx.

Larry Feinstein, chief executive officer of Hire Dynamics, says the local labor market was already tight when Amazon.com Inc. opened a 1,000-person fulfillment center in the county last year. “Amazon comes in and sucks up all the labor,” says Feinstein, whose recruiters are scrambling to hire 40 people a day for a warehouse operated by Carter’s Inc., a maker of baby and children’s clothing. “Every one of our clients up there has raised their pay rates at least $2.” graph of an expanding army of warehouse workers

Forklift drivers are especially hard to find and now command at least $15 an hour, and up to $17.50 in parts of Georgia, according to the Randstad staffing agency. Meanwhile, general laborers have seen their wages bumped up a couple dollars to $12 or $13 an hour, which is at least a 30 percent premium over what most cashiers in the state earn and slightly more than what retail salespeople earn. Unemployment in Jackson County was 3.3 percent in December, almost 1 percentage point below the national average.

What’s happening here is part of a nationwide boom in warehouse construction reshaping economies that once relied on farms or factories. Between 2013 and 2017, developers added about 848 million square feet of warehouse space, or more than double the roughly 300 million square feet built over the five previous years, according to real estate firm Cushman & Wakefield. The number of stock clerks and order fillers—which is the Bureau of Labor Statistics’ designation—expanded by almost 311,000 in the decade to 2016.

Companies have always put their distribution hubs on the edge of urban areas. What’s changing is the “edge” keeps getting redefined outward as 500,000-square-foot facilities become million-square-foot ones, says David Egan, head of industrial and logistics research at CBRE.

Employees who used to drive from 25 miles out are now having to commute from as far away as 40 miles—a long haul for someone making $12 an hour. Amazon, which has 70 fulfillment centers in the U.S., runs shuttles for employees at some locations and hands out gift certificates to those willing to carpool, says spokeswoman Ashley Robinson.

Robert Connor, 22, one of the applicants who showed up at Hire Dynamics hoping to land a warehouse job, lives in Winder, Ga., outside Jackson County. “Just to drive here and back takes a half-tank,” says Connor, who owns a 2000 Honda Accord. “Thank God I don’t have one of those six-cylinder trucks.”

Six of the new warehouses in Jackson exceed a million square feet, and a seventh is just shy of it, a county map shows. “Anything under a million square feet is considered small, which is kind of unbelievable to me,” says Mike Buffington, publisher of the Jackson Herald and several small newspapers in the region. Coincidentally, a million square feet is about the size of a regional mall, many of which are struggling as more Americans go online to do their shopping. Large mall retailers other than department stores closed 2,468 stores last year, many quietly without announcement, according to researcher Green Street Advisors LLC.

In Lehigh Valley, a metropolitan corridor that straddles Pennsylvania and New Jersey, employment in e-commerce and distribution centers has surged by 10,000 over the last five years and now trails the area’s traditional manufacturing sector by just a few thousand jobs. “We almost don’t have enough people with low skills to fill all the need in the fulfillment industry,” says Don Cunningham, who heads the Lehigh Valley Economic Development Corporation.

It’s not just workers who are in short supply. The vacancy rate for industrial space in the U.S. fell to 5.2 percent in the third quarter of last year, the lowest on record, real estate company Colliers International Group said in a recent report. The scarcity of 50- to 100-acre tracts close to major highways and with suitable access to utilities has caused industrial land prices to more than double in a few years. The price of an acre on the fringes of metro areas was about $50,000 in 2015 and has since climbed to more than $100,000, according to commercial real estate company CBRE Group and researcher CoStar Group. “There has been significant new construction in this sector, and all of it has gotten absorbed,” says Barbara Denham, senior economist with researcher Reis Inc.

Hire Dynamics employs Kimberly Little

Hire Dynamics employs Kimberly Little, who works at one of the many fulfillment centers that have opened in Georgia’s Jackson County.

Jackson County’s residents have to contend with some unpleasant side effects from the warehouse boom. A traffic jam at Interstate 85’s intersection with state Route 53 near Braselton stretched up to two miles during the past holiday season, recalls Ronnie Jones, owner of Stonewall’s BBQ restaurant. Fewer customers seem to be coming by for barbecue in the late afternoon. He attributes the drop in business to people avoiding the area because of gridlock as the warehouses empty out around 4:30 p.m. Some locals have showed up at county meetings wearing red T-shirts to signal “no more warehouses” as they creep closer to residential areas.

 

Marlene Ramirez Hire Dynamics employee

Marlene Ramirez, another Hire Dynamics employee, places inventory on a conveyor belt.

Economics development officials are ambivalent: They’ll put out the welcome mat if e-tailers come calling, but they generally don’t seek them out, says Brian Hercules, a chamber of commerce executive in Murfreesboro, Tenn. The threat that many of the jobs they create could soon be lost to automation is one concern. The availability of affordable housing is another.

Murfreesboro, a 40-minute drive from Nashville, landed an Amazon facility five years ago, while a unit of Ebuys Inc., which sells footwear and accessories online, opened a warehouse in surrounding Rutherford County a year ago. “You get one or two of these businesses and it’s great, because you have a certain percent of the population with those skills,” says Hercules. Yet there’s a limit to how much they help a local economy, he says: “At $25,000 a year, if you have a wife and two kids, are you going to be able to buy a house?”

Overall, Jackson County’s warehouse boom is a net positive, even if it snarls traffic on occasion and puts pressure on the housing stock, says Jim Shaw of the Jackson County Area Chamber of Commerce. Residents who once depended on its now-shuttered textile mills or its still-active poultry processing industry are finding overnight shift work in warehouses. “We’ve filled a lot of jobs in the distribution centers over the past few years,” Shaw says. “I often wonder if, as hard as that work may be, it seems a lot easier than working in a broiler house.”

This article originally appeared in Bloomberg Businessweek. All photography credits are to Melissa Golden for Bloomberg Businessweek.

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