Amazon are in the news again after announcing they are set to hire 10,000 new workers. In a normal world, people would celebrate this; indeed, before we left the EU, many people were fearful that corporations would stop investing in the UK. Now, with the devastating impact of Covid-19, we should be more jubilant than ever that companies have enough faith in the British economy to create so many jobs.
Sadly, we don’t live in a normal world. Staff writer for the Tribune, and self-avowed democratic socialist Grace Blakeley has recently explained to her followers that these jobs do not come from the innovative talent that Bezos has, rather they route from “exploiting workers, crushing unions, avoiding tax, and cosying up to politicians”.
Is she right? Do we need to re-evaluate our praise for such investments in light of these heinous crimes? Thankfully, these accusations are overblown and largely unfair.
So, if it wasn’t through exploitation then how did Jeff Bezos become a multi-billionaire? An answer to this lies in a revealing video from 1997. Here, Bezos explains Amazon’s story. When working for a hedge fund he discovered that web usage was growing by 2300 per cent annually. This presented an opportunity for profit. This wasn’t something that only he knew – anyone could see this.
However, what Bezos identified is that this fact could be used to sell books. There are millions of different books, but each shop could only ever sell at most a few thousand different items. An online store offered what a physical one couldn’t. Anyone could now buy whichever book they wanted, without scouring through hundreds of shops and libraries in the hope of finding the exact book they were looking for. Consumers would benefit – and so would Amazon. Consequently, the value of his shares grew. Today, those same shares that were initially worth next to nothing account for the vast majority of his wealth.
Blakeley’s argument is that it was not meeting consumer demands that got him there. She argues that Bezos has exploited labour laws to gain a competitive advantage. However, this is not consistent with reality. In 2018 Amazon made the voluntary choice to increase its internal minimum wage to $15 an hour – over double the federal minimum wage. Even in the UK, where minimum wages are quite a lot higher than in the US, Amazon still sets an above market rate minimum wage of £9.50 an hour (or £10.50 an hour in London). It seems the pay is actually pretty good.
Of course, none of this excuses the poor working conditions. Hundreds of stories have come out over the last few years, ranging from timed toilet breaks to worryingly high rates of injuries. These conditions are unacceptable and more should be done to provide better conditions for the people who work there. However, let’s be realistic.
While we should support fair conditions for workers, let’s not kid ourselves that the minute workers’ conditions are improved Amazon will lose their competitive advantage. Fundamentally, Amazon is a company that routinely provides better customer service than any of their competitors, and at better prices.
The tax issue must also be addressed. People often ask why it is that a company who makes £14bn in revenue only paid £290m in tax in 2020. But this mistakes how taxes work in the UK. We don’t tax revenue in this country -– we tax profit. Therefore, companies with high levels of investment and low profit margins end up not paying much tax. Discouraging a company from growing and taking on more employees through our tax system is the last thing we want to do.
Moreover, as Lord Clyde once explained: “No man … is under the smallest obligation, moral or other… to arrange his legal relations … to enable the Inland Revenue to put the largest possible shovel in his stores”.
Amazon’s duty is to pay whatever tax they legally have to. If the Government arranges their institutions in a way that allows Amazon to not pay much tax then it is the Government we should blame. Truth be told, few of us, including myself, would wish to pay more tax than the minimum we legally have to.
Quite bluntly, Jeff Bezos did not become the richest man in the world through exploitation. To put it in the terms of 18th century economist Jean Baptiste Say, Jeff Bezos has shifted resources from an area of lower productivity into an area of higher productivity. He is the ultimate entrepreneur and all of us are reaping the benefits from his ingenuity. So, let’s celebrate the extra 10,000 jobs his company is creating in the UK and hope he creates even more in the future.