Opinion: Amazon has powerful impact on the Inland Empire economy

Amazon’s Slam operator Steve Morgan sorts through merchandise at the The Amazon Fulfillment Center in San Bernardino, CA., Monday, Oct. 28, 2013. The fulfillment center opened up a year ago with only half of the facility opened for business, now with the the million-square-foot center complete they will host a grand opening on Tuesday, with Gov. Jerry Brown in attendence. This distribution center has been celebrated in San Bernardino and at the state level as an example of job creation and growth. (John Valenzuela/Staff Photographer)

Anyone with any interest in the Inland Empire economy knows that Amazon.com has become a major local player.  In fact, it is now the region’s largest private sector employer.  Given the firm’s major role, I was able to interview Alexei Alexandrov, Amazon’s principal economist among others, to gain an understanding of the company’s policies and Inland spending which informed the discussion below.

John Husing, Ph.D., is the chief economist for the Inland Empire Economic Partnership.
John Husing, Ph.D., is the chief economist for the Inland Empire Economic Partnership.

To put the Amazon’s impact into context, it’s important to understand that in the five years from 2012 through 2017, the Inland Empire added 289,091 jobs, according to the state’s Employment Development Department data. That ranks second among California’s metropolitan regions behind only Los Angeles County. Importantly, it’s far more than either the San Francisco-San Mateo or Silicon Valley metro areas.

A key to the Inland area’s extraordinary growth was the 2012 opening of California’s first dedicated e-commerce operation by Amazon in San Bernardino. Since then, the company has grown to 10 such operations scattered throughout the region with two more scheduled for 2018 (Riverside and Eastvale).

Amazon’s 2012 entrance into the region has become a catalyst for a boom in Inland e-commerce operations that has helped the logistics sector add 52,767 jobs, according to EDD, or almost one in five of all new jobs created here in 2012-2017. Without this sector’s growth, the area would have remained in a prolonged recession.

Alone, Amazon conservatively accounted for at least 16,000 of those 52,767 new distribution jobs or 30 percent.

When a company brings spending to the Inland Empire, it has two overall impacts. First is its direct spending. According to Amazon’s economist, its 2012-2016 spending amounted to over $2 billion for workers, supplies, utilities, facility costs and security. Of this, in excess of $1 billion was paid to employees.

Second is the impact when the local workers and suppliers receiving these monies, in turn, spending it on goods and services to support themselves. Using U.S. Bureau of Economic Analysis modeling, as the firm’s direct spending from 2012-2016 moved through Inland outlets like local hair salons, restaurants, industrial supply firms and grocery stores, it generated a secondary impact totaling $2.7 billion.

However, the people working and managing these operations would have been unaware that some of the money coming to them initially came from Amazon. Combined, this two-step process meant Amazon had a $4.7 billion economic impact on the Inland Empire from 2012-2016 with $1.95 billion created in 2016 alone.

To provide some context, CNBC reports that Amazon’s third quarter 2017 North American sales were $25.4 billion. At its 0.8% profit margin ($8 per $1,000 in sales), its profits were roughly $203 million.

Also, to celebrate the company’s five year anniversary in San Bernardino, they contributed $50,000 and will help create a training program at Cajon High School to educate local students for moving up in the logistics world.  The importance of that type of effort was seen when an IEEP staff member toured one of Amazon’s huge logistics facilities where hundreds of robots and 1,000-plus workers interact to deliver online purchases.

A staff member walked over to the young man managing of all this technology and found he was a Bloomington High graduate who started at an entry-level position, stayed on the job and worked his way up to his technological position.

As long as the public continues its fascination with online buying, Amazon is going to continue growing. In Southern California, that expansion will be in the Inland Empire as it is the only place than can accommodate the large facilities needed for e-commerce.  The firm is a good match for our labor force since the U.S. Census Bureua indicates 46 percent of local adults have high school or less schooling.

As a result, the region will continue to see the employment, economic impact and community contributions of the company continue to expand the local economy.

John Husing, Ph.D., is the chief economist for the Inland Empire Economic Partnership.

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