Should public policy try to rein in Amazon?

Question

Bernie Sanders and Donald Trump agree on one thing: Amazon CEO Jeff Bezos is bad. Sanders introduced a bill to tax Amazon and other big employers who pay low wages. I wrote this blog post, https://www.taxpolicycenter.org/taxvox/amazon-isnt-bad-employer-stop-bezos-bad-bill, about why the Stop-BEZOS bill is terrible economic policy. Economists who commented agreed that the bill was counterproductive, but some argued that Amazon's anti-competitive practices hurt workers (and are kind of evil). For example, Amazon likes to locate its facilities in rural areas where it has monopsony power and can pay low wages, but it's not clear to me that this hurts workers.

I'd be curious what I/O and labor economists think about this. Is there a sensible version of Stop-BEZOS?

Answer 1

I was interested to read a NYTs article on the topic in which I learned the new name "Hipster Antitrust." https://www.nytimes.com/2018/09/07/technology/monopoly-antitrust-lina-khan-amazon.html I can't say that I learned how antitrust is being reframed from reading the article, but maybe that's a place to start.

Answer 2

Monopsony and increased concentration of market power is said to be correlated with low labor share in this paper...
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3177079

So the question in this post is a good one.

For me, the prime directive of economics is to maximize net social benefits. So, low wages and low taxes paid increase social cost to most workers and their families.  
The government (federal or state) should raise the minimum wage. This will increase net social benefits of the economy.
A paper to read about social cost of labor in relation to raising the minimum wage is...
https://research-repository.griffith.edu.au/bitstream/handle/10072/35628/66037_1.pdf;sequence=1

Answer 3

I am not a labor economist, but am a PhD working in the private sector.

My personal belief: in an optimal world people would get a UBI, say 10-15k/year, and would not be forced to work 40 hours a week to get health benefits. I think this would be a win win - industry would replace more workers with capital and those remaining would be more productive and spend less time fixing the messes of those that create more work instead of doing it. If we had this, managers would be less inclined to keep someone out of pity as well - for despite all the talk of harshness of bosses, what I have seen more in white collar is "idiot keeps job because is reasonably liked and has family to take of."

So I say that because I do not think Amazon is the reason for all those problems. To me, the concern I have over concentration of market power is if that market power turns around and buys political power. In a pure sense, I can envision it being socially optimal to have one mega corporation operating a nationwide autonomous drone logistics network (which is what Bezos sees as the future - and it is obvious that is going to happen). I could even envision the political power being important to getting to that goal because there are a lot of laws that need to be written if we are going to have an autonomous drone logistics network - the hurdles are not technical at this point they are legal and societal acceptance.

But where I could be concerned is when the power gets out of hand and they start pulling the levers for whatever reason they want. What if Amazon becomes the only practical delivery agent for all consumer goods. They could be like railroads on steroids if they get into autonomous drones that can ferry passengers as well. Before we know it, they could be dictating things that we as consumers may not put up with if we didn't have the huge switching costs that comes with having a sole provider.

I don't know what those "things" are. But look at Facebook. Innocent picture sharing site right? Well they were slow to react their product being used to help massacre civilians in Burma (or whatever it is called now). Amazon is fairly innocent I think so far.

I do fault them for having crappy labor standards at their warehouses but I think its because they view humans as a unfortunate crutch they have to rely on until they can figure out full automation (much like Uber, which is why they don't really care about treating their drivers like carp (the fish is uncensored apparently)- they think its a transitory placeholder while they gather data). I do wish labor standards were such that you couldn't fire someone for small reasons and then re hire them back as a form of punishment.

But as far as the pay and hours, well I go back to the beginning. I think society should set a bare minimum subsistence, such that you could live in a 1 BR apt with a roommate and work menial jobs, and still be able to get by. I'm not talking about free cell phones and internet. I'm talking raman noodles, a mattress, and a roof. If you had that, employers would need to offer more to menial workers to entice them to get out. In turn, they could be more selective and also more incentivized to switch to more robots.  As it is now, Amazon's primary whip is the fear of destitution, which is the market power that all purchasers of labor have over us.

As an aside, take it from someone that has worked white collar/Finance for 5+ years. I am in favor of a 50% tax on corporations. Heck, 75%. No reason other than this. It would finally force them to take a hard look at all the made up/BS jobs they have given their buddies as rewards for showing up for a few years. Maybe shareholders would suddenly realize the company has about 2-3x as many line managers as they need. At places I've been, the ratio of managers to workers ("individual contributors" as they call it) makes the dreaded "administrator to faculty" ratio look benign. They all put manager at titles of people that they like, give them 1-2 people that could very well do their jobs unsupervised, and they all go sit in meetings with others in suits all day.

I am joking of course about the tax. But its not wrong, the wastage.

Comments

Your point of view is really amazing. But in my opinion an autonomous logistic business in first instance will pay wages in other companies that produce their machinery and wages and profit are the only factors of cost in an economy under capitalism (a company pay wages and a cost to other companies that pay wages and costs from other companies again and again). In second instance the profit would be really great and good taxes can create employment in other areas. In an autonomous world under capitalism the profit of the companies would be the wages of the people.
I think that work is good for us the human being (With good wages and short workdays). So I think that we have to keep improving our knowledge and abilities because our work will be necessary forever.

Answer 4

The key questions around regulation for me focus on if regulation is are consumers harmed.  This question is nuanced based on short-term and long-term effects.  


Amazon (and other tech companies like facebook) are keenly aware of their competition and often avoid it through acquisition.  Amazon recognizes is started off just selling books, and then used that to become a marketplace for everything.  So anybody that gets good at selling anything, and Amazon wants to buy them or shut them down.  

Take for instance Diapers.com.  Amazon saw they were having some success and wanted to acquire them.  When they started meeting with Amazon, Amazon aggressively cut their prices to encourage the sale.  This is a rare example of predatory pricing, as those inside diapers.com estimate Amazon was losing $35m a month on diapers alone.  When Walmart emerged as another potential buyer, Amazon cut their prices even lower.   In the short run this behavior benefits consumers, but in the long run Amazon might raise their prices more when their competition is gone as long as barriers to entry are  high .  And this isn't the only Amazon exerts market power.  They also do so in the pricing of goods on its website.  

http://www.slate.com/blogs/future_tense/2013/10/10/amazon_book_how_jeff_bezos_went_thermonuclear_on_diapers_com.html