Job wars: Employers wince as Amazon warehouse rises in Indiana town
ELKHART, Ind., April 7 (Reuters) - What happens when Amazon.com Inc (AMZN.O) plops over 1,000 new jobs in one of the hottest blue-collar job markets in the country?
The RV Capital of the World is about to find out.
Like many other manufacturing hubs around the United States, this patch of northern Indiana about 100 miles (161 km) east of Chicago has struggled to fill factory jobs throughout the pandemic, due in large part to an unprecedented boom in the recreational vehicle industry that dominates the local economy.
New U.S. manufacturing jobs were minted at a rate of about 32,000 a month over the past year - the swiftest clip in more than a quarter century - but the regional variations are sizable. Around Elkhart, whose population is about 52,000, the share of the total workforce that is employed in factories and manufacturing is 51.5%, compared with a share of 8% nationally, according to the Labor Department.
The region's jobless rate sank to 0.9% in December, the lowest rate in the country, according to the Labor Department, though it has since edged up slightly.
That is why when Amazon announced in October it would open a sprawling fulfillment center as well as a smaller last-mile delivery station in town, many of Elkhart's existing employers winced.
"I'm not 100% clear on the thinking of putting another 1,000 jobs in this tight labor market," said Bob Martin, chief executive of Thor Industries Inc (THO.N), the country's largest RV maker, which has plants dotted around Elkhart.
The new jobs have roiled all types of employers. Amish Shah, chief executive of Kem Krest, a distributor of automotive chemicals and accessories such as paint pens used to touch up scratches on cars at auto dealerships, said, "The community at large is up in arms."
Shah estimates his 700-employee company is short 100 workers, despite constant recruiting, and noted he has gone to new extremes to retain employees and keep them happy. The company recently opened a free medical clinic at its main warehouse, for instance, and last week held a contest for workers with six months of perfect attendance. Top prize? Free use for a year of a new Chevrolet Trailblazer SUV, which typically retails for over $26,000.
"We have people who have already gotten calls from Amazon, saying 'come work for us,'" said Shah, adding that no one has jumped ship for Amazon just yet.
Amazon's new warehouse is rising from a muddy field in one of the most prominent spots in the county - just across the freeway from the RV Hall of Fame and Museum, a local landmark. When it opens next year, it will have space equal to 14 football fields. The other facility, designed for last-mile deliveries, has yet to break ground but is also expected to open in 2023.
Amazon declined to discuss whether it worried about filling jobs in Elkhart's tight labor market - or whether it expected to pay more than usual to attract willing hands.
The company, which has faced tough criticism for working conditions in its facilities and is battling labor unions seeking to organize its workers, has said only that its jobs come with an average starting pay of $18 an hour. Just last week workers at an Amazon facility in New York City voted to form a union despite the company's campaign against it. read more
The company often emphasizes the other benefits it offers when it creates new jobs, including health benefits and aid for continuing education.
"Amazon is proud of this job creation and we also think employees will be excited to grow their career at Amazon in the Elkhart community," said spokesman Andre Woodson, in a statement.
Elkhart's tight job market is driven largely by the booming RV industry, where demand has soared as Americans sought new ways to travel while staying away from strangers during the pandemic. read more
An estimated 30,000-40,000 workers commute to Elkhart County each day for work, giving the otherwise rural-looking roadways regular doses of heavy traffic. The county's total workforce is about 115,000, according to the state's Department of Workforce Development, so the commuters are vital to filling existing jobs, which numbered just under 140,000 at the end of September, federal employment data showed.
"Just looking at the numbers, it doesn't make a lot of sense. They already have far more jobs than workers," said Michael Hicks, an economist at Ball State University who studies Indiana's industrial economy.
WHO WILL COME?
A key question is what the Amazon jobs will ultimately pay. Many local officials expect the company will need to pay more than the $18 an hour average, given the extremely tight labor market. Elkhart County ranked No. 4 among the largest 344 U.S. counties in year-over-year weekly wage growth as of the third quarter of 2021, the latest Labor Department data shows.
"I think they'll do what they have to do to meet demand (for labor)," said Chris Stager, president of the Economic Development Corporation of Elkhart County.
Stager and other local officials said the region faces a daunting challenge even without adding a big new employer. Housing is in short supply and more companies in Elkhart have started expanding in other regions simply to find enough workers.
Thor Industries is one of them. The company is building several factories about 30 miles away in Sturgis, Michigan, as part of its latest expansion and recently acquired a company in Alabama that gives it access to a more plentiful pool of labor.
"Amazon is competition, and sometimes competition makes you a better company," said Thor's CEO, Martin.
But analysts believe the big RV makers are more insulated from losing workers to Amazon than many other types of employers. The RV industry uses a wage structure that offers production-driven incentives on top of relatively low hourly rates that can massively boost factory wages during good times, as is the case now. It is not unusual for assembly workers in plants to make the equivalent of $50 or more an hour.
One question is how long the boom lasts.
"The music is going to stop at some point," said Pete McCown, president of the Community Foundation of Elkhart County. High gas prices and rising interest rates could put a damper on the industry, though there is no obvious sign yet of a major slowdown.
To be sure, there remain many workers in Elkhart who would likely get a raise by jumping to Amazon - including many who earn less in restaurants and other lower-paid service industries.
As of May 2021, the county had about 6,500 food-service workers earning an average of $12.46 an hour, Labor Department data released last week showed. In all, about half the county's workers then earned less than $19 an hour. While that wage has certainly risen since then given the competition for limited workers, it would still leave tens of thousands in the county earning less than the $18-an-hour starting average that Amazon promotes.
Jason Lippert, chief executive of LCI Industries (LCII.N), the largest parts supplier to the RV industry, said companies in the region that offer competitive pay and good working conditions should not worry. He includes LCI in that group.
"The restaurants are the ones who always get blitzed," he said, "because they have the lowest pay."
He thinks Amazon will burnish the region’s "glow."
"Others will look at the county and say, 'Wow, this big tech company went there, so there must be something good in Elkhart.'"
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