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Elkhart County’s planned Amazon facility wants to hire 1,000 workers. But will it be able to?

By Jakob Lazzaro, IPB News | Published on in Ball State, Business, Economy, Statewide News
A rendering of the two facilities in Elkhart County, which Amazon says will create 1,000 full-time jobs. (Photo: Amazon)

Last month, Amazon announced plans for two facilities in Elkhart County — a robotics fulfillment center and delivery station — both projected to open in 2023. And in the news release, the company said it plans to create 1,000 full-time jobs.

But like the rest of the United States, Indiana companies claim they can’t find enough workers. And that’s especially true in Elkhart County, which currently has an extremely low 2.4 percent unemployment rate according to the most recent state data.

For comparison, St. Joseph County is currently at 3.8 percent unemployment. Berrien County is at 4.8 percent, and all other WVPE listener counties range between 2 and 5 percent unemployment — LaGrange is the lowest at 2 percent, and St. Joseph County, Michigan is the highest at 4.9 percent.

In the announcement, Amazon said it will offer an “average starting wage” of $18 an hour plus benefits for full-time employees including health, vision and dental insurance, a 401(k) with 50 percent match, up to 20 weeks paid parental leave and Amazon’s Career Choice Program, where the company will pay full college tuition “for its front-line employees.”

But that average starting wage is less than what Elkhart County RV companies are offering — several months ago, many boosted pay to $20 or more an hour plus benefits in an effort to attract workers during a booming year for the industry.

So, what is the incentive for a worker to choose Amazon over a job in the RV industry that will pay more?

Chris Stager is the CEO of the Economic Development Corporation of Elkhart County. He said workers could be drawn to Amazon due to the benefits and more flexible scheduling, and specifically pointed to parental leave and the college tuition program.

“Those types of benefits are a little more contemporary to other places in the country,” Stager said. “Those are things that are not typical here.”

And he said Amazon could always pay more if it runs into trouble hiring workers.

“Amazon is aware of what they’re going to do to have to compete for labor,” he said. “As we grow, the wages continue to grow — and we’ve seen that wage growth over the last couple of years — Amazon will have to compete just like everybody else has to compete.”

The county is aware of the “challenges” with labor, Stager said, but those “are everywhere right now.”

“We tried to be sensitive to that,” he said. “But this level of investment, this type of technology is desirable for a lot of reasons.”

Jeff Rea, the President and CEO of the South Bend Regional Chamber, agrees. He said Amazon will “very quickly find out” whether $18 an hour is enough.

“My guess is they’ll probably have to pay a little bit more than that,” Rea said. “I think that’s what ultimately happens. They need to attract a workforce, and if $18 doesn’t get them there — and the benefit package they’re offering — they’ll have to end up paying more.”

In addition, Rea said an employer of this size will be drawing people from across Michiana, not just Elkhart County.

“Can you get employees to come from Berrien and Cass and St. Joe and Marshall and LaGrange counties to work there, and if so, is $18 enough to get somebody to drive that far for work?” Rea said. “I would call it a supply and demand kind of thing.”

And Rea said Amazon could draw workers with higher wages when compared to industries such as fast food or retail.

“If Taco Bell is paying $15, and Amazon is paying $18, maybe someone doesn’t want to work at Taco Bell or McDonalds anymore,” he said.

Overall, he called it a positive development for the region.

“They really could go about anywhere, and they found the conditions in our region to be right — and I think that’s good,” he said. “You don’t enter these decisions lightly if you are an Amazon. They have studied this market pretty extensively to understand what they need to do.”

But Michael Hicks, an economics professor and director for the Center for Business and Economic Research at Ball State University, doesn’t think Amazon will pay higher wages if it can’t find employees.

He expects labor market conditions will be similar in 2023, when the facility is projected to open. And if they are?

“Amazon’s not going to be able to hire people at $18 an hour,” Hicks said. “They’re just going to invest in automation until they end up with a 150-employee facility instead of a 1,000 one. They’ll claim labor shortage and just bring in an automated warehouse.”

The wages of those workers will be higher, Hicks said, but it’s still a significant change from the original number.

“They’ll be servicing equipment, they’ll be technologists helping write and maintain the code that operates them, they’ll be doing other technologically oriented work,” Hicks said. “Not stuffing packages, which is what the $18 an hour workers are doing.”

Stager said the county is excited about the project because of the use of automation.

“It correlates very well with some other initiatives we have going on in the county — for example, we’ve got an advanced automation simulation lab that’s been installed in Ivy Tech,” Stager said. “We’re trying to support automation, generally speaking.”

Another benefit, Stager said, is that Amazon will bring diversity to Elkhart’s economy, which is heavily focused on the RV industry.

The county hit a high of 20.6 percent unemployment during the great recession, and officials want to prevent that from happening again.

Hicks agrees that Amazon will be more stable in a recession.

But he also said the facility doesn’t address the long-term threats Elkhart County faces from automation.

“Almost all of the jobs in the RV industry can be automated away entirely and will be automated away entirely sometime in the next decade or two,” Hicks said.

And he said jobs in the logistics industry — like at an Amazon warehouse — are also at very high risk of automation.

“So, you bring in an Amazon warehouse, you don’t do anything to your automation risk,” Hicks said. “You actually worsen it, as you now have more jobs that are higher-risk.”

Hicks does agree with Stager that free college tuition could help attract workers. But he said it’s unclear how many employees will actually take advantage of them.

“The question is how many Amazon workers, they’re working these odd shifts, are going to be enrolled in part-time college?” Hicks said. “My guess is that’s a low single-digit share of workers. Out of 1,000, if there are 100 at any given time who are engaged in this, I would be shocked.”

He also criticized the incentive package the county government offered Amazon.

Stager said Amazon was not offered anything out of the ordinary, and the county does more than a dozen similar transactions per year. There are two main components — firstly, Stager said the company is getting a 10 year “phase-in” on real estate property taxes.

Hicks said legally, that’s an abatement — which means Amazon will pay zero real estate property taxes the first year, 10 percent the second year, 20 percent the third year, and so on.

Hicks said the value of the land will increase over time, but the value of the buildings and other infrastructure investments on it will decrease via depreciation. He said that’s typically over eight years — meaning that after 10 years, it will be at 30 percent of the original value.

“If they put a billion dollars in now, it’s only going to be worth $300 million in 10 years,” Hicks said. “They’ll pay tax on that $300 million in 10 years. The problem is that’s effectively a 1 percent tax rate.”

Secondly, Stager said the county had been planning a road connection between County Roads 17 and 19, just north of the Indiana Toll Road, and that it was in process about a year ago.

But to accommodate the Amazon facility, the road needs to be relocated north and improved, along with adding utility connections. It’s expected to cost about $15 million.

And to pay for those improvements, Stager said the county created a special district around the facility called a tax increment financing district, or TIF, which will use the revenue from Amazon’s personal property taxes to fund the needed infrastructure.

But Hicks said that means the money won’t be going to local governments for schools and other services.

And with an unemployment rate of less than 3 percent, he said many of the workers Amazon hires already live in the area and will be commuting into Elkhart County for work while living somewhere else — straining county infrastructure while not paying county taxes.

“Nobody’s going to move to Elkhart to take an $18 an hour job — it’s just not going to happen,” Hicks said. “There’s an $18 an hour job open in every county in Indiana right now.”

According to 2019 income tax data, Elkhart County already has a net inflow of 34,289 workers per day. That means about 20 percent of Elkhart County workers have chosen to work in the county, but live — and pay taxes — somewhere else.

Hicks said that in his view, a better use of tax dollars would be to improve county institutions to increase the desirability of the county as a place to live.

“It sounds like a great deal until you do the arithmetic,” Hicks said. “And the arithmetic says the benefits that are flowing to the residents of Elkhart County are negligible, and the benefits that are flowing to Amazon are huge.”

But back to the workers themselves — Amazon has also faced controversy surrounding how they treat their employees, including reports of delivery drivers urinating in bottles due to pressure to meet quotas, warehouse injury rates double the national average and anti-union tactics. Could that add to the hiring challenge Amazon may face in Elkhart?

Stager, Rea and Hicks don’t think so.

“Is it perfect? No. It probably isn’t — and there are probably some things they can improve on,” Rea said. “At the same time, I’ve talked to Amazon workers who’ve said it’s a great place to work.”

When contacted for comment, Elkhart County Commissioner Suzie Weirick acknowledged the “likely” hiring challenges Amazon may face.

“As you well know, this is a national problem and Elkhart County is not unique,” Weirick wrote in an email. “After a discussion with the EDC [Elkhart Economic Development Corporation] board yesterday who also employ many individuals in the area, the attraction will come down to workplace culture and benefits.”

Weirick also wrote that the county will “continue to attract a stronger workforce and retain great businesses because of Amazon.”

“It won’t be easy getting there,” she wrote. “But anything worth having is never easy. Elkhart County strong means something no other place understands.”

WVPE also reached out to Amazon for an interview, but the company declined. Instead, spokesperson Andre Woodsen sent the following emailed statement:

“We’re excited to be part of the Elkhart community and create over 1,000 great jobs that provide competitive pay and comprehensive benefits, paid time off, education and skills training, as well as opportunities for long-term career growth. These jobs support communities of all sizes, from large cities like Indianapolis to small cities like Elkhart.”

In the email, Woodsen also said that Amazon has created more than 20,000 jobs in Indiana since 2010 and hired more than 450,000 employees across the United States since the start of the COVID-19 pandemic.

Hicks said he wishes the company luck in Elkhart County.

“But I’m sure the RV guys are chuckling at the idea of being able to pick up that many workers,” he said. “I think Elkhart is just another community that has welcomed Amazon in, only I think they’re going to find it’s not as happy a relationship as one had hoped.”