The Amazon effect: What the $250M investment means for your business

The e-commerce giant plans to build a robotics fulfillment center in Davenport with 2.9 million gross square feet over five stories, creating 1,000 permanent jobs, city of Davenport and Quad Cities Chamber officials announced Wednesday.

While companies like Deere & Co., the Rock Island Arsenal and Arconic have grown over the past several decades, Amazon represents Davenport's single largest attraction of jobs at once, said Paul Rumler, president and CEO of the Quad Cities Chamber, giving the economy an immediate boost and making Amazon one of the Quad-Cities region's top 15 employers.

"Amazon will invest $250 million," Rumler said. "That’s a huge influx of money into our community. On an annual basis, this will have at minimum an economic impact of $148 million."

Rumler said that's based on Amazon salaries for 1,000 workers generating an approximate $35 million annual payroll, plus Amazon’s spending in the area to support the center. That investment, Rumler estimated, could spark another 400 indirect jobs through spin-off and related projects — such as "last-mile" delivery stations — as well as spur growth of existing businesses to support the facility and attract new logistics, warehouse and distribution operations.

"Amazon choosing this is going to be a calling card for the Quad-Cities region to say, ‘Look, we do have transportation network’ needed to get from Minneapolis to St. Louis to Chicago and beyond," Rumler said.

The vast majority of the positions created by Amazon in Davenport would be associates who work selecting, packing and shipping customer orders, such as books, toys, electronics and other household items.

Remaining positions would include salaried managers and human resources and finance professionals, with more than 100 out of the planned 1,000-plus jobs earning $60,000 or more. More than 40 jobs would earn $80,000 or more, according to city officials.

$16-an-hour starting wage

The new warehouse positions will offer a starting wage of at least $16 an hour, plus comprehensive benefits and a sign-on bonus of up to $1,000, according to Amazon, which recently announced pay increases across its fulfillment and transportation networks. City and chamber officials lauded the move, which they said have led to a positive ripple effect that compelled other businesses to raise wages.

Amazon’s pay increase to a $15 minimum in 2018 resulted in a 4.7% increase in the average hourly wage among other employers in the same labor market, according to a study by economists at the University of California-Berkeley and Brandeis University.

Small businesses as well will benefit from the buying power of Amazon employees, who earn more than double the federal and state minimum wage, city and chamber officials said.

Chamber and city officials brushed off concerns Amazon will siphon off workers from other companies and the pressure placed on other businesses to raise wages.

Alderman Kyle Gripp, at-large, said having Amazon in the Quad-Cities would make the local job market more competitive to the benefit of families and workers.

"We have that concern whether Amazon comes here or not," Gripp said of pressures to raise wages. "We have to figure out workforce in the Quad-Cities, in Davenport, in the state of Iowa, but it seems to be a national trend we have to address. We have to be competitive, but I don't think you stop seeking out employers because of it. It's more of, 'How do you attract people to live in your city and work in your city'" to grow the tax base and support business growth.

"And, hopefully, this will push us in that direction," Gripp said.

Site development

Amazon hopes to have the new facility functional by Labor Day 2022, according to the Greater Davenport Redevelopment Corporation.

The public-private partnership between the city of Davenport, Scott County, MidAmerican Energy and the Quad Cities Chamber of Commerce is responsible for managing and developing the Eastern Iowa Industrial Center, north of Interstate 80 and west of the Davenport Municipal Airport, where the five-story warehouse with a 640,000-square-foot footprint — 2.9 million gross square feet — will be built.

The GDRC in December announced it successfully executed an option agreement with The Shriners Hospitals to market the land for industrial development and move forward with site certification with the Iowa Economic Development Authority.

"The board of Greater Davenport Redevelopment has known for years that the key to landing a project of this magnitude was contingent on us securing an option to purchase the property from the Shriners Hospitals for Children," GDRC chairman Jason Gordon said. "This transaction ... enables Shriners to further their mission of providing care to sick children, while providing GDRC with a property that will be developed by Amazon and provide jobs and economic growth for many years to come."

Atlanta-based project developer Seefried Industrial Properties, Inc., acquired the land from the GDRC, and retained Ryan Companies as the general contractor for the project.

Crews have already begun moving dirt to prepare the site for development.

To offset the cost of about $3.9 million in road improvements for the site, Davenport has applied to the Iowa Department of Transportation Revitalizing Iowa's Sound Economy grant program. The grant would cover 60% of the cost, and the city will use general funds and bonds abated by a tax increment financing program to cover the other 40%.

"Their investment in our community shows that Davenport is the ideal place for companies to locate and grow," Davenport Mayor Mike Matson said. "We look forward to this exciting company coming to make our vibrant economy even more vibrant."

Workforce

Wednesday's news comes amid soaring profits as consumers flocked to online retailers during the COVID-19 pandemic. Amazon posted $108.5 billion in sales for the quarter ending March 31, a 44% increase in year-over-year growth, smashing Wall Street analysts expectations for first-quarter earnings and revenues. Amazon reported record earnings per share of $15.79, up from $5.01 per share, and profits of $8.1 billion.

"Obviously workforce is the top issue on just about every employer’s mind,” Rumler said Wednesday of difficulties employers across the region and nation are having hiring and attracting workers. "That existed just before the pandemic, and it’s going to continue. ... Wherever Amazon was going to locate this project, there was going to be workforce pressure. We’re confident that we can actually solve some of that workforce pressure.”

He estimates there are 30,000 recent college graduates within a 60-mile radius of the Quad Cities.

"We’re talking about anybody with a college associates degree or certificate all the way up through a bachelor’s degree, so we have a wide group that we can attract here within our labor shed,” Rumler said. “Our laborshed market expands all the way up to Cedar Rapids, Dubuque, Galesburg and we draw people from outside the region who want to come work in the Quad Cities area."

Rumler, too, anticipates construction of additional workforce housing. Gripp said he's already heard from some developers who are planning to build more housing in northwest Davenport in a response to the new jobs.

"Inventory is low so you’re going to see more apartments, more housing in the works," Rumler added. "We’ll be encouraging developers and cities to be looking at what their housing stock looks like and how they encourage a mix of housing (throughout the Quad-Cities) to meet the demand that’s going to be happening."

Labor practices

City and chamber officials also lauded Amazon for its commitment to its employees, despite scrutiny it has received for its labor practices over the past several years as it's become a larger employer.

“They’re concerned their employees are valued," Mayor Matson said of Amazon.

But in spite of solid wages and generous benefits, Amazon has quickly cycled through employees, the New York Times reported. It's global workforce fell from more than 1.29 million at the end of 2020 to 1.27 million full-time and part-time employees at the end of March, according to its latest quarterly financial report.

An a recent analysis of OSHA data compiled by a coalition of four major labor unions found that Amazon's focus on speed comes at a cost to the company's workforce.

The report by the Strategic Organizing Center, a coalition of labor unions representing more than 4 million workers, states rate of workplace injuries at Amazon is nearly two times that of other non-Amazon warehouses and storage facilities.

In Illinois, multiple Amazon warehouses have injury rates even higher than the national rate, Illinois News Connection reported.

Amazon announced in May it was rolling out a new safety and injury-prevention program, piloted since 2019, to all Amazon operations sites in the U.S. before year-end as part of a $300 million investment in worker safety.

The company aims to cut recordable workplace injury and illness rates by 50% by 2025.

"The health and safety of employees is Amazon's number one priority — and has been from Day One," according to a statement from city of Davenport and chamber officials. "Amazon works closely with health and safety experts and scientists, conducts thousands of safety inspections each day, and has made hundreds of changes as a result of employee feedback."

Officials, too, touted Amazon's paid family leave policy and career training and tuition-assistance programs.

"It will be interesting to see where their hiring is actually coming from," said Alderwoman Judith Lee, Ward 8, who represents the area where the fulfillment center will be built. "It can't hurt, that's for sure. It's a lot of jobs, and I'm really interested to see how it plays out."