Focus: Job wars: Employers wince as Amazon warehouse rises in Indiana town

LCI Industries

07/04/2022 11:00

By Timothy Aeppel
    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.
    
    RV BOOM
    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.  urn:newsml:reuters.com:*:nL2N2VZ1CT 
    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.  urn:newsml:reuters.com:*:nL1N2SY2H0
    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.
    
    'A GLOW'
    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.'"

 (Reporting by Timothy Aeppel in Elkhart, Ind.;
Editing by Dan Burns and Matthew Lewis)
 ((Tim.Aeppel@thomsonreuters.com;))