Sep 13, 2018
Food Stamps For Amazon Workers
Jeff Bezos is now the richest man in the world and quite possibly the richest man ever to have lived.
Prior to founding Amazon he worked at DE Shaw, a wildly successful hedge fund. It was his grounding in finance, and how the capital markets worked, that I believe truly gave him an advantage over many of his peers. He was really the first to recognize the changes that were taking place in the financial markets and capitalize on them. After the banks merged in 2008, larger institutions with greater needs for capital were more able to access funds than smaller companies.
Finally, his company truly benefited from the changes that took place in the student loan market that enabled students with no sources of income to borrow massive amounts of debt. Debt that would later be used to buy his products.
The cost of college for prior generations was quite affordable. However, once the government got involved in the student loan markets, costs skyrocketed. The costs further exploded when Obama came into office and made sure the government became the only source for all student loans. Once universities figured out that the government would lend out whatever the rate, tuition costs exploded.
In generations past, college students worked in the the summer time to pay for some of the college, but wages from summer jobs nowadays can barely put a dent on tuition. In generations past most student dorms were spartan in nature. Televisions, like phones, were a luxury and most computers were housed in the campus library.
Fast forward.
Today, enter any dorm room and you will most likely find the following:
- Every student has a Facebook and or Instagram account to stay in touch with their peers.
- Every student has a laptop most likely made by Apple.
- Every student has an Amazon account for books, movies and more.
- Every student has a Netflix account to watch movies,
- Every student uses Google as their main search engine.
It is no coincidence that these companies (F.A.A.N.G stocks) are some of the best performing stocks over roughly the last ten years which coincides with the government controlling the student loan market.
In the business world, contracts from the U.S. government have always been the most prized asset a company could have. Its why an industry of lobbyist was created to get these contracts because doing so meant a company could flourish and grow for years. But the F.A.A.N.G companies got the next best thing. They got unlimited funds from the government provided to students who loved to buy their products.
This business model was so good for Amazon that they lost money for years while at the same time destroying the retail sector. There was no pressure whatsoever to make money because Wall Street gave them unlimited amounts of cash while students gave them tons of business.
This model made Jeff Bezos the richest man on the planet.
Given the enormous return that the stock has generated for its holders, one would naturally think that surely many of his employees did quite well. But alas this did not happen. A significant portion of workers at Amazon are on government assistance… including food stamps. In fact Amazon is one of the top employers in five states whose employees receive the most amount of SNAP benefits (aka food stamps)
How can this even be possible?
What makes it more unbelievable is that the government actually pays companies via tax credits to get people off of the government roles if your hire them. And even with that economic incentive from the government, Amazon still has many Amazon employees that don’t make enough to cover their bills.
But Amazon is not the only one guilty of this. The founder of Uber is worth something close to six billion dollars yet has many drivers that can’t make enough money driving for them. Think I am the only one talking about this issue? Watch this interesting clip between a driver and its founder over this great wage disparity.
So, two of the main stalwarts of innovation that has benefited the U.S. economy over the last ten years have not been able to create a fundamental benefit for many of the people involved in, and perpetuating by their efforts, their personal success.
The Republicans cheer for companies like this as it shows the innovation and power of free markets. Yet, they don’t lament the plight of its workers who can’t make enough to get by. Worker bees, really. The Democrats, for the most part, remain quiet on the issue because both founders have the correct political Left calling cards. That’s what gets them a pass on this travesty.
Clearly Amazon benefits by this arrangement. It can pay its employees rock bottom wages knowing the government will subsidize any shortfall. Amazon keeps all the profits, while the tax payers incur all the costs.
Never would I have thought that I would find myself on the same side as Senator Bernie Sanders, a vocal critic of Amazon and its CEO, Jeff Bezos. Yet, jut recently, Sanders announced that he would be introducing legislation that would impose a 100% tax on companies with more than 500 employees on public assistance, according to The Post. For example, if an employee draws $100 from food stamps, that money would be taxed against that individual’s employer.
We live in strange times where a capitalist like me is siding with a socialist like Bernie Sanders. But if we are to pull ourselves out of the mess in which we find ourselves this can’t be about party or affiliation. It has to be about truth and personal responsibility.
Amazon is benefiting in ways that most companies could never dream of: easy funds from the capital markets, students with unlimited funds (thanks to the government) and subsides for their workers.
What a racket…and what a disgrace.
Steve
Originally published at abovethefraypodcast.com on September 13, 2018.
