AMAZON.COM AND THE RETURN OF THE OLD ECONOMY.

Modern day union busting on the doorsteps of internet territory.

When I first encountered Alan Barclay, he still believed in Amazon.com. It was mid-January, and we met at a downtown Seattle pub to discuss his efforts to help organize Amazon’s customer service staff into a union–and thus give organized labor its first foothold in the Internet economy. Barclay, 39, was an unlikely rabble-rouser: He has a bachelor’s degree in anthropology and, with his thin goatee, looks more bohemian than blue-collar. But he was a key figure in the campaign, having spent the last few months sending e-mail messages to co-workers, drafting union propaganda, and quietly arranging meetings in co-workers’ basements. He could even claim some credit for the campaign’s name, “Day 2”–a play on Amazon’s unofficial corporate motto that it is always “day one” at the fledgling Internet retailer.

In Barclay’s mind, the drive to form a union wasn’t an act of disloyalty but an act of faith–not just a campaign for financial security but an effort to return the company to the values it had once embodied. Barclay considered himself an “Amazonian.” He wanted to bring the company back to its early, heady days when philosophy majors eagerly manned the phones and managers worked hand in hand with frontline employees. Barclay didn’t just consider Amazon’s recent turn toward corporate hierarchy, rigid work rules, and outsourcing a personal betrayal; he considered it a betrayal of the company itself. “Day 2,” said Barclay, “would restore what I once felt I had at Amazon.”

A week later, Barclay, a telecommuter, received an e-mail message at home from Bill Price, Amazon’s vice president of customer service: Amazon was terminating nearly all of its Seattle customer service workforce–some 400 employees in all, Barclay among them. Although rumors about downsizing had been circulating for weeks, the move came as a shock; Price had assured nervous employees just six weeks earlier that the company had no immediate plans for layoffs. What’s more, the doomed Seattle division included some of Amazon’s most senior employees–people like Barclay, a company old-timer at 33 months–whose institutional knowledge and superior skills supposedly made them indispensable to Amazon’s mission of becoming the “earth’s most customer-centric company.” Of course, those same qualities also made them some of Amazon’s most expensive, and demanding, employees. And that, apparently, made them expendable after all. “I want you to know that this was a very difficult decision for the company to make, but the unfortunate reality is that it is simply a matter of economics,” read Price’s e-mail message. “Seattle is our least cost-effective location, in both labor and real estate costs, and we need to consolidate our operations across the US.”

After absorbing the news, Barclay started typing. His job at Amazon had included corresponding with disgruntled customers. Now he fired off an angry e-mail message of his own. “As an employee,” he wrote me, “any illusions I might have had about the nobility of Amazon.com have been shattered.”

Was Barclay hopelessly naïve? Perhaps. But he wasn’t alone. Only last year, the vision he embraced, about Amazon in particular and the new economy in general, was widely peddled by management gurus, business magazines, and Washington politicos.

You remember the story line. The new, information-age economy required workers with greater skills than, say, your typical stock boy or secretary. To attract such people, companies would offer lavish benefits and unparalleled creative freedom. The regimented, top-down management structure of yesteryear would disappear, replaced by a new paradigm of fluid, democratic workplaces where even frontline workers received autonomy, high wages, and partial ownership of the company via stock options. If workers changed jobs frequently, as seemed likely, it would be on their own terms–and for their own benefit. “The new economy,” wrote Alan Webber, founder of the business magazine Fast Company, “would celebrate individuality, workplace democracy and creativity over the old economy mind-set that put a premium on the organization man, corporatism and sheer size. In the new economy, one individual could make a very big difference…. And, for that effort, that person would receive not just a salary–the old economy’s fair day’s pay for a fair day’s work–but also a share in the value created by his or her ingenuity, intelligence and innovation.”

Washington struggled to catch up. On both sides of the aisle, politicians and pundits demanded that government embrace the ethos of the new economy. What, after all, is the point of unions, with their antiquated, bipolar view of management and labor, in a world where that distinction has blurred to unrecognizability? The workforce of the new economy would consist of technologically savvy free agents who didn’t need–in fact, would be confined by–the labor unions and government regulation that had protected their parents.

Sometimes this new political climate led to the explicit rollback of existing labor laws–as in 1997, when the high-tech industry convinced the state of Washington to exempt certain contingent workers from overtime compensation. Often it just resulted in bromides. If you shilled for General Electric, you were a corporate apologist with your eye on the bottom line. If you shilled for Silicon Valley, you were forcing an anachronistic political culture to accept the future. “There will be a need to change the way we think about the workforce,” Republican Representative Pete Hoekstra announced in 1997. “We will have to replace a Depression-era mentality of dependence with an empowered worker’s confidence to meet the challenges of the future…. Workers must be empowered to `be all they can be.’ The chains of antiquated laws and burdensome restrictions must be lifted.”

But now that the NASDAQ has crashed, some 45,000 dot-com employees have been laid off in the last year, and many of those who still have their jobs are toiling under poor conditions for low wages, those “antiquated laws and burdensome restrictions” don’t seem quite so bad. All the dazzling new-economy rhetoric notwithstanding, it turns out workers sometimes still need protection. Just ask the employees at Amazon.com.

The idea that Amazon.com would be a different sort of workplace began the day you applied for a job. The company’s founder, Jeff Bezos, believed that success in the Internet economy required recruiting the most talented people at every level, so he instituted a rigorous vetting process. Even though most of Amazon’s entry-level jobs were in warehouses or the customer service department, the company made it clear it was looking for college graduates; applicants were asked to submit their SAT scores, samples of their writing, and letters of recommendation. Then came interviews with current Amazon employees and, for those lucky enough to be hired, a one-month apprenticeship during which they would receive further scrutiny by supervisors and co-workers.

It was an extraordinary gauntlet given that the prize at the end was usually a job fielding complaints from customers. But Bezos believed that prompt, quality customer service was essential to convincing book buyers to shop on the still-novel World Wide Web. So he sought employees who could be trusted not only to master the intricacies of Amazon’s sales and distribution system but to communicate effectively. “They had people who were way overqualified for their jobs,” says former customer service representative Scott Buss. “You’d call the call center to discuss a book of literature, and you’d get an English major.”

Wooing and retaining these people, Bezos realized, required financial enticements. So, to supplement the relatively modest base salary of $11 to $13 per hour, he gave employees what all good Internet companies did: stock options with the right to vest, or cash in, more of the stock each year they logged with the company. For an employee who joined up when Amazon was still in start-up mode, this was no small thing: In one year, Amazon’s stock price rose fivefold, from its initial public offering of $18 per share to nearly $90 per share. “You say, `My God, I could have $3 million in just three years,'” recalls Mike Daisey, a former Amazon customer service employee. “I had the stock macroed to my keyboard. It would just open up Yahoo! and show me the stock price–and I know tons of people who did the same.”

But it wasn’t just the promise of riches that drew people like Daisey to Amazon; it was the company’s seductive ideology. Amazon had a certain cultlike quality, replete with a messianic leader (Bezos), hordes of enemies (the skeptical business establishment), and masses waiting for deliverance (worldwide consumers). “I really believed in it,” says JJ Wandler, who would later become one of Day 2’s leaders. Bezos was legendary for visiting customer service centers and warehouses to personally exhort his flock to work harder and faster in Amazon’s communal campaign to revolutionize commerce. When Time magazine named Bezos its “Person of the Year” in 1999, it cited the overwhelming response to one of his typical warehouse speeches:

The workers in the first four rows start handing up their white hardhats to be signed too. Then a group of workers behind them gets up and encircles Bezos, proffering hats, dollar bills, scraps of paper–anything–for his signature. Welcome to Bezosville, U.S.A.

Amazon supervisors tried to instill the same devotion, making employees feel not just respected but vital to the enterprise’s success. Workers were called “owners” (in recognition of their shareholder status), and mandatory overtime was dubbed “ownertime”–anything to dispel the idea that Amazon was just another retail company. In recognition of the chronic stress its entry-level jobs entailed, Amazon gave its employees free aspirin. December witnessed a regular pilgrimage by Bezos and the rest of the executive pool to the distribution warehouse floor, where the CEO would roll up his sleeves alongside the grunts, stuffing books and CDs into cardboard envelopes so they’d reach Christmas shoppers on time. Even the office furniture had an egalitarian flair. To this day, every desk at Amazon–even those in the top corporate offices–is a knockoff of the one Bezos used in his garage when he first started the company: a wooden door laid on its side, propped up by four pieces of two-by-four lumber.

The progressive spirit expressed itself in work rules, too. Amazon granted its customer service representatives the authority to do almost anything necessary to satisfy the consumer–for example, buying a back-ordered text at the local bookstore or shipping a CD via messenger so a customer would get it more quickly. Amazon encouraged employees to attend “Talk Your Boss’s Ear Off meetings” on everything from corporate strategy to what sodas belonged in the company vending machines. To keep the brightest employees on board, Amazon promised not just stock options but the prospect of advancement. “We were like, `Who here wants to be a vice president?'” laughs Daisey. “`Who here wants to be a manager? OK, you,’ and so on.” And while Amazon drove its employees hard, demanding long workweeks and requiring overtime, it also let them set the exact schedule. “The general atmosphere was so laid-back and flexible,” remembers Buss, who started working at Amazon in 1998. “They trusted you to do your job, and everybody did.”

But not everybody considered Amazon a worker’s paradise. In 1998, Seattle Weekly, the local alternative newspaper, ran a memoir by a fired Amazon employee who suggested working conditions there were “worthy of the Electronic Sweatshop Seal of Approval.” In a subsequent Weekly expose on life in Amazon’s Seattle warehouse, a former temporary employee complained of sweltering conditions during the summer, with employees passing out, even vomiting. (Amazon denies the allegations.) Winter brought its own problems: During the holiday season, mandatory overtime forced customer service employees to work weekends in a downtown building with erratic heat.

In November 1998, frustration with such conditions finally prompted one employee, Christopher Bowling, to contact the Washington Alliance of Technology Workers, a.k.a. WashTech. WashTech was Seattle’s affiliate of the Communications Workers of America–Local 37083, to be precise–though it bore little resemblance to other local unions. Founded just a few months earlier by three former Microsoft temporary employees, WashTech’s primary focus was adapting unionism to an industry in which contingent work was the norm and unionization seemed alien. And, in fact, WashTech’s initial efforts to reach out to Amazon workers–through a report on working conditions and an online employee survey–were met with limited enthusiasm. While WashTech claims that management intimidated employees from speaking out, it’s likely that, for most of the Amazon workforce, things still felt pretty good–good enough that bringing in organized labor seemed unnecessary. Buss remembers that, at a meeting in the summer of 1999 where a supervisor raised the union issue, about 95 percent of the people reacted negatively–including himself. “[I thought], `Who would bring that up here?’ I just rolled my eyes and couldn’t believe that this wonderful thing we’d found could be interrupted by bringing in a union.”

That was before Joe Galli. Even as Amazon was becoming the Internet’s first, and biggest, mass retailer–now selling not just books and music, but housewares, toys, and electronics–the company continued to hemorrhage money. And some of the very things essential to employee creativity–for example, the lack of formal budgets–were fueling the higher operating costs. So, after years of defiantly ignoring Wall Street’s advice that the company push harder for profitability, in June Bezos hired an old-economy corporate exec, Galli, to be his chief operating officer. Galli, who had spent the last 19 years at Black & Decker, wasted no time in imposing business discipline. The days when Amazon employees hired messengers on their own authority were over, as Fortune reported; now expenses required supervisor approval. Flexible customer service shifts were next to go: Soon managers were setting the schedules, employees say, with workers bidding for the best slots based on seniority. Amazon still promised to promote from within, but Galli began bringing in managers from Delta Air Lines and NBC. Says former employee Peter Perry, “They gradually made us feel more like employees, not owners.”

That feeling only increased in January 2000, when Amazon eliminated 150 jobs. Downsized workers were told the news and then given an hour to pack their belongings before they were escorted off the premises. On their own, the layoffs might not have been such a big deal: This was, after all, the famously fluid new economy. But even as Amazon was letting go Seattle workers, it was preparing to expand its customer service operations in two cheaper labor markets, West Virginia and North Dakota. Then came word, in July, that Amazon had reached an agreement with a firm called Daksh.com: Workers in New Delhi, India, making about one-tenth the salary of their Seattle counterparts, were to begin handling customers’ e-mails. Galli stepped down as COO the day after Amazon announced its India deal internally, but disgruntled employees couldn’t help but notice that he had made $8 million in signing bonuses alone–at a time when their stock options were plummeting.

Suddenly, even employees like Buss, strongly anti-union just a few months earlier, began to reconsider. They could live without the money or they could live without the inspiring job, but they couldn’t live without both. And so, in October, a new group of employees, including Alan Barclay, contacted WashTech and plotted an organizing strategy. They held a series of meetings in people’s homes. Via e-mail or in person, they’d invite a few co-workers to each meeting, calling it a “party” so as not to tip off supervisors. Finally, on November 15, they held an open meeting at an independent movie theater in the city’s University District. Some 60 employees attended–representing about 15 percent of the customer service workforce–and, to nearly everybody’s surprise, they voted unanimously to go forward with a union effort and ratify the project’s name, Day 2.

Knowing that word about such a large gathering was bound to leak, Day 2 issued a press release the next day, announcing its intention to organize Amazon’s customer service department. It included a mission statement which read: “Quality customer service requires professional, well-trained individuals that have job security, compensation that reflects our skills and commitment to the company, respect, career development opportunities, continued education and a voice. Amazon.com cannot sustain the standard of excellence that it has attained with anything less than a true commitment to these core values.” In short, the employees wanted what they thought they were getting when they joined Amazon in the first place.

It took less than a day for Amazon to launch its counterattack. It began in the lunchroom of the Decatur building, where most of the customer service employees worked. The occasion was an “all hands” meeting, which meant it was open to anybody, at any level. About 150 employees crammed into the room, crowding around tables and sitting on the floor, while a group of supervisors–and a few company lawyers–stood along the wall by the vending machines. The meeting’s ostensible purpose was to address employee grievances. But management didn’t exactly go out of its way to solicit criticism, by most accounts. “I stood with my hand in the air for an hour, and they would not call on me” says Wandler, who had outed himself as a union supporter by signing the Day 2 press release. “They looked me in the eye, and called on people in other sections.”

Of course, for much of the time managers weren’t answering questions at all: They were simply attacking the union. Bringing in organized labor, they said, would turn Amazon into a more regimented workplace, where lunch hours were fixed and you could be fired if you didn’t heed union guidelines. The union might order employees to strike against their will, the managers said, WashTech was only interested in their dues money, and so on. At least one employee, Michelle Gray, also spoke out against the union, arguing that Amazon was already a place that valued employee input–and that the divisiveness a union would bring could destroy that. “Amazon is in such a growth period,” Gray would tell me later. “This whole thing is brand new. We need to be able to change with the times. A union would, I believe, limit that.”

The workers who had attended the Day 2 meeting earlier in the week had a rather different reaction. As it happened, one of the promotional materials WashTech had circulated was an old yellow pamphlet titled “Our Boss Said We Didn’t Need a Union … What Will Yours Say?” With its photos of men with wide lapels, bushy mustaches, and Afros, it looked like something that had been printed in the 1970s–something, as Buss puts it, “so corny the Brady Bunch wouldn’t get near it.” Yet, sure enough, just about every argument Amazon supervisors had made against the union was right there in the pamphlet, along with a rejoinder. Amazon, the great Internet pioneer, was literally taking a page from the ’70s anti-union playbook. “There was more support right after that meeting than any other time, because employees realized that management was trying to scare us,” said Tricia Phillips, a senior member of the customer service department. “It was really insulting. It was like being in elementary school.”

It was only the beginning of Amazon’s campaign against the union. Mindful of their public image, Amazon officials kept their appeals in the press high-minded: “We think there’s a role for unions in society,” Bezos told CNN, “but we don’t think we need them at Amazon.com.” Inside, they were less delicate. They distributed pamphlets that said, “Be Smart. Don’t Sign a Union Card,” and they set up an internal website alerting supervisors to warning signs that workers might be plotting to organize. Among those listed: “hushed conversations when you approach which have not occurred before,” or “small group huddles breaking up in silence on the approach of the supervisor,” or excessive time spent in the rest rooms. The material was meant for management only, but it found its way into the hands of The New York Times, which called the site “a rare internal glimpse at how a company is fighting off a union.”

When I visited last month, it was hard to tell whether these tactics had eroded support for the union. What was clear, though, was that Day 2 still had a ways to go. Under U.S. labor law, a union must go through a two-step process to win certification. First, it must collect signatures in support of the union from at least 30 percent of the workforce and petition the National Labor Relations Board to hold an election. If, in that election, a majority of employees vote for the union, the board certifies it as the employees’ appointed bargaining representative. Day 2’s leaders figured that they’d need more than 120 signatures to reach the 30 percent threshold–employers often challenge some signatures–and that they had somewhere between 70 and 100.

Needless to say, last week’s layoffs made the matter moot. Although WashTech insists the organizing effort will go forward, it’s hard to imagine it succeeding now that most of its organizers have been let go. In theory, the NLRB could deem the firings an illegal attempt to stymie the union. But such things are notoriously hard to prove.

Disgruntled Amazonians claim the company is undercutting its long-term viability by outsourcing labor and thus imperiling quality. Maybe. But in the short run Amazon needs to make money. And there’s no question that outsourcing to North Dakota and India will, in the immediate future, improve the bottom line. Amazon, in other words, is doing what it needs to do to survive. Even Bezos admits it: His oft-quoted business-strategy-cum-mantra “Get big fast” has given way, he says, to a new one: “Make some great cash, baby.”

Like it or not, that’s the way capitalism works. But if Amazon is going to behave like General Electric, its workers should have the same protections they’d have at General Electric, including the right to organize unions and the “chains of antiquated laws and burdensome restrictions” politicians such as Hoekstra have been so eager to dump. It turns out that America’s lack of universal health care–which increases the cost of employing U.S. workers and thus leads auto and steel companies to outsource abroad–has the same effect on new-economy companies. Amazon workers would also have benefited from greater government investments in technical training and from workplace regulations that protect against repetitive stress injuries (protections the Clinton administration pushed through last year over loud objections by Republicans and corporations).

In short, Amazon’s workers could have used a lot of the same protections as old-economy workers, because, whether they or their employers wanted to admit it, they were a lot like old-economy workers. While the tech boom may have helped thicken the middle class with well-educated, reasonably well-paid “knowledge workers,” and while there is still a demand for workers to fill the most difficult, most lucrative programming positions, many new-economy jobs still revolve around basic service and support work–more, certainly, than new- economy boosters let on. In Washington state, for example, the software lobby boasts that the average annual salary of high-tech workers exceeds $200,000. But that figure is grossly misleading, because the Washington state government puts many “Internet economy” jobs into more traditional categories, such as retail or temporary office help. According to Julie Farb, research director at Seattle’s Worker Center AFL-CIO, throwing those people into the mix would bring the average wage much closer to what you’d find in traditional industries. “Taking away the perks and the New Age rhetoric exposes a reality that has become clearer since the Nasdaq meltdown of last spring,” Kim Girard observes in a new issue of Business 2.0. “In the New Economy as in the Old, many jobs aren’t so great.”

A week after the Amazon layoffs, I got back in touch with Michelle Gray, the outspoken anti-union employee I’d met in January. A tattooed 24-year-old with double-pierced ears, Gray had a blunt take on Amazon and job security. “I don’t feel [Amazon] can guarantee anything, and that’s OK,” she had said back in January. “I don’t guarantee to the company I’ll be here forever.” I wondered whether being laid off had altered Gray’s view of employer-employee relations. It hadn’t. “It happens,” she said matter-of-factly.

It helps that Gray is young enough to view starting over as more an opportunity than a setback. But it’s also no coincidence that she started working at Amazon well after most of the union organizers did. By the time she arrived, in mid-1999, Amazon was already tamping down its rhetoric about revolutionizing the workplace and was treating employee-owners more like plain old employees. Gray never really viewed her customer service job, which she said consisted of being “a professional apologizer,” as anything more than just that: a job. If Michelle Gray never grew disillusioned, it’s partly because she never developed illusions in the first place. She understood that capitalism can be cold, even in the new economy. A pretty jaded perspective? You bet. And it happens to be right.

Author: Jonathan Cohn

News Service: The New Republic

URL: http://www.tnr.com/021901/cohn021901.html