March 16, 2010 09:24 PM UTC

Amazon "Job Loss" Fiction Continues

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• by: Colorado Pols

Over the weekend, we were obliged to correct some rather egregious misrepresentations in a Denver Post column on the economic impact of online retailing giant Amazon.com’s decision to end its affiliate relationships with Colorado residents. Post columnist David Harsanyi, among several other profoundly dumb assertions, claimed that Amazon’s “closure” of its Colorado affiliates “involved 5,000 jobs.” Which, as we’ve explained before and will again in a moment, is a wild and baseless exaggeration of reality.

But first, a word from the Colorado Senate Minority Leader Josh Penry’s press office!

“Accusing the business community of ‘crying wolf’ over job losses is a huge insult to the hundreds of Amazon affiliates laid off because of the new Internet tax [Pols emphasis] or the thousands of steel workers whose jobs have been put in jeopardy because of the new energy tax,” said Sen. Ken Kester, R-Las Animas.

Business owners repeatedly testified before members of the legislature saying that a series of Democrat proposed tax increases would kill jobs. Pepsi officials, for example, told lawmakers a new soda tax will put at risk as many as 800 jobs. A new tax hike on candy will target 150 workers at Grand Junction confectioner Enstrom’s, and the more than $3.3 million the company spends each year with more than 300 Colorado vendors…

On the “Amazon tax,” what we’re talking about are essentially online advertising agreements with owners of small websites, both commercial and personal. Let’s put this in perspective: say you’ve got a website. If that website gets 2,500 unique visitors in a month, which is not too shabby for a lot of websites, and assuming a click-through rate of 0.5%, higher than many studies have shown typical–that’s 13 people, rounded up, who would click through to an Amazon “buy something” page. Let’s generously say that half of those actually buy the product, for simplicity’s sake a $25 book. Amazon’s “Classic” compensation program pays a 4% commission on these sales.

7 sales x $25 = $175 in sales, 4% of which is…$7.

Seven dollars a month, folks, and that’s under a fairly generous set of hypothetical circumstances. We’re not unsympathetic to any loss of income in these tough economic times, to be sure, but we don’t know anybody who would consider the loss of seven dollars a month to be a “lost job” in any realistic sense of the term. We wouldn’t call that a lost job at many multiples of that figure, and we have yet to see a Colorado-based website that has actually produced anything remotely close to full-time employment income through this program–period. Take issue with the policy all you want, but please don’t refer to these referral programs as “lost jobs” or “layoffs” ever again. It’s just silly.

As soon as you understand the extent to which Amazon’s arbitrary response to this law, more to the point the economic effect of that response, is being blown out of all earthly proportion by opportunistic politicians, the idea that a 2.9% tax won’t really put 800 Pepsi employees out of work (please, folks)–or Enstrom or Rocky Mountain Steel either–makes a lot more sense.