February 16, 2018

How can workers reap more benefits from retail development projects?

Research from two UCR professors looks closely at the impacts of distribution centers like QVC’s Ontario outpost on working communities

Author: Tess Eyrich
February 16, 2018

Located 35 miles east of downtown Los Angeles, the city of Ontario is home to more than 173,000 residents — plus a 1-million-square-foot warehouse that serves as QVC Inc.’s West Coast distribution center.

Best known as a home-shopping TV network and online retailer, QVC is part of a long line of companies that have set up distribution centers in Inland Southern California, a region whose proximity to airports and other transportation hubs has been a boon for the logistics industry.

But according to researchers from the University of California, Riverside, workers in Ontario and similar cities may be getting the short end of the stick when it comes to the deals that allow companies like QVC to move in.

Ellen Reese, a professor of sociology and chair of UCR’s labor studies program, and Juliann Allison, an associate professor of gender and sexuality studies, took an in-depth look at the 2015 operating agreement between the City of Ontario and QVC.

What they found was cause for alarm: The agreement, which established Ontario as a “point of sale” for the retailer’s goods, allows the city to collect sales tax revenue from QVC. In exchange, however, the city agreed to return to QVC an astonishing 55 percent of that sales tax revenue up to $500 million — and 60 percent thereafter.

Reese, Allison, and their research colleague, Nathaniel Cline of the University of Redlands, found the agreement lacked transparency, does not require annual public reporting, and includes zero built-in protections or benefits for workers and residents.

“It seems like a lot of people in Ontario weren’t aware or didn’t notice the QVC agreement was on the table in 2015,” Reese said of the arrangement, which gives back to the retailer an estimated $2.75 million in revenue annually. “Overall, there was very little public debate about it, and it was approved by the city council in under a minute.”

In a brief published online this week by UCLA’s Institute for Research on Labor and Development, the researchers suggested that in working communities like Ontario, such agreements can contribute to rising poverty levels and hollowed-out tax bases.

“Ontario has a high concentration of Hispanic or Latino residents, and tends to have lower levels of education and income than the California average,” the researchers wrote. In fact, 18.1 percent of the city’s population lives below the poverty line, while 22 percent of its workers are employed by transportation and warehousing firms — like QVC’s distribution center — where they earn a median wage of $14.88 per hour ($12.38 for laborers), and where many are classified as temporary workers.

So why would the city have been so eager to agree to an arrangement like the QVC partnership, which tends to offer primarily lower-paying, even temporary jobs?

According to Reese, Allison, and Cline, it all has to do with sales tax revenue, which in Ontario constitutes the largest share (32.7 percent) of the city’s total annual revenue. The lure of sales tax revenue, the researchers argued, has compelled “local governments to favor, and even compete for, retail development projects,” often to the detriment of the people who live near them.

Still, the researchers wrote, it is possible for working communities to push back against bare-bones agreements to argue for more clear-cut benefits. In particular, Reese, Allison, and Cline identified two types of agreements that have been shown to empower Southern California workers: community benefit agreements, or CBAs, and project labor agreements, or PLAs.

“CBAs are agreements between coalitions of community organizations and developers that improve the outcomes of development projects for local workers and residents and help to minimize their harm,” they wrote.

Broadly focused, CBAs can help ensure residents receive employment opportunities and decent wages. They can also include environmental protections and require the implementation of new community funds and resources, such as affordable housing units, public parks, or job training programs.

PLAs are spearheaded by coalitions of organized laborers that seek to guarantee hiring opportunities for residents including public sector employees and contractors, among others, before development projects begin.

“PLAs are more labor-focused, whereas CBAs tend to involve coalitions of community activists who draw attention to all sorts of issues,” Reese said, noting both types of legally enforceable contracts give organized coalitions room to voice their concerns and bargain with developers and policymakers alike.

A third approach requires development projects to pay prevailing wages, hire local residents, and provide public benefits through dedicated policy initiatives such as Measure JJJ, which was passed in Los Angeles in 2016.

Reese went on to describe Ontario as a microcosm of comparable situations happening around the country and even internationally.

“What happened in Ontario with QVC isn’t far from what we’ve been seeing with companies like Amazon,” she said. “There’s fierce competition among cities to host these companies, and local governments often offer large subsidies in exchange for the opportunity.

“The onus is really on both sides to level the playing field,” she added. “Community and labor organizations need to coalesce and make known what they want. But city councils and policymakers also need to make it more transparent that these projects are being considered and agreements are being developed and finalized.”

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