Moving a Rectangle using Keys
The reason the position of the paddle doesn't update is because the paddle that you adjust the velocity of in class Shapes is a different instance of paddle than the one you're drawing.
Make these changes to class Shapes: 

delete field: private Paddle paddle = new Paddle();

add line 
Paddle paddle = panel.paddle;

in the constructor after you declare Panel panel = new Panel();

Additionally, you will likely want to switch your yVelocity values, as pressing "down" sends the box up, and vice versa.