Amazon announced the $15 pay raise today in response to criticism by progressive politicians like Sen. Bernie Sanders who recently introduced a bill to tax companies like Amazon 100 % for employees on government assistance. The company plans to hire over 100,000 seasonal workers this holiday season, the raise will apply to all full – time, part-time and seasonal workers beginning November 1st. The pay move by Amazon comes at a time when retailers are finding it hard to hire clerks and warehouse workers for wages generally under $15 @hr. Amazon’s move is a challenge to retail firms across the country forcing them to raise wages or lose out in hiring to Amazon. Sen. Sanders congratulated Amazon in a tweet, noting the raise was a ‘shot heard around the world, certainly for all hourly workers worldwide.
Sources: Amazon, The Wall Street Journal – 10/2/18
While the $15@hr wage increase made the headlines, the firm took away bonuses and stock awards for warehouse workers. The company said the wage increase more than makes up for the loss of bonuses and stock awards. What? Why is Amazon doing this? To mitigate the cost of raising wages to $15@hr to bottom line profits. Amazon needs to think through the message they are sending, do they want the ideas and dedication that bonuses and stock recognize or not?
In addition, the company said it would be lobbying in Washington for a raise of the federal minimum wage which has been stuck at $7.25 for ten years. Amazon uses a highly profitable server business to provide a cash feed to the retail business while building market share to eliminate competitors. Amazon raising wages makes it even more difficult for competitors to hire workers and retain them.
We applaud Amazon for waking up and making this sweeping move to raise hourly wages to a baseline of $15 @ hr. At the same time we are concerned that with giving the wage increase they are taking away bonuses and stock awards – this policy sends the wrong message to workers. The wage increase is a strategic move as well, putting its weaker competitors back on their heels and in a worse political position. Are they going to oppose federal legislation that may come from a Democrat led House to raise the federal minimum wage? In a mid-term election year where non-supervisory workers have experienced stagnating wages since the 2008 recession Amazon competitors will be hard pressed to make their case to consumers. As politics is more in the spotlight for companies and consumers, brick and mortar retailers’ possible stand against raising wages may hurt sales and hiring.
With Amazon making the first move we agree with Sen. Sanders, who called on other major companies to start paying decent wages to their employees so they support their families, buy cars and purchase a home.
The e-retailer behemoth is in the cross hairs of political criticism in terms of work conditions like few bathroom breaks, to uncertainty with plans to add 40,000 robots over the next five years. The firm’s automation plans will have a significant impact on the workplace for non-college educated workers, we need to be working on a public policy recognizing the impact automation has on worker careers. Should robots be taxed as some have suggested? If so, based on what formula? How would the funding be used to support retraining and safety net needs for the workers displaced? Amazon has been able to amass a dominant retail position by using revenues from its business to business cloud server profits to mitigate the ecommerce business running at a loss and early development of brick and mortar stores. We stand by our earlier analysis that the server business – Amazon Web Services (AWS) be spun off from the e-retail business to level the market playing field with other retailers.