Business Shiv Soin

Wait, Amazon Raised its Minimum Wage?

Amazon seems to be taking an advocacy position for this issue, but its intentions must be questioned

By: Shiv Soin

Amazon seems to be taking an advocacy position for this issue, but its intentions must be questioned

On October 2nd, 2018, Amazon announced that it would raise its minimum wage to $15 per hour for full-time and part-time workers and temporary employees, effective November 1st. The minimum wage increase impacts 250,000 employees as well as 100,000 seasonal employees.

“We listened to our critics, thought hard about what we wanted to do, and decided we want to lead,” said Amazon CEO Jeff Bezos. “We’re excited about this change and encourage our competitors and other large employers to join us.”

Let’s examine the wage hike step-by-step:

Criticism of Labor Practices

For months, Amazon has faced criticism for its labor practices. For instance, The Guardian reported that Amazon workers who were injured while working were left with little financial assistance which resulted in homelessness.

Another example comes from Vicki Shannon Allen, an Amazon warehouse worker. In an interview, she explained how she “noticed managers would ask questions all the time about any bathroom breaks, performance and productivity. What they do is code your time, and they are allowed to change it at will. To me, that’s how they get rid of people.”

Political Pressure

Senator Bernie Sanders (D-VT) has put immense pressure on Amazon to change its labor practices. Last month, Sanders introduced the “Stop BEZOS” Act, which created provisions to tax large employers whose workforce largely relies on government subsidies. This act was a response to Bezos holding down employees’ wages despite having employees heavily reliant on food stamps and government healthcare benefits.

Senator Sanders also has also pointed to Bezos’s net worth as a concern. He has highlighted the inherent issue with Bezos being the richest man in the world and yet paying his workers a non-living wage.

After Amazon’s announcement, Sanders tweeted his enthusiasm for the action, saying, “what Mr. Bezos has done today is not only enormously important for Amazon’s hundreds of thousands of employees, it could well be a shot heard around the world.”

Congressional Lobbying

In a statement, Jay Carney, Amazon’s head of global corporate affairs, said that Amazon “will be working to gain Congressional support for an increase in the federal minimum wage. The current rate of $7.25 was set nearly a decade ago. We intend to advocate for a minimum wage increase that will have a profound impact on the lives of tens of millions of people and families across this country.”

Amazon seems to be taking an advocacy position for this issue, but its intentions must be questioned. If a nationwide minimum wage of $15 an hour was law, all of Amazon’s competitors would be subject to this price immediately. Although Target has already announced that it will be paying the $15 minimum wage by 2020  and Walmart has announced that in January they will raise their wage to $11, neither competitor is close to Amazon’s new demands.

Business Insider notes how “it was theoretically a smaller cost for Amazon to bump its workers up to $15 than it would be for Walmart to bump all of its store employees up to $15.” The increase would force companies to divert their resources to wages rather than competing with Amazon on technological innovation.

 Seasonal Employment

In August 2018, the Bureau of Labor Statistics reported unemployment to be 3.9 percent. The low rate means that retailers need to compete with each other for holiday employment. Being able to attract employees is crucial for Amazon, as they hope to hire 120,000 employees for this holiday season. Having a $15 minimum wage gives Amazon an edge over their competitors.

Unions

In September 2018, the Wall Street Journal reported that employees of Whole Foods, an Amazon subsidiary, emailed workers at all 490 locations to express their desire to “collectively voice [their] concerns to Whole Foods Market and Amazon leadership.”By raising the minimum wage, Amazon could be diminishing any major union threats by any Amazon employee.

Trade-offs

With the increase in minimum wage, Amazon has stopped monthly bonuses and stock options for employees. This move has upset many warehouse workers who would be losing thousands of dollars through incentives. According to the Verge, “warehouse workers get two shares of Amazon stock when they’re hired ($1,952.76 per share as of writing), and an additional stock option each year. After the changes take effect, the RSU program will be phased out for stocks that vest in 2020 and 2021, and it will be replaced with a direct stock purchase plan by the end of next year.”

The income generated from these incentives provided no small amount of income for workers. In a statement to CNBC, an Amazon spokesperson has said “the significant increase in hourly cash wages more than compensates for the phase out of incentive pay and RSUs…  [and] employees will see an increase in their total compensation as a result of this announcement. In addition, because it’s no longer incentive-based, the compensation will be more immediate and predictable.” However, many workers are still unsure if that will actually be true or not.

Conclusion

While Amazon seems to be marketing the increase in minimum wage from a social advocacy stance, there is evidence to suggest otherwise. This decision was made to ensure Amazon’s dominance in the global market. The company’s profits are increased by removing incentives that were beneficial to many workers. The costs associated with increasing wages are also relatively small, and using the political capital created by the move to increase the national price floor will ensure larger profits for Amazon in the long run.

Works Cited

Campbell, A. F. (2018, October 02). Amazon is raising its minimum wage to $15 for US workers. Retrieved from https://www.vox.com/2018/10/2/17927686/amazon-raises-minimum-wage-workers

Green, D. (2018, October 04). An economist explains how Amazon could use its lobbying for a $15 minimum wage as a ‘weapon’ against other retailers. Retrieved from https://www.businessinsider.com/amazon-lobbies-for-15-wage-weapon-over-walmart-target-2018-10

Haddon, H. (2018, September 06). Whole Foods Workers Push to Unionize. Retrieved from https://www.wsj.com/articles/whole-foods-workers-push-to-unionize-1536235201

Lee, D. (2018, October 03). Amazon eliminates monthly bonuses and stock grants after minimum wage increase. Retrieved from https://www.theverge.com/2018/10/3/17934194/amazon-minimum-wage-raise-stock-options-bonus-warehouse

Matsakis, L. (2018, October 03). Why Amazon Really Raised Its Minimum Wage to $15. Retrieved from https://www.wired.com/story/why-amazon-really-raised-minimum-wage/

Sainato, M. (2018, July 30). Accidents at Amazon: Workers left to suffer after warehouse injuries. Retrieved from https://www.theguardian.com/technology/2018/jul/30/accidents-at-amazon-workers-left-to-suffer-after-warehouse-injuries

Salinas, S. (2018, October 02). Amazon raises minimum wage to $15 for all US employees . Retrieved from https://www.cnbc.com/2018/10/02/amazon-raises-minimum-wage-to-15-for-all-us-employees.html

Weise, K. (2018, October 02). Amazon to Raise Minimum Wage to $15 for All U.S. Workers. Retrieved from https://www.nytimes.com/2018/10/02/business/amazon-minimum-wage.html

Image Source: https://www.seattletimes.com/opinion/amazon-raises-the-minimum-wage-for-employees/

 

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