Amazon has revolutionized online commerce. It has created a monopoly-like business with the online sales of books and has aggressively expanded into other product categories. In addition, it has enticed countless customers with its two day prime shipping option. Recently, Amazon continues to lead the way for modern US businesses with its decision to raise the minimum wage from $11 to $15. This move was partially enacted to rectify the bad reputation it earned given Amazon’s harsh treatment of its workers. However, Amazon does not want to lose its competitive advantage by paying a higher minimum wage, and so it is now lobbying for a national minimum wage hike. Initially the rise may result in the loss of customers due to higher prices on goods, but it could help Amazon entice new employees. The increase in minimum pay will create both positive and negative effects for the company.
Amazon has been notorious for its poor treatment of workers. In 2015, interviews with current and former employees revealed Amazon’s highly competitive and hostile work environment. Senior managers had incentives to attack one another’s ideas in meetings believing conflict creates innovation. Workers were penalized or pushed out for suffering a cancer diagnosis, miscarriage, or other personal challenges. However, it was reported that there were many opportunities to move ahead in the company. Amazon is all about growth and so it is not a good environment for a workers who are content to stay in the same position. Consequently, Amazon maxes out its pay scale after several years at each tier in an effort to promote forward momentum. In addition, the company was known for providing good benefits which contribute to total compensation. (Adams) While Amazon’s aggressive culture did have some redeeming attributes, its constant need for growth resulted in a cutthroat work environment.
Amazon treated its lowest paid employees the most poorly. There have been numerous reports of warehouse workers who have suffered from workplace accidents/injuries and who have been fired or put on unpaid leave and so been unable to produce income. There are other cases of warehouse employees who couldn’t overcome the fatigue of the job and so were forced to quit before they got injured. (Sainato) According to the Guardian (https://www.theguardian.com/technology/2018/jul/30/accidents-at-amazon-workers-left-to-suffer-after-warehouse-injuries), “Amazon’s warehouses were listed on the National Council for Occupational Safety and Health’s ‘dirty dozen’ list of most dangerous places to work in the United States in April 2018. The company made the list due to its pattern of unsafe working conditions and its focus on productivity and efficiency over the safety and livelihood of its employees.” (Sainato) Amazon’s reputation as a power-hungry corporation with little regard for its workers has resulted drastic changes such as the change to its wage scale.
Amazon has expanded its markets into many different regions of the US economy. According to the Forbes (https://www.forbes.com/sites/lauraheller/2016/11/30/amazons-growing-stranglehold-on-the-us-economy/#d407c09eb408), the Institute for Local Self-Reliance states, “Today, half of all U.S. households are subscribed to the membership program Amazon Prime, half of all online shopping searches start directly on Amazon, and Amazon captures nearly one in every two dollars that Americans spend online. Amazon sells more books, toys, and by next year, apparel and consumer electronics than any retailer online or off, and is investing heavily in its grocery business.” (Heller) Amazon’s tactic is to draw members in using Amazon Prime, which gives exclusive offers and better prices. Consequently, Amazon seeks to be the website that consumers look to first for the best deals. (Heller) Once Amazon had gained a substantial number of Prime Members, the company announced in April 2018 that it would raise the cost of membership from $99 to $119. This helped drastically improve Amazon’s profitability. The company’s net income for the first quarter of 2018 was $1.63 billion, compared with net income for the first quarter of 2017 of $724 million. A major factor in this jump in profit is its cloud computing and advertising businesses as well as the boost to the cost of Prime members. Profits are expected to continue to grow. (Wingfield)
Amazon’s rapid growth created the necessity to hire more employees. However, the growth in jobs came mostly at lower levels. Amazon is leading the shift in the United States’ economy to technology focused jobs. According to USA Today (https://www.usatoday.com/story/tech/columnist/2017/01/13/amazons-jobs-creation-plan-comes-amid-labor-pains/96488166/), “The impact is felt far beyond Amazon, labor and retail experts said. The breakneck growth of Amazon is ‘upending’ the retail industry, which accounts for one out of every eight jobs in the USA, says Stacy Mitchell, co-author of a recent report that concluded Amazon eliminated about 149,000 more jobs in retail than it has created in its warehouses.” (Swartz) While Amazon may be creating jobs in its own market, it exerts a downward pressure on wages as competitors that are pressured by Amazon’s low prices are forced to cut costs too. Their growth doesn’t necessarily make up for the losses it’s causing. This graphic demonstrates the rapid increase in employees that Amazon has hired from 2007 to 2018.
Amazon’s work force has grown by more than 6x since 2017. While the growth has been rapid, the pay for low-wage workers has not increased until 2018.
Consequently, while Amazon is creating jobs, the type of jobs it is creating is not beneficial for the overall economy as these jobs do not provide a livable wages. This exerts pressure on government aid where costs are paid by the taxpayers. Additionally, many of the jobs that are being created are only part-time positions which cannot support an individual, let alone a family. Amazon is just one example of a major corporation trying to characterize its underpayment of workers as a boost for the American economy. Walmart is another culprit. (Picchi) According to CBS News (https://www.cbsnews.com/news/amazon-walmart-retail-hiring-wages/), “In its latest hiring plan, Walmart said it will add 10,000 retail jobs. The company didn’t immediately return a request for comment about what those jobs will pay or what types of roles they’d represent. The typical Walmart sales associate with two children earns little enough to qualify for government assistance, such as food stamps, Medicaid and home energy assistance, Making Change at Walmart said.” (Picchi) These individuals have jobs yet receive the same government assistance as an unemployed individual would receive. Amazon and Walmart are creating these jobs not to boost the economy, but to boost their profitability. Unfortunately for Amazon, this story has been analyzed and reported. Therefore, in order to boost its public image, Amazon raised the minimum wage from $11 an hour to $15 an hour.
Amazon sought to rejuvenate its reputation with the wage boost. However, the company didn’t want to lose its competitive edge by raising wages, and so is lobbying the rest of the country to follow suit. Amazon did not lead other retail chains with this increase. Last year, Target announced that it would raise its minimum wage to $15, Costco raised its minimum pay to $14 an hour, and in January of 2018, Walmart stated that it would raise its starting wages to $11 an hour. The federal minimum wage is $7.25, however it varies from state to state. In California, it will rise to $15 on January 1st. According to Sen. Bernie Sanders, it was inevitable that Amazon would increase minimum pay levels. He is quoted in Amazon to Raise Minimum Wage to $15 for All U.S. Workers, stating, “‘I think they saw the writing on the wall. I think they saw the calculation that it was indefensible that a man whose wealth is over $150 billion be able to continue paying workers wages that are so low that they are forced to rely on federal benefits.’” (Weise) The public is feeling wealth inequality more as the gap continues to grow in the United States and, the pressure for change is growing.
Amazon may appear to be creating positive changes for its workers with this wage boost, however Amazon may in fact be cutting other benefits in this process. The minimum wage was increased to $15 an hour, but another new policy eliminated bonuses and the ability to receive stock in the company for warehouse workers. Amazon had utilized a restricted stock unit program which gives shares to workers who have stayed with Amazon for a certain amount of years. This program will now be phased out. (Pisani) Further, there are Amazon employees who are against the increase in minimum pay. According to The Washington Post (www.washingtonpost.com/business/economy/amazons-15-minimum-wage-doesnt-end-debate-over-whether-its-creating-good-jobs/2018/10/05/b1da23a0-c802-11e8-9b1c-a90f1daae309_story.html?utm_term=.2ef42b164dd0), employees voiced these concerns: “They asked why people who had been toiling in the company’s warehouse for years would now be paid similarly to new employees and temporary holiday help.” (Long) These offsets in benefits, as well as the perceived advantage for new employees over old employees, harm the positives created by a higher minimum wage. It seems clear that companies will attempt to get some concessions for raising salaries through cuts in different areas.
Amazon is a powerhouse in terms of efficiency and profit growth. The company is revolutionizing the future and the technological shift in the American economy. With this leadership comes a responsibility and the public has begun to hold Amazon responsible for its treatment of workers. Amazon has recently announced that it will be raising its minimum wage from $11 to $15. This may be the result of a movement for livable wages in the United States. However, the impact of Amazon’s contribution to the prevalence of low wage jobs will not simply be remedied with this increase.
Sources:
https://www.nytimes.com/2018/04/26/technology/amazon-prime-profit.html
https://www.statista.com/chart/7581/amazons-global-workforce/
https://www.cbsnews.com/news/amazon-walmart-retail-hiring-wages/
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