Amazon makes ‘politically savvy’ minimum wage move

Amazon makes ‘politically savvy’ minimum wage move

Following criticism from the likes of Senator Bernie Sanders about its treatment of warehouse workers, Amazon has announced an increase in its minimum wage to $15 for all full-time, part-time, temporary (including those hired by agencies), and seasonal employees across the US, effective 1st November. 

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

“We 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,” adds Jay Carney, Senior Vice President of Amazon Global Corporate Affairs. “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.”

The decision is both a politically savvy move and one made out of economic necessity, according to Neil Saunders, Managing Director of GlobalData Retail, who observes that it also comes at a time when Amazon's profitability is improving, so the company is in good shape to make the change.

“While some of the allegations levied against Amazon with regards to its labour practices are hyped, political pressure has been mounting for some time with regard to low wages. The narrative that Amazon is an ungenerous employer at a time when the company's sales, profits, and valuation are soaring does not play well among many customer segments. Amazon will hope that this move demonstrates its commitment to staff and their wellbeing,” says Saunders.

Although the hike is partly political, there is also an economic imperative to increase wages. Amazon's superior growth necessitates a lot of recruitment which is becoming increasingly difficult in a tight labour market. This is especially so over the holiday season. Without a rise in wages, the e-commerce giant would be placing itself at a disadvantage in the labour market.

“While Amazon can afford the increase, there will be an impact on the bottomline. However, this is likely to be masked by improving profitability and growing sales. It is also the case that Amazon gets something of a free pass on profit levels from investors, so is able to manage market expectations. The same cannot be said for other retailers, many of which are under increasing economic pressure to increase wages and benefits. In our view, those moves could well impact earnings into the new year,” Saunders concludes.

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