Image By Seattle City Council from Seattle [CC BY 2.0], via Wikimedia Commons
Amazon founder and CEO Jeff Bezos recently announced that the company will increase the minimum wage for all its workers, including seasonal workers, temporary workers, and employees at subsidiary companies, to $15 per hour. Amazon had come under fire from many people, including Senator Bernie Sanders, for underpaying and mistreating its workers, though these claims are somewhat dubious. Still, Bezos seems to believe that bumping up their minimum wage will help get the naysayers off his back for a while, a fair trade.
There are quite a few interesting things to consider about this story. Let’s take just a quick look at each point.
While raising the minimum salary, Amazon will be ending the Restricted Stock Unit (RSU) grant program for some of its hourly employees, providing them instead with the ability to directly purchase stock if they choose. Amazon says this is because, in surveys, these employees “prefer the predictability and immediacy of cash to RSUs.” Which is fine, but no additional salary will be offered to replace the RSUs over the new $15 per hour wage, making the raise not quite as good as it seemed at first. Especially so for those hourly employees who were already making near or over $15 per hour.
The new wage will position Amazon well in the fight for seasonal workers. They plan to hire approximately 100,000 season workers, and the pool to hire from has been shrinking. This new wage gives them a competitive edge in this hiring.
This is a bit of a salvo in Amazon’s ongoing war against Walmart. Walmart announced in January that it would increase all employees’ pay to $11 per hour. This move by Amazon frankly embarrasses Walmart. This also moves the heat for underpaying and mistreating workers off of Amazon and back over to Walmart, who had managed to regain some goodwill after the raise announcement early this year.
At the same time that Amazon announced this increase in pay, Bezos also announced that the lobbying arm of Amazon would start pushing for a national increase in the minimum wage. He did not say how high they want to see it, but any increase is highly beneficial to Amazon and Bezos. Peter Schiff very nicely summarized the strategy involved here, so I will leave you with his words:
“Bezos is no fool. He will reduce his headcount, and step up his automation effort to eliminate as many low-skilled jobs from Amazon. Then he will lobby Congress to increase the minimum wage for his competitors that still employ lower-skilled workers. As these competitors will lack the resources to automate, they will be driven out of business, and all their workers will lose their jobs. Less competition will make it easier for Amazon to raise prices.”
As you can see, there are many facets to this latest announcement. While many will applaud Amazon taking the lead to pay its workers better, the move is not as altruistic as it seems at first glance.