In its quarter-century of existence, Amazon has built a reputation as the Great Disrupter, starting with consumer retailing but expanding to whatever business sector — health care, entertainment, space exploration — happens to intrigue Jeff Bezos at the moment.
Even the suggestion that Amazon might be turning its focus to some overlooked, neglected and stagnant industry or activity is enough to send jolts of panic through it, what with Amazon’s size, its unwillingness to sit still and the sad history of companies that didn’t react to the looming threat.
So it’s no surprise that Amazon’s announcement of a $15 minimum wage for full-time, part-time, temporary and seasonal employees is a huge disrupter in the labor markets, or that it’s Amazon that’s doing it.
The bigger issue, and question, is motivation.
The official reason, one Amazon cited in its own announcement, was that it was reacting to critics who have lambasted the company for pay and working conditions, particularly in its warehouses/distribution centers. Amazon says it will also begin lobbying for an increase in the federal minimum wage, currently at $7.25 an hour.
But this rings a little hollow. Working at Amazon, either in an office or a warehouse, might not have been many people’s dream career, but with the pay and benefits it currently provides the company was hardly the worst of the lot of potential employers.
And while Bezos has a record of posturing himself and Amazon as progressives, in the political sense of the term, neither has gone much out of the way to foster a warm and cuddly image with the public or the media. Any feeling of goodwill is likely to last for about two seconds before critics are carping about something else Amazon-related. The extra money spent on increasing pay won’t buy much relief or influence.
Not that it needs more of the latter. To judge by the willingness of cities, counties and states to throw money at Amazon for offices and distribution centers, it seems to be doing just fine in that department, even taking into account the feud with the president.
So what else might be the reason?
One could be external competition. By jacking up the minimum wage, Amazon puts pressure on other retailers to match. That’s not speculation, by the way. To quote from the Amazon release, “We’re excited about this change and encourage our competitors and other large employers to join us.”
No doubt those competitors are excited too, in a different sense of that word.
The increase in costs will be especially tough for retailers that don’t charge customers for the privilege of shopping there (as Amazon does with Prime and Costco does with its membership fees) or lack an affiliated business (Amazon Web Services) that can underwrite the retailing side.
That applies to everyone from the big players such as Target and Walmart to the smallest of small businesses competing for customers and labor.
That’s another calculation that might have entered into the decision-making. A $15-an-hour wage is a lot more expensive than $15, as anyone who has met a payroll knows, once FICA, workers’ comp and the like are factored in. Amazon’s wage increase — effective Nov. 1 — will affect more than 250,000 employees, as well as more than 100,000 seasonal employees to be hired for the holiday season. That won’t come cheap.
But the low-wage, low-productivity, high-turnover model has its costs too.
Some big companies survive on the body-shop model — bring in a bunch of cheap unskilled labor and when they burn out or leave for something better, bring the next crop in. It would be a shock if somewhere in Amazon there isn’t a sophisticated spread sheet tracking the tradeoffs between the body-shop approach and paying more to recruit workers who show up, are trainable and productive and will stick around.
In many labor markets around the country there’s a growing shortage of those kinds of workers. Good labor will get more expensive. Perhaps Amazon figures that recruiting and retaining workers with higher pay now gives it a head start on other companies and one more competitive edge.
One more factor that might be in play: It’s not going to matter in the long run.
Two reasons why: At $15 an hour, a worker would receive $31,200 a year in wages for a full-time job (not including benefits). Here’s a wild surmise: Amazon is paying considerably more than that for coders, programmers and other technical, administrative, managerial and executive positions. That’s where the real money will be spent.
For all the automation and robotics in an Amazon distribution center, it still takes a stunning number of people to staff one, to handle tasks such as unloading inbound shipments and packing outbound customer orders.
For the moment, it’s both a capital and a labor-intensive business. But how much longer for the second part?
Eventually a driverless truck will back into a loading dock, to be unpacked by one type of robotic unit with inventory sent to the shelves by another, to be retrieved and packed by yet more, and sent to the customer by unmanned drone.
At that point the place will be operating virtually lights out and unstaffed, except for the folks who keep the robots running. They’ll probably be earning good money for those skills.
Everyone else who used to work there? Their employment fates will depend on whether the next disruption Amazon or someone else comes up also comes with a lot of jobs that pay decently.