Amazon.com says is raising the minimum wage it pays all US employees to $US15 ($20.90) an hour, firing back at criticism over its compensation for warehouse workers and stoking competition for labour in the holiday-shopping period.
The new minimum wage will kick in on November 1, Amazon says, covering more than 250,000 current employees, or more than 40 per cent of its global workforce. Another 100,000-plus seasonal holiday employees will be granted the higher pay.
Exactly how big a financial commitment the announcement entails is difficult to assess. Starting hourly pay varies across Amazon’s warehouses, though it is generally several dollars lower than $US15. Amazon is also giving hourly workers who made $US15 or more a raise, though it didn’t specify the increase. But the company is doing away with certain incentive pay and stock compensation for hourly warehouse and customer-service employees, potentially helping offset the cost to the company of the wage increase.
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Amazon, which has a market value of almost $US1 trillion and revenue last year of $US178 billion, can absorb the added costs, analysts say. The goodwill gained with politicians and workers could outweigh any hit to profitability, and such a move gives Amazon a possible advantage in hiring tens of thousands of workers during a competitive holiday season and a low-unemployment environment.
More broadly, Amazon’s commitment provides fresh evidence that the strong job market is pressuring businesses to bid up wages for lower-skilled workers and spreading the benefits of a long-running economic expansion more widely. Meanwhile, politicians in several states are working to boost hourly pay. In California, the state’s minimum wage is set to rise to $US15 an hour in 2022.
Amazon chief executive Jeff Bezos used the announcement to go on the offensive against rivals as well as politicians and others who have questioned the company’s treatment of workers.
“We listened to our critics, thought hard about what we wanted to do, and decided we want to lead,” Mr Bezos said. “We’re excited about this change and encourage our competitors and other large employers to join us.”
Amazon’s sheer size and market dominance has made it a corporate target of politicians on the left and right. They claim the company mistreats its workers and doesn’t pay its fair share in taxes, and criticise it for its impact on the economy and traditional retailers.
Analysts said the wage changes were likely to result in a small ding to profitability. A US50c raise an hour across 250,000 employees, for example, would imply a post-tax impact on operating profit of roughly $US200 million, or 1-2 per cent, according to Colin Sebastian, an analyst with Robert W. Baird.
But Amazon’s revenue growth is so strong — consistently hovering around 40 per cent — that it has managed to post record profits even in periods of heavy investments. In July, the company reported its quarterly profit topped $US2.5bn for the first time on nearly $US53bn in revenue.
Amazon’s pay raise quickly won political praise. US President Donald Trump’s chief economic adviser, Larry Kudlow, told reporters at the White House: “Good for them. I’m in favour of higher wages.” Mr Trump has been a big Amazon detractor, in part for its effect on other retailers.
One possible political convert is senator Bernie Sanders, who has made Amazon and Mr Bezos a favourite target in his messaging about wealth inequality. He recently introduced a bill, called the BEZOS Act, aimed at taxing big companies whose employees rely on federal benefits to make ends meet.
On Tuesday, the Vermont independent struck a different tone. “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,” Senator Sanders said. “I urge corporate leaders around the country to follow Mr Bezos’s lead.”
Amazon’s announcement comes as the retail and logistics industries are kicking off their hiring for the year-end holidays, and experts in those fields say the e-commerce giant may have gained a leg-up in labour markets.
Minimum pay of $US15 an hour put the online retail giant in the top 25 per cent for starting wages for general warehouse jobs in the US, said Brian Devine, senior vice-president of the logistics-staffing company ProLogistix.
“This will impact every other company’s ability to attract and retain workers,” Mr Devine said.
US retailers are already scrambling to find enough workers to staff stores. Target has said it plans to hire 120,000 seasonal workers. For their warehouses, United Parcel Service has said it will hire roughly 100,000 seasonal workers, while FedEx has said it will take on 55,000.
Amazon said its salary increase would cover part-time and temporary workers hired by agencies. It also covers recently acquired Whole Foods Market employees, where there are efforts to unionise.
Wages in several low-skill occupations including warehouse workers, retail clerks and restaurant waiters are rising at a faster rate this year than overall hourly pay, according to Labour Department data. Declining unemployment points to a scarcity of workers that is forcing employers to pay more.
Several large retailers have raised their minimum wages in the tight labour market. Walmart, which employs 1.5 million people in the US, in January said it would raise starting hourly pay to $US11 for all US employees. That followed a similar move by Target, which raised its starting hourly pay to $US12 in September, from $US11 last year, and set plans to lift it to $US15 by 2020.
The national jobless rate has fallen to 3.9 per cent, near low levels last seen in 2000. In all, there are more available jobs in the US than unemployed workers.