Amazon’s $15 minimum wage could put pressure on other retailers to raise pay
Amazon.com Inc.’s minimum wage increase to $15 could put pressure on other retailers, who are already competing for talent in a tight labor market.
Amazon AMZN, -0.60% said Monday that it’s raising its minimum hourly wage to $15 an hour starting November, affecting 250,000 full-time, part-time and temporary workers, as well as seasonal workers.
Amazon Chief Executive Jeff Bezos said the e-commerce giant “listened to [its] critics” in order to come to the decision.
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“We will be working to gain congressional support for an increase in the federal minimum wage,” said Jay Carney, senior vice president of Amazon global corporate affairs, in a statement. “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 announcement got Sen. Bernie Sanders’ seal of approval.
Many cities, including Amazon’s home city, Seattle, and many retailers have raised wages and offered one-time bonuses to reward staff, retain them and attract new workers. However, the $15-an-hour threshold, pay that advocates deem a living wage, is one that few retailers have reached.
Target Corp. TGT, -0.10% announced in March that it would gradually raise its minimum wage to $15 by 2020. It’s $12 in 2018.
Others that have raised their wages over recent months include Costco Wholesale Corp. COST, -0.71% , to $14 an hour; Starbucks Corp. SBUX, +0.40% , which raised wages, offered stock grants and other perks as part of a $250 million investment; and Walmart Inc. WMT, -0.99% , which raised the minimum wage to $11 and offered a one-time bonus to workers, including $1,000 to 20-year veterans.
“With more than a million associates in the U.S., we continue to make significant investments in the wages, benefits and training we offer,” Walmart said in a statement, adding that the company hasn’t announced any plans to raise wages at this time, but is always watching the marketplace.
“We also offer competitive wages in the markets that we operate in. As you would expect, we consistently review where we stand, taking into account many factors, and we will continue to do so.”
MarketWatch reached out to all of the aforementioned retailers competing with Amazon, with the exception of Target, as well as Gap Inc. GPS, -0.31% , Macy’s Inc. M, +0.89% , Kohl’s Corp. KSS, -0.12% , and Kroger Co. KR, +0.98% for comment on the Amazon announcement. We did not hear back from the other companies.
The question of compensation is also tied to the need to hang on to talent, according to Kathy Gersch, executive vice president at Kotter.
See: Ebay cease-and-desist letter accuses Amazon of illegally poaching its sellers
“People become more important to provide service and knowledge, and it becomes more important to retain people,” she said. High turnover can get expensive due to the costs of recruiting and training staff.
“If you’re retaining people longer by paying them more, the cost of replacing an employee is significant,” Gersch said. “If your retention rates are going up because you’re paying more, at a certain point it’s easy to offset the cost.”
Investors appeared worried about the higher labor costs associated with higher wages, sending retail stocks down in Monday trading.
Though, it’s important to note that pay is only one part of the equation.
Amazon has come under fire after reports of grim working conditions, including workers relieving themselves in bottles because the rigors of their job don’t allow for bathroom breaks.
“If you’re paying more and not retaining workers, the math is problematic,” Gersch said. “The issues go beyond compensation if you’re losing people.”
Neil Saunders, managing director of GlobalData Retail, said Amazon’s pay increase was “both a politically savvy move and a change made out of economic necessity.” The company has also faced harsh criticism for paying low wages. It needs a lot of workers to keep the e-commerce engine running, especially heading into the holiday season.
And: Amazon’s $15 promise puts focus on $7.25 U.S. minimum wage: Here’s who earnings it
“Amazon will hope that this move demonstrates its commitment to staff and their well-being,” Saunders wrote. “Without a rise in wages, Amazon would be placing itself at a disadvantage in the labor market.”
Statements from OUR (Organization United for Respect) Walmart, a nonprofit that unites low-income workers and their communities to improve working conditions at retailers across the U.S., supports the analysis from Saunders and Gersch.
“It’s time for Walmart to acknowledge where the industry is headed and recognize that paying a living wage to the nation’s largest workforce is a necessity, not an option,” said an OUR Walmart leader Madeline Chambers, who is also a part-time Walmart employee. OUR Walmart thinks $15 should be the minimum wage.
Another OUR Walmart leader and part-time Walmart worker, Arianna Smith said the minimum wage increase at Amazon makes her want to work at Amazon, and she would like to know where the closest Amazon facility is in her area.
Amazon shares have gained 107% over the past year, outpacing the Amplify Online Retail ETF IBUY, +0.34% , up 35.6% for the last 12 months, and the S&P 500 index SPX, +0.42% , up 16% for the period.
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