Amazon is pushing up wages, ratcheting up pressure on its competitors as they scramble to hire seasonal workers in the run-up to the vital holiday season.
The web giant said it would boost its minimum wage for all U.S. employees, including those at its Whole Foods grocery chain, to $15 an hour from Nov. 1. This is more than double the current federal minimum wage and gives a raise to more than 250,000 employees as well as 100,000 seasonal holiday workers.
“We listened to our critics, thought hard about what we wanted to do, and decided we want to lead,” said Jeff Bezos, Amazon’s founder and chief executive officer.
As well as pledging to lobby Congress to increase the federal minimum wage, Bezos, the world’s richest man, encouraged his competitors and other large employers to make similar pay hikes and some labor organizations and politicians were quick to agree.
Madeline Chambers, a leader at labor organization OUR Walmart and part-time employee at Walmart, jumped on the announcement, stating that it left the nationwide retail chain in the dust.
“I make $11 an hour at Walmart and it’s not enough for me to support myself and my two kids. The time for excuses and half-measures is over,” she said. “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.”
Senator Bernie Sanders also waded into the pay debate, telling Reuters that while he has been a harsh critic of the wage and employment practices of Amazon, he has to “give credit where credit is due,” while White House economic adviser Larry Kudlow said on CNBC, “Good for them. I’m in favor of higher wages.”
Other retailers have been nudging up pay, but not as aggressively as Amazon. Walmart Inc. this year moved its minimum to $11 an hour, citing the benefit from changes to the tax code. Target last year raised its starting wage to $11 an hour from $10 and committed to keep moving the rate up to $15 by 2020.
While pushing up pay is always good PR for companies, it’s also becoming increasingly necessary amid a tight labor market thanks to the strong economic backdrop. The employment rate, currently 3.9 percent, has been extremely low this year, hovering at levels not seen in 18 years and it’s set to fall even lower, with the Federal Reserve forecasting that it will stick at around 3.5 percent in both 2019 and 2020.
In the longer run, it’s expected to rise slightly to 4.5 percent, still exceptionally low compared with historical standards and in stark contrast to the depths of the downturn when it was close to 10 percent. All this adds to pressure on retailers to stand out in the scramble to attract thousands of seasonal workers and in most cases, that means higher pay and better benefits than their competitors.
Joel Bines, global co-head of retail, and a managing director, at consultancy AlixPartners, said: “Low unemployment means a shrinking talent pool, so retailers are going to have to offer extra perks and, yes, more money to get bodies into their stores and fulfillment centers with Black Friday just days away.”
Charlie O’Shea, Moody’s lead retail analyst, added: “There’s no question that there’s a battle for quality retail employees. We’ve all heard the stories of people crossing the street for an extra 25 cents an hour. There’s pressure.”
And the tight labor market isn’t the only factor at play — states are also turning up the heat. Arizona, Colorado, Maine, Massachusetts, and Washington, D.C., have already hiked their minimum wages by more than 10 percent this year and at least a dozen other states are planning to bump up their minimum wages by 10 percent or more over the next few years, according to Alix Partners.
For now, Amazon is turning the change into an opportunity to be seen as a standard-bearer in the area, although activists who have criticized the company’s treatment of workers, particularly at its fulfillment centers, will no doubt remain skeptical.
Sijal Nasralla, a campaigner for SumOfUs, an international consumer watchdog organization, argued that while Amazon increasing the minimum wage for its U.S. workers is a good thing, the overall treatment of Amazon workers must change as well.
“Unrealistic productivity goals, worker deaths, reports of workers being afraid to use the bathroom, and reports of suicide show that Amazon’s worker abuses extend far beyond wages and into company practices as a whole,” he said. “Moreover, Amazon contractor workers still lack the basic protections and wages that Amazon is now extending to its U.S. employees.”