Should retail rivals see Amazon’s $15 minimum wage and raise it $1?

Discussion
Photo: Amazon.com
Apr 12, 2019
George Anderson

In Amazon founder and CEO Jeff Bezos’ annual letter to shareholders, he discussed the “explorer” and “listening” mindset that has led the e-tail giant to find new solutions to old problems (fixing the checkout issue in stores with Amazon Go) and venture into totally unrelated businesses (AWS) without there being a clear call to do so.

Of all the topics he touched on in the annual missive, there doesn’t appear to be any that has gained as much attention as Mr. Bezos’ call for retail rivals to raise the stakes on employee recruitment and retention by offering a higher minimum wage than the $15 an hour that Amazon began paying its entry-level warehouse workers and store associates last year.

“This wage hike benefitted more than 250,000 Amazon employees, as well as over 100,000 seasonal employees who worked at Amazon sites across the country last holiday,” wrote Mr. Bezos. “We strongly believe that this will benefit our business as we invest in our employees. But that is not what drove the decision. We had always offered competitive wages. But we decided it was time to lead — to offer wages that went beyond competitive. We did it because it seemed like the right thing to do.”

While Mr. Bezos may posit that Amazon took the high and righteous road in looking after its workers, some would counter that it took a combination of political pressure, negative press reporting on working conditions and employee morale at the e-tailer’s warehouses and a tightening job market to get the company to do “the right thing.”

Regardless of the motivation, it seems clear that Mr. Bezos and company now see its $15 an hour minimum wage as a differentiator and competitive advantage over many, if not most, of its retail rivals.

In his letter, Mr. Bezos wrote, “I challenge our top retail competitors (you know who you are!) to match our employee benefits and our $15 minimum wage. Do it! Better yet, go to $16 and throw the gauntlet back at us. It’s a kind of competition that will benefit everyone.”

Some large retailers have already matched Amazon. Costco raised its minimum to $15 an hour, bringing the average hourly wage paid its warehouse club workers up to $23. Costco frequently uses the good relations it has with workers as both a recruiting tool and in public relations messaging that appeals to many of its members.

Target has been phasing in pay increases with plans to bring its minimum up to $15 an hour next year.

Walmart, which apparently knows who it is, didn’t take kindly to being called out by Mr. Bezos. CNBC reports that Walmart’s executive vice president of corporate affairs, Dan Bartlett, shared an article on Twitter that points out that Amazon is not paying anything in federal taxes after posting profits on more than $11 billion. Mr. Bartlett tweeted, “Hey retail competitors out there (you know who you are) how about paying your taxes?”

DISCUSSION QUESTIONS: What do you think Jeff Bezos was looking to gain by challenging retail rivals to offer a higher minimum wage than Amazon? Do you expect many of Amazon’s rivals to respond?

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16 Comments on "Should retail rivals see Amazon’s $15 minimum wage and raise it $1?"


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Mark Ryski
BrainTrust

Bezos’ challenge to raise wages may have been a PR stunt, but I doubt it. And even if it was, frontline employees will benefit. Raising retail wages appears to be a growing trend. As noted, Target and Walmart are well on their way to increasing wages, benefits and training for employees. Ultimately, frontline employees have a significant impact on store experience and sales results. Higher wages will enable retailers to attract and retain the best employees. I believe that more and more retailers will follow this trend and I must say, it’s about time.

Chris Petersen, PhD.
BrainTrust

This is disingenuous at best. Sniping at competitors does not do anyone any good. Do your business and do it well for both customers and employees. This is NOT Bezos’ finest hour. Sounds a lot more like political defense than the innovation Amazon is known for.

Art Suriano
BrainTrust
There is no doubt that Amazon led by Jeff Bezos has been an enormous success. Of course, how many remember the years when Amazon did nothing but lose money, and we’re talking significant dollars? However, Bezos was successful in encouraging the investors to continue putting in more money and years later, yes, they have turned it around. But let’s face it, Bezos is an egomaniac. How could he not be? Jeff Bezos is the richest man in the world and remains the richest man in the world even after forking over 30 billion dollars to his ex. He is in the news every day getting praise for his accomplishments. So yes, there is an ego. However, one thing Bezos said I agree with — “one day Amazon will go out of business.” It’s impossible to see that now and even think of how and when that could happen. However, just as so many other giants have eventually failed, Bezos is probably right, and if so, it could very well be his ego that gets them… Read more »
Phil Masiello
BrainTrust

Amazon is using this to stop some of the negative publicity around the warehouse workforces I would assume. Moreover, they are trying to reduce turnover, which is very costly to them.

I would think that most retailers are faced with the same turnover problems. The costs of turnover would be greatly reduced with a more stabilized workforce and probably outweigh the costs of the wage increases.

Paula Rosenblum
BrainTrust

It’s always about PR with Bezos. I think most retailers pay their warehouse workers $15/hour-plus — after all, they are generally trying to keep unions out, and Amazon doesn’t have enough stores to matter, particularly (I don’t see Whole Foods Market mentioned in here, and even if it is in, Whole Foods has always been a good paying company).

So there’s not a lot of cost to Amazon, more endless free press and pressure on competitors.

Having said that, I have predicted that absent some kind of economic collapse, this year will find retailers with a lot of upward wage pressures in stores. If you really want your employees to engage with customers in a real way, or you really want them to work hard and stay around for a while, you have to be competitive. And that means paying a living wage.

I’m glad for it, honestly. It’s going to place tremendous pressure on store P&L’s, but there isn’t much choice.

Ananda Chakravarty
BrainTrust

It’s great that Amazon is jumping on the minimum wage bus. But they are certainly not first. Many retailers have already made significant strides here. This does fall into Amazon’s opportunistic mindset however. Many retailers are ill-equipped to raise wages or provide added employee services without ripping into their profits. Surely Bezos knows this. From the outside it looks like Amazon is using capital to eliminate market competition and even push low margin retailers out. Internally, maybe he’s become more magnanimous now that he’s the wealthiest of all. Retailers won’t be following his lead on this one though — they can’t afford to.

Steve Montgomery
BrainTrust

Let’s label this for what it is – a PR stunt. It costs Amazon nothing to challenge other retailers to raise their wages having done so itself already. As others have already noted they did for many reasons some of which may have been our of genuine concern for their workers but many of which were not. As Walmart’s retort indicated Amazon didn’t have to pay any federal taxes nor does every retailer have a non-retail revenue stream that contributes a large share of its income.

Ray Riley
BrainTrust

The playbook seems to involve owning the conversation, deflecting from related news (for example the reports of the working conditions that these $15/hour workers experience), and most importantly distract the competition. If only for a few hours yesterday preparing a response, or at most a few meetings running a cost/benefit analysis — it cost Amazon and JB nothing.

Rich Kizer
BrainTrust

I feel like this is part PR and part competitive challenge for all retailers. I guess I am more sensitive to this than others, but it always scares me when huge retailers make a move and sometimes literally make other retailers meet them … It smacks of one competitor running the other’s business. I am all for fair wages and advancement. I do not think it wise to start a race of upping the ante by a buck. Who knows where that goes or what it starts.

Dave Bruno
BrainTrust

While Jeff Bezos never passes up an opportunity for more PR (and the media sure does feed the beast), in this case, I am happy to see the coverage of the minimum wage issue. While it isn’t necessarily a fair fight as Amazon has so few stores to staff, I think the conversation is good for everyone. Higher wages across the board will help associates stay in their jobs and be happier (and hence more productive). Happier, productive associates deliver better experiences, which leads to happier customers, who visit more/spend more. Which leads to happier quarterly returns. Oh, and the economy will benefit from more people with more disposable income, too, which helps retail. A win-win-win-win. What’s not to like about this public wage-shaming?

Ben Ball
BrainTrust

The mathematics of this scenario lead me to think Bezos (who I do admire for both strategic vision and operational excellence) is simply spinning a smart competitive strategy into a bonus PR turnaround. Without using real numbers, just think of the equation this way. Warehouse workers + retail workers divided by total sales revenue as compared to warehouse workers only. Who has the greatest total labor hours per revenue generated? So if there were a “level playing field” of labor cost between the two business models, who winds up at a net labor cost disadvantage? Right. PR move? Sure. One that leverages public and media sentiment to pressure traditional retailers to voluntarily take a less competitive position. Brilliant. At least Machiavelli would think so.

David Weinand
BrainTrust

Amazon has huge advantages that the competition doesn’t – a massive cash cow in AWS and an extremely low cost of $$. They can provide wages even higher and put more pressure on their competition to follow suit (and hurt their margins). As others have already said, this is good PR – the likes of which few are better at than Bezos.

Ryan Mathews
BrainTrust

First of all Bezos is probably — as always — looking for a new way to get positive PR. As to the response, in a tight labor market employers are forced to raise starting wages, so anything is possible. Of course, if Amazon’s competitors fall into the trap Bezos has set and raise starting salaries to $16 an hour, he’ll just turn around a raise them a dollar an hour — a cheap investment for positive publicity.

Doug Garnett
BrainTrust

Yes, this is about PR. It’s always about PR with Amazon. We see this truth further revealed in the silliness Amazon released about third-party sellers. Now that investor-funded losses have bought the loyalty of third-party sellers, Amazon wants those sellers to help protect against a government mandated breakup.

My advice to Amazon’s rivals is just to go about your business. Amazon loves to try to manipulate the world — and has been able to do that with press releases. But would a $15.50 per hour minimum at Walmart be a good response? Never. Amazon has won the “we have been lousy and are trying to be better” sweepstakes. Walmart (and the rest) should just sit back and let Amazon spin themselves into a train wreck.

Larry Corda
Guest

Amazon is comparing its wages to retail workers … shouldn’t Amazon be comparing it to warehouse workers?

Patricia Vekich Waldron
Staff

PR is Bezos’ strongest suit.

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