Amazon raises wages to $15/hour

The Thinker by Rodin

The news has been pretty miserable recently. But yesterday brought an event that truly made me cheer out loud and actually made me teary. Amazon’s CEO Jeff Bezos, whose wealth grows by $250 million every day, decided to pay his workers at least $15/hour. Starting November 1, all Amazon employees, including the part time and temporary ones, will be paid a minimum of $15/hour. This resulted in something you would not expect: Amazon employees cheering their employer (see video).

This should make everyone cheer, except perhaps Amazon stockholders. This wage increase may reduce Amazon’s profits, and thus its stock value. More than likely though Amazon stockholders will grow to understand that this move makes business sense and will help ensure Amazon’s long-term profitability.

Early in the auto industry’s years, Henry Ford realized that if he paid his autoworkers generously they would buy his cars. If like many Amazon employees you now make ends meet (if you can) with second and third jobs, plus food stamps and Medicaid (in states where Medicaid is an option), receiving $15/hour means a whole lot more money in your pocket. Given that you can buy almost anything on amazon.com, a lot of that extra pocket money should go back into Amazon’s coffers.

If you are a taxpayer, you should be thrilled that Amazon workers shouldn’t need government assistance to survive anymore. The U.S. government doles out huge amounts of money in the form of corporate welfare, which in 2012 cost taxpayers about $100B a year. The primary beneficiaries of corporate welfare (unsurprisingly) are large corporations, which can afford to lobby for theses benefits. Because the government subsidizes their costs, this puts small businesses at a disadvantage. So when companies like Amazon wean themselves off of indirect corporate welfare (in the form of food stamps and Medicaid costs borne by taxpayers for their low wages), this competitive advantage largely disappears while also reducing federal and state spending.

Small businesses presumably won’t be happy if they have to increase their wages to compete with higher wages at places like Amazon. They are under no obligation to do so. But workers who can opt for higher wage employers like Amazon will try to get jobs there instead. Higher wages allow Amazon to pick from a better talent pool and retain workers. Ultimately small businesses have to either become more efficient (like Amazon) or pay their employees a living wage too. This may result in higher costs, but higher costs are easier to handle if there are consumers with more money to spend. And that’s another benefit of these actions: putting more money into circulation, so the economy does better overall.

Other large employers are raising wages too. Target is on track to raise its minimum wage to $15/hour by 2020. Given that Amazon will offer more sooner, they might want to match Amazon’s wage rate sooner too. Early this year Walmart raised its minimum wage to $11/hour. They may now face similar pressure. More progressive companies were there way before Amazon. Costco pays its employees a starting salary of $20/hour.

In the case of Amazon, it looks like shame was an effective strategy. Just last month, Senator Bernie Sanders (I-VT) introduced the Stop BEZOS Act, which would have levied a tax against large employers equal to the public benefits their employees receive. In a Republican congress, the act had no chance of passage. But just by introducing it and making noise about it, it convinced Jeff Bezos to raise wages. In fact, Bezos thanked Bernie Sanders. Bezos is now on record as a supporter of a living wage and hopes Amazon’s actions spur other employers to do the same.

The great thing is that it probably will. Amazon’s action feels like the straw that broke the camel’s back. The $15/hour minimum wage proposal is very popular with the public. Back in 2016, 53% of Americans supported raising the minimum wage, and 48% of Americans supported a $15/hour minimum wage. Those numbers are likely higher now. By setting a new floor of $15/hour, it also encourages employers to raise wages generally. These are important steps to address the widening income inequality between rich and poor, but also between the rich and the middle class.

$15/hour is still probably not really a living wage in most of the country, but it’s closer to getting there. Its main benefit is simply to make work pay again. One reason for the generally low labor participation rate in the United States is because work does not pay for most jobs that require few skills.

These actions are not happening due to an employer’s beneficence. They are the result of a lot of sustained actions by Democrats and progressive groups. It’s quite clear which party is really on the side of the working class, and which is not.

Like many Americans, I spent time eking out a living (if you can call it that) at or just above the minimum wage. It is nearly forty years in my past, but I never forgot just how hard it was, and it is much harder today than it was then. That is why I have supported actions like Fight for $15 to set $15/hour as a new minimum wage and to better allow these workers to unionize. It’s hard for me to understand how anyone who had to survive on these miserly wages could not. Basic decency requires that all Americans be paid a living wage. $15/hour is a start.

The Walmart egg cracks at last

The Thinker by Rodin

Walmart protesters like me are cheering, somewhat tentatively. We are celebrating Walmart’s announcement this week that it is raising its starting wages. Walmart will boost starting wages to $9 per hour this year and it will raise them to $10 per hour by February 2016. $10 an hour is still not a living wage, but it is at least a start in the right direction. In addition, Walmart is changing policies to allow more predictive schedules for its employees, many of who are part time and many of who have to struggle their Walmart schedules with other job schedules. Employees will know more than two weeks in advance what their hours will be and when their hours will be. In addition, those desiring more hours will be able to request them. This good news is trickling up. Department managers will get a raise too, up from $13 an hour to $15 an hour.

So hip hooray, for Walmart, but certainly not a hip-hip hooray. Walmart has obviously been assessing the optics of its labor policies for a long time. Organizations like Making Change at Walmart have given widespread attention to their lagging wages, and the hassles and often brutish conditions that their employees endure. This included some strikes, sit-downs and walkouts, not to mention Black Friday protests such as I helped organize last year. It is quite likely that without these events there would have been no announcement this week from Walmart.

I have been focusing on Walmart’s unfair labor practices for many years because I believed it was where the fulcrum of labor change needed be applied. This is because it is the nation’s (if not the world’s) largest private employer. So affecting real change in Walmart was likely to have a nudging effect on all the other private employers out there. Indeed, that is the expectation. There is at least one Walmart in any community of size. $10 an hour may still not be a living wage, but when someone looking for a job has a choice between Walmart at $10 an hour and washing dishes at an Applebees at $7.25 an hour, they will go with Walmart. Walmart gets a richer set of potential employees to choose from. To compete at some point Applebees has to raise its wages too.

Unquestionably some of this is due to the improving economy. With the official unemployment rate at 5.8 percent and many disaffected people rejoining the labor market each month, the labor pool is tightening up at last. A number of employers have been proactive. Costco and Wegmans have long paid their starting employees a living wage and not coincidentally have prospered. Starbucks, Gap Inc., Hobby Lobby and IKEA have all seen this freight train coming their way and recently raised wages. Walmart then is something of a laggard. However, due to its size it has sent a signal that other employers must respond to or have their businesses put in peril.

I doubt that the bean counters at Walmart have figured this out, but raising their employees’ wages is good for their bottom line as well. Most likely much of the raises will be spent at Walmart. As starting wages are raised nationwide Walmart stands to increase sales, as they cater to value customers that come predominantly from the middle class, working class and poor. Happier employees are likely to be more productive as well, which means that Walmart’s notoriously poorly stocked shelves may be less so in the future.

It also means, however marginally, that money which would have otherwise gone toward the rich, where it is unlikely to be spent, will instead go toward the working class, where it will almost certainly be spent. In short, it will mean that the economy will grow more than it otherwise would have. Since the United States leads the world economy, our greater prosperity and our demands for goods and services will spur the world economy, the beginning of a virtuous cycle.

None of this should be news, but it may be to those who favor austerity. Walmart’s and all employers’ low wage policies are ultimately self-defeating. Low wages create high turnover and lower employee morage. Low wages do not build employee loyalty and give no onus for employees to be productive. Low wages make employees feel used instead of valued. It creates unnecessary conflict between employees and management and creates the conditions for labor to organize that employers don’t like. It taints businesses by projecting them as cheap, uncaring and harsh.

It also tends to stifle business creativity. Fast food restaurants like Chipotle are prospering by offering fresher, tastier, trendier and more natural foods. Chipotle’s simple use of a cafeteria line moves customers through more quickly and more cheaply while allowing them to pay employees more while needing fewer of them. In short, this makes them more productive and profitable. McDonalds, which has used the counter methodology for its more than sixty years in business, can’t seem to rethink its business model in such obvious ways. Clinging to tradition rather than embracing change is a major reason for their lackluster sales.

Employers that demonstrate that they value employees in the form of living wages set up a virtuous cycle wherein higher profits are a probable outcome of a generous corporate philosophy. Walmart is beginning to dimly grasp this but in fact this is what worked for American for most of the latter half of the 20th century. In truth, Walmart’s profitability is centered on its ability to treat its employees with respect through living wages and humane working conditions. Without employees it simply cannot survive. It needs to see its employees as invaluable and treasured assets, not as commodities. Living wages are the primary way to demonstrate this. Then Walmart may see sustainable increases in sales and profits again.