Amazon Announces $15 Minimum Wage: Will Affect California Business

What Amazon’s New $15 per Hour Minimum Wage Means for the State of California Business

In early October of 2018, reports came buzzing in about Amazon CEO, Jeff Bezos and his decision to start all of their employees at a $15 minimum wage. Many Californians see this entry-level wage increase as a boost for the local economy. Essentially, this is a $2 per hour increase in wages for many of Amazon’s employees, including those that work at the grocery chain, Whole Foods which Amazon purchased in 2017. The effects of this increase will influence the entire economy of California, from housing, to restaurants and barbershops. This wage increase could also put pressure on other companies in the industry where the average starting wage for warehouse workers is $12.21 per hour. Amazon employs 30,000 workers at its warehouses and processing centers across the state of California.

Receiving immense pressure and public outcry, Jeff Bezos made the decision to increase worker’s pay. “We listened to our critics, thought hard about what we wanted to do, and decided we want to lead. We’re excited about this change and encourage our competitors and other large employers to join us.” Bezos said in a statement. He is currently the world’s richest man, with $165 billion in net worth. Meanwhile his company, Amazon holds nearly a $1 trillion dollar market capitalization. Therefore, pressure has been intensely strong from labor groups and politicians across the country for Amazon and Bezos to pay their fair share.

Vermont Senator, Bernie Sanders was one of Amazon’s most vocal opponents. He had introduced legislation alongside California Representative Ro Khanna in September called the Stop Bad Employers By Zeroing Out Subsidies Act, or the “Stop BEZOS Act”. This bill addressed the fact that large employers like Amazon and Walmart had their employees receiving state benefits such as food stamps and Medicaid. The intent of the proposed legislation was to force employers to pay for those government services since they weren’t paying their employees enough to cover the basic living expenses.

We listened to our critics, thought hard about what we wanted to do, and decided we want to lead. We’re excited about this change and encourage our competitors and other large employers to join us.
Jeff Bezos

As well intentioned as the Stop BEZOS Act may have been, many critics have vocally expressed concerns that the bill would have a multitude of unintended consequences. Some critics argue that the minimum wage increase will actually lower total worker’s compensation as the plan eliminates stock purchasing options and bonuses for employees. But Bezos quelled some concerns stating they will be replacing their restricted stock unit (RSU) program with a direct stock purchase plan that would commence in 2019. Other criticisms include that the overall cost of living will increase making the wage hike’s impact effectively null.

Amazon seems poised to gain a lot from this move to a $15 an hour starting wage. As they are moving into the holiday shopping season, Amazon will need to fill upwards of 100,000 seasonal jobs in the coming months if they want to remain the Christmas shopping giant they have in the past. With an already tight labor market, (unemployment is currently below 4%, so many are simply not looking for work) the new wage increase sets Amazon in position to attract the workers they will need during the busy holiday season.

The move towards higher wages will also relieve some political pressures on the internet retail giant. Amazon has already offered a decent benefits package that company representatives claim will not change with the wage increase. These benefits include:

  • 401k matching program
  • Comprehensive health care: medical, dental and vision insurance plans
  • Up to 20 weeks paid parental leave
  • Career training incentive programs

In spite of these seemingly generous benefits, Amazon had been widely criticized for a multitude of worker’s rights issues, aside from just the living wage. Working conditions had been in the news in the summer of 2018 stating that many warehouses did not have adequate ventilation causing some employees to pass out from heat exhaustion while on the job. Many employees reportedly were not allowed to take bathroom breaks and many Amazon employees were receiving public food stamp (SNAP) benefits.

This raise in wages is a politically smart move for Amazon. They will likely lower their position on the radar for employee rights movements and have shown here that the move is not only welcomed by labor advocates, but may actually pressure other retail giants like Walmart to follow suit and raise their wages too. All of this will have a great impact on California’s economy and across the United States as a whole.

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