Sorry workers, but Ontario isn’t Amazon.
Marni Soupcoff, Page A10
Amazon’s recent decision to raise the minimum wage it pays its workers to $15 an hour was greeted with enthusiasm and praise, no one more pleased than independent Senator Bernie Sanders, who tweeted: “This is what the political revolution is all about.”
Anyone who watched the clip of Amazon employees shouting for joy at the announcement of the pay hike — and hundreds of thousands of people watched the clip — would probably assume that Amazon’s move was one of those rare bits of unequivocally good news. Big company voluntarily chooses to pay blue collar workforce better wages. No downsides!
That is, of course, sadly but predictably far from the truth. Everything has its downsides, and Amazon’s minimum wage raise is no exception even if it’s been a public relations slam dunk. Well, almost a slam dunk.
A week after Amazon’s announcement, The New York Times published a piece headlined “Why Some Amazon Workers Are Fuming About Their Raise.” It turns out a lot of Amazon employees say they are mad about the wage hike because they’re now losing other compensation and bonuses that they valued more than a higher hourly rate.
No more financial rewards for good attendance and productivity. No more granting of Amazon stock. Not a happy development for workers who benefitted significantly from these policies and had no desire to trade them for, say, an extra dollar an hour.
Notably, Amazon founder and CEO Jeff Bezos is also advocating for the U.S. federal government to increase the legal minimum wage, which is music to progressives’ ears, but is also very good for Amazon.
It’s easy for a company of Amazon’s size and with Amazon’s revenue to sacrifice a tiny percentage of their profits for a higher hourly pay rate, but for a lot of employers, even a modest wage hike would represent a significant percentage of what they take in.
Mandated wage raises are never unequivocally good, and even voluntary acrossthe-board wage raises tend to be damaging when they’re motivated mostly by a desire for good press, rather than a genuine effort to attract and maintain good employees. All blanket minimum wage increases have the potential to occasion higher prices for consumers and, ultimately, fewer jobs, especially entry-level and part-time ones.
One of the most challenging problems for unskilled or low-skill workers is the degree to which automation is decreasing the need for human help. And there’s no better driver of automation than an increased minimum wage.
We should always remember this, but now is a particularly good time to be mindful of it given that Ontario premier Doug Ford is being accused of “social murder” (among other evil things) because he’s putting a freeze on the province’s hourly minimum wage, which had been due to increase to $15 (after an already dramatic increase from $11.60 to $14) in 2019.
Ford critics speak of the negative effect the premier’s decision will have on intergenerational poverty and the working poor in particular. Yet ending the cycle of poverty is hardly helped by a policy that leads to layoffs. Ontario’s Financial Accountability Office has estimated that the raised minimum wage could lead to the loss of 50,000 jobs.
It’s also of little help to the working poor when their cost of living increases as the businesses they depend on (daycares, corner stores, etc.) raise their own prices to cover their increased labour costs. Or go out of business, contributing to the ghettoization of low-income neighbourhoods.
Jeff Bezos has encouraged the U.S. government to increase its federal minimum wage because the change “would have a profound impact on the lives of ten of millions of people and families across this country.” Unfortunately, that impact isn’t guaranteed to be a net positive one, though it is guaranteed to have its painful and destructive elements.
Bezos deserves leeway in deciding how to run his own company. He can experiment with wages and stick with an increased wage floor even if it doesn’t happen to be the best development for his current and potential future employees, or for his shareholders.
Government doesn’t get the same kind of pass. Mandating a minimum-wage increase for everyone is a far greater economic distortion and therefore a far greater responsibility.
Moving from $14 to $15 minimum hourly rate, on the heels of a big jump of more than $2, in Ontario could be damaging, especially to the working poor and those looking for work.
It may not be a great PR move to acknowledge this, but it’s a brave and creditworthy to do so.