Amazon’s salaries make it an outlier in world of big tech

We have just learned that the median salary of employees at Amazon.com is $28,446 (Dh104,480), excluding its chief executive and founder, Jeff Bezos.

That pitiful number raises an intriguing question: is Amazon a high-paying tech company or a low-wage retailer?

“Both” is the answer, but to this Amazon aficionado that answer is incomplete.

The pay figure, which was disclosed for the first time in Amazon’s annual proxy statement, reflects a large number of low-paid retail and warehouse employees. The proxy also disclosed that Mr Bezos was paid $1.68 million, making the ratio of what he was paid and the median pay 59:1.

What does that ratio tell us? Really, not very much.

Mr Bezos, according to the proxy, had a 2017 compensation of $81,840 in salary. The rest was in the form of perks, much of it for “security arrangements” and travel. But Mr Bezos’s pay, which seems rather modest when stacked up against the obscene earnings of many other corporate chiefs, is almost irrelevant.

That’s because Mr Bezos is the world’s wealthiest person, with a fortune now estimated at about $129 billion.

So that ratio, although accurate, means next to nothing. If you really want to understand the gap between chief executive and worker, consider instead the ratio between the net worth of the boss and his employees: I did, and it’s beyond measure.

Seriously, 100bn:1 is not an outlandish estimate.

Here’s how I came up with that ratio. Let’s begin with the very realistic assumption that the median net worth of all of those thousands of Amazon warehouse serfs is – like that of the rest of hand-to-mouth America – somewhere between negative and a little more than zero. As Gizmodo recently reported, Amazon’s warehouse workers are among the top 20 recipients of food stamps. How did this happen?

The main culprit, of course, is market forces: stagnant wages, globalisation, the China shock, automation and the rise of software. These created conditions that Mr Bezos skillfully took advantage of – and not just in one market, but many.

The company’s expansion into so many corners of the economy offers a partial explanation as well. Some of the company’s business lines are clearly pure tech: its Amazon Web Services cloud business, the streaming audio, video and content services, the devices group creating gadgets like Echo, Firestick and Kindle and its platform to allow third parties to sell goods and now services to consumers, with Amazon taking a cut.

All of these services leverage the technology infrastructure Mr Bezos & Co have built to service online consumers.

But the company’s first and still dominant business is selling and shipping physical product. Although this business relies critically on technology and logistics, it would not exist without a huge physical footprint made up of warehouses and distribution centres much like those of any large retailer. The company’s presence in the bricks-and-mortar retail industry only became bigger when it bought Whole Foods Market last year for $13.7bn.

To operate in what we call the meatspace of warehouses and supermarkets and shipping and physical stores requires hundreds of thousands of employees.

These are not highly paid coders, engineers and product managers, but stock clerks and cashiers and drivers. Last year, Amazon passed 500,000 employees (it now has about 566,000, according to Bloomberg). Compare that with Alphabet’s (Google) 80,000 as of the end of 2017, Apple’s 100,000 and Facebook’s 25,000. The pay scale is vastly different as well, mainly because of the kind of employees each company has. Apple’s average salary, according to data research firm Paysa, was $100,733. That includes lots of retail workers at Apple’s stores (not the low-paid workers assembly line at contractors like Taiwan-based Foxconn).

At Google, which has no retail workers, the average employee salary is $190,854. At Facebook the average is $203,894. As we can see, Amazon is a tech outlier.

Its investors have given it a pass for generating little or no net income during much of the 21 years since it went public. The same isn’t true of its big tech peers, all of which are enormously profitable. I wonder how much longer its customers like me will continue to look the other way.