Ama­zon’s $15 wage likely to have rip­ple ef­fect

The Charlotte Observer (Sunday) - - Business - BY CHRISTO­PHER RU­GABER

Af­ter years of slug­gish pay gains, the econ­omy may be start­ing to work for Amer­ica’s low-wage work­ers.

Ama­zon’s an­nounce­ment Tues­day that it will raise its min­i­mum wage to $15 an hour will in­ten­sify pres­sure on other com­pa­nies to lift their pay lev­els as well. Among the most likely to do so: Ama­zon’s ri­val re­tail­ers and ware­house op­er­a­tors, many of which are fac­ing the prospect of staff short­ages as they ramp up for the holi- day shop­ping sea­son.

“This is go­ing to be a big deal for very low-wage work­ers,” said Ben Zip­perer, an econ­o­mist at the lib­eral Eco­nomic Pol­icy In­sti­tute. “It’s go­ing to com­pel other busi­nesses to raise wages as well.”

Low-wage work­ers typ­i­cally re­ceive higher pay from an ex­pand­ing econ­omy only af­ter high­er­in­come peo­ple have ben­e­fited, econ­o­mists note. Now, with the un­em­ploy­ment rate near a 50-year low and the num­ber of job open­ings ex­ceed­ing the num­ber of un­em­ployed, more lower-in­come Amer­i­cans are fi­nally re­ceiv­ing mean­ing­ful raises.

Low-paid work­ers “get kicked the most in the re­ces­sion, and they gen­er­ally ben­e­fit more later in the boom,” said David Neu­mark, an econ­o­mist at Univer­sity of Cal­i­for­nia, Irvine.

Ac­cord­ingly, re­tail­ers, who em­ploy a siz­able share of the na­tion’s lower-paid work­ers, have been step­ping up pay in­creases. Av­er­age hourly wages for re­tail work­ers, ex­clud­ing man­agers, rose 4 per­cent in Au­gust com­pared with 12 months ear­lier.

Ama­zon’s an­nounce­ment will likely em­bolden la­bor ac­tivists and unions that have been press­ing large fast-food and re­tail chains to raise pay, pro­vide more re­li­able work sched­ules, and al­low for union rep­re­sen­ta­tion.

Among the crit­ics Ama­zon has faced over its pay and work con­di­tions, Sen. Bernie San­ders of Ver­mont has noted that some of its work­ers re­ceive food stamps and other ben­e­fits that are geared for the poor, while its owner Jeff Be­zos has be­come the world’s wealth­i­est per­son.

“Now that ac­tivists have suc­ceeded, they can now take that de­mand to other em­ploy­ers,” said Mar­shall Stein­baum, a fel­low at the Roo­sevelt In­sti­tute. “You say you can’t af­ford this, but your com­peti­tor ob­vi­ously can.”

In­deed, shares of re­tail com­pa­nies fell sharply Tues­day in a sign that in­vestors ex­pect them to have to raise pay to com­pete with Ama­zon, a step that would po­ten­tially slow their prof­its. Best Buy’s share price dropped nearly 5 per­cent; Kohl’s Stores fell 3.9 per­cent.

Ama­zon, the world’s largest on­line re­tailer, also said Tues­day that it will lobby to raise the fed­eral min­i­mum wage from

$ 7.25 an hour, though it did not say what fig­ure it would push for. The im­pact of a higher fed­eral wage, though, would likely be mod­est, be­cause more than 20 states have min­i­mum wages above the fed­eral level.

A higher fed­eral min­i­mum wage could in­ten­sify pres­sures on smaller busi­nesses that don’t have the fi­nan­cial re­sources that Ama­zon has to raise pay sig­nif­i­cantly.

His­tor­i­cally, large com­pa­nies have been a driv­ing fac­tor in push­ing up the min­i­mum wage, Stein­baum said. Once they start to raise pay in re­sponse to com­pet­i­tive forces, they typ­i­cally lobby to push oth­ers to fol­low suit, to pre­vent other com­pa­nies from un­der­cut­ting them.

Dar­ren Moscato, who owns an Ex­press staffing agency in Buf­falo, New York, where Ama­zon has built a ware­house, said the higher pay of­fered by Ama­zon “will make it harder for lo­cal busi­nesses to com­pete for work­ers.”

Moscato noted that smaller com­pa­nies typ­i­cally spend more on la­bor than does Ama­zon, which uses more au­toma­tion.

“This is why Ama­zon is also push­ing for a higher na­tional min­i­mum wage,” Moscato said. “It will give them a com­pet­i­tive ad­van­tage.”

Other re­tail­ers and ship­ping com­pa­nies are likely to feel the brunt of Ama­zon’s de­ci­sion as well, an­a­lysts said. The pay in­creases would ap­ply to about 100,000 Ama­zon sea­sonal work­ers. That’s equal to roughly 16 per­cent of the 623,800 re­tail jobs that the econ­omy added in Oc­to­ber and Novem­ber last year.

“We’ve al­ready seen just how much pres­sure there is – I think this is only go­ing to in­crease it,” said Judy Conti, di­rec­tor of govern­ment af­fairs at the Na­tional Em­ploy­ment Law Project.

An ad­vo­cate for higher min­i­mum wages, Conti added that Ama­zon would likely ben­e­fit if $15 an hour be­came the new base­line. Any small busi­nesses that com­pete with larger com­pa­nies by pro­vid­ing bet­ter ser­vice rather than by match­ing ev­ery price cut should also man­age fine, she said.

Com­pa­nies like UPS, FedEx and XPO Lo­gis­tics typ­i­cally hire tens of thou­sands of sea­sonal work­ers to meet the crush­ing de­mands of on­line shop­ping dur­ing the win­ter hol­i­days. Ama­zon plans to add 100,000, many of them at the higher $15 wage, which takes ef­fect Nov. 1.

“The cri­sis in ware­house and ship­ping per­son­nel is very real, and there’s go­ing to have to be a mean­ing­ful in­crease in wages to at­tract and in­crease tal­ent,” said Steve Barr, con­sumer mar­kets leader at PwC.

Ie­sha Townsend, who works as a McDon­ald’s cashier in Chicago, said she hopes other com­pa­nies fol­low suit. Townsend, 32, plans to demon­strate for higher pay on Thurs­day as part of the Fight for $15 move­ment.

“Why shouldn’t we get it too?” she said, re­fer­ring to Ama­zon’s raise. “We work so hard, and we get less.”


Work­ers pre­pare sand­wiches in­side an Ama­zon Go store in Seat­tle. Ama­zon’s an­nounce­ment Tues­day that it will raise its min­i­mum wage to $15 an hour will put pres­sure on other re­tail­ers and ware­house op­er­a­tors to match that wage.

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