Amazon increases minimum wage under political and economic pressure

Amazon has raised the minimum wage for its warehousing staff. Last week the company said that it would increase its minimum wage to “$15 for all full-time, part-time, temporary (including those hired by agencies), and seasonal employees across the U.S. – effective November 1”. Amazon has also increased its minimum wage in the UK “to £10.50 (US$13.80) for the London area and £9.50 (US$12.40) for the rest of the UK for all full-time, part-time, temporary (including those hired by agencies), and seasonal employees – effective November 1”.

In both the US and the UK it is unclear what the previous rates were for Amazon warehousing staff, however it is suggested that new employees at Amazon in the US used to start on around US$11 an hour.

Press opinion in the US implies that the move reflects the political pressure that Amazon is under. Certainly, when announcing the minimum wage increase Jeff Bezos commented that “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.”  In the US the company has been criticised from the political left, with Senator Bernie Sanders commenting over the decision that “I think they saw the writing on the wall. I think they saw the calculation that it was indefensible that a man whose wealth is over $150 billion be able to continue paying worker’s wages that are so low that they are forced to rely on federal benefits”. From the other political direction President Donald Trump has criticised the company’s relationship with the US Postal Service. So, Amazon may be feeling vulnerable.

However, these issues do not explain the increase in the minimum wage in the UK. Unlike the US, Britain has had a minimum wage for some time, at £7.83 per hour for those over 25. The new Amazon rate is considerably higher than this.

The real driver of the increase in the starting wage may be shortage of applicants. Both the UK and the US have unemployment rates around 4% and sectors such as road freight are reporting acute labour shortages. Both Deutsche Post in Germany and the Royal Mail in the UK are facing issues with cost inflation driven in great part by higher wages. There is no reason to think that Amazon is immune from these problems. Working conditions at Amazon’s fulfilment centres can be demanding and it is likely that underlying reason for the increase in the minimum wage is an old fashioned pay increase.

Source: Transport Intelligence, October 9, 2018

Author: Thomas Cullen


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