Amazon’s $15 Minimum Wage Hike in the Context of US Corporate-Worker Relations

The USA’s $15 minimum wage movement has gone mainstream in recent years. 25 states have a minimum wage above the federal $7.25 rate for all workers, while California, Massachusetts, and New York plan to eventually reach the $15 mark statewide (“State Minimum Wages”, 2018). The ‘Fight for 15’ found public support and success in the liberal city of Seattle in 2014 (Hannah, 2016), and even the southern cities of Durham and Gainsboro passed $15 wage legislation for city employees in 2015-16 (Brown, 2017). With this national scene in place, mega-corporation and e-retailer Amazon has put into effect a minimum wage increase that impacts 350,000 of its workers this November (“Amazon’s $15”, 2018). Is this move a wholehearted positive step by the corporation in helping workers, or a publicity stunt that hides the corporation’s cost-saving techniques that suppress its workers’ livelihoods? And what will the real-life effects of this move be on the daily lives of Amazon workers? The answers to these questions have ramifications important to not just Amazon but the study of corporate-labor relations and workers’ rights in the USA as a whole.

This essay will begin by providing historical background regarding the labor relations in the USA at the time of Amazon’s expansion. Then, it will provide background on Amazon and explore the corporation’s current US labor geography. It will continue by providing an overview of contemporary working conditions at Amazon in the USA. Next, Amazon’s motivations for boosting its minimum wage will be discussed: these motivations include the corporation’s need to have a positive image with workers, politicians, and the general public as well as the corporation’s business strategy in relation to workers and governments. To conclude, this essay will argue that although the wage hike may bring meaningful benefits to many Amazon workers, extensive further actions are needed to improve workers’ standings at Amazon and in the wider USA: these actions should be launched by labor activists, governments, and corporations.

The condition of the American worker has changed considerably over the past 50 years, and Amazon’s current practices in its recent rapid expansion have been shaped by this change. The depression-era National Labor Relations Act (NLRA) is a huge help for workers, as the still in-effect law “provides private sector employees legal protections to organize, communicate, and act collectively” (Hannah, 2016, 264). In the years after the act was passed, union contracts that provided high wages with increases indexed to inflation were signed, especially in the manufacturing sector. By 1970, unions covered 33% of (non-agricultural) workers in the Midwestern USA. The South remained more hostile to organized labor, but still had 17% union coverage. Non-unionized workers in areas with many unions often won similar benefits during this time (Angel, 2016). These processes raised many Americans’ standards of living, allowing them to enter the middle class (Hannah, 2016). However, from the 1970’s to today, economic restructuring has caused major changes in employment dynamics: manufacturing has declined in favor of the service sector, and employers have preferred non-union labor over unionized labor when changing locations or setting up new locations (Angel, 2016, Hannah, 2016). In the short timeframe of “1974-1984, the percentage of the non-agricultural work force belonging to unions declined from 28.3 percent to 19.4 percent” (Angel, 2016, 126). This continued restructuring has occurred largely because of government inaction and counterproductive action in promoting workers in comparison to corporations. Since 1970, attempts to reform the NLRA to account for economic restructuring have been voted or vetoed down (Hannah, 2018). Although the federal minimum wage has been hiked in this time period, most recently in 2009, these increases have not accounted for inflation enough (Manning, 2018). The buying power of minimum-wage workers has decreased by 35% since 1969, despite the fact that in the same time period US economic productivity has increased by 135% (Atkinson, 2018). Anti-union “Right to Work” laws, “which allow workers to opt-out of paying union dues or other fees even if they work under a union-negotiated contract,” have been passed in 27 states, including all of the South: messages portraying unions as anti-worker among people who do not have much experience with them have had success (Brown 848). Recent $15 minimum wage movements and Amazon’s recent minimum wage hike run contrary to the labor situation of recent history.

Amazon, founded in 1994 (Wulfraat 2018), is a massive e-tailing corporation with a global production network that employs around 575,000 workers worldwide (Weise, “Amazon”, 2018). The company rapidly rose to prominence in the late 1990’s and, after extensive restructuring eased temporary profit woes in 2001, has expanded to become one of the world’s most important corporations (Wulfraat 2018) Its founder and CEO, Jeff Bezos, is the richest person in the world: he has a net worth of $165 billion. The corporation has a market capitalization of nearly a trillion dollars. 250,000 of the firm’s full-time workers (including Whole Foods workers) and 100,000 of the firm’s temporary workers have seen increased wages after Amazon’s announcement of the pay hike for American workers (Weise, “Amazon”, 2018). Amazon workers at fulfillment centers are currently paid, on average, $13 per hour (Long, 2018). However, bonuses and stock options have been cut in concurrence with the hike (“Amazon’s $15, 2018). Clearly the minimum wage hike affects a lot of people -- in fact, Amazon is the USA’s number two employer (Long, 2018). The corporation’s success reflects the national transition from a manufacturing-led economy to a service-led one.

Where do Amazon’s American workers work? In total, the corporation has 359 active facilities, mostly warehouses, covering around 140 million square feet in the USA, and has plans to construct 48 more facilities covering around 35 million square feet. The states with the largest number of facilities are California, Texas, Florida, Illinois, and Pennsylvania: reflecting the growth of the Sunbelt, the majority of Amazon facilities are in the South and West. The West being having the second-largest Amazon presence of the regions makes sense due to Bezos founding the corporation in Seattle (Wulfraat 2018), and the South being the most entered-into region for Amazon makes economic sense because the region has historically had high anti-union sentiment and lower wages than other parts of the nation (Angel, 2016).

What are the working conditions of US Amazon workers like? Most of the workers affected by the raise of the minimum wage are warehouse workers in the various centers the firm operates (Weise, 2018), which are usually tens of thousands to millions of feet in area (Wulfraat, 2018). Some jobs are not physically intensive: 43 year-old Emily Byres, an Amazon worker from Indiana, explains: “So on a day-to-day basis, I will work on a computer and just to make sure that our bins match up physically and virtually” (as quoted in “Amazon Employees”, 2018). However, other workers face much more challenging workdays. 71 year-old Chuck, an Amazon picker who is part of the temporary CamperForce program that recruits people (including many retirement-age workers) who live in RVs, moves items around a fulfillment center: he walks from 15-17 miles each day. His wife Barb is often in pain during work at the center and loses feeling in her hand at night sometimes. One day, Chuck hit his head on the job and was put right back to work without a proper concussion test. Fulfillment center workers are also trained to climb many stairs, bend when reaching down to avoid physical distress, and carry 25 pounds without assistance/49 pounds without assistance (Bruder, 2017). Pickers like Chuck and Barb have said that “items in Amazon's warehouses are not sorted methodically...Instead, items are immediately put on whatever shelf is available when they arrive at the warehouse. Pickers rely on handheld monitors that tell them where to locate something” (Long, 2018). This work, although physically exhausting, allows Amazon to cut costs and resist automation (Long, 2018). According to economist Diane Swonk, it’s simplicity makes pickers easily replaceable in Amazon’s eyes (as quoted in Long, 2018).

Despite not currently having any unions (Eidelson, 2018), Amazon workers have been far from silent in organizing for better conditions and pay. A group of Somali workers from a fulfillment center in Minnesota have had meetings with and reached some agreements with management, but are planning further action due to excessive working pace quotas. Their complaints stem from multiple instances. Packer Hibaq Mohamed, who takes prayer breaks as a Muslim, was pressured because of packing quotas being raised from 160 to 230 items per hour. 31 year-old pregnant worker Khadra Kassim was refused medical treatment after falling while carrying a heavy box in the heat (Weise, “Somali Workers”, 2018). Workers at Whole Foods are beginning to explore the process of unionizing (Weise, “Amazon to”, 2018). And, as of days before the writing of this paper, Staten Island workers have begun preparing for unionization: they believe that Amazon “treats them like robots and should be focused on improving conditions [at their fulfillment center] rather than raking in tax breaks to build a new headquarters” (Eidelson, 2018).

Amazon’s move to raise the minimum wage has clearly been a way to improve the company’s image, with workers expressing discontent with their conditions and their frustration reaching the ears of politicians and the public. Popular progressive Vermont senator Bernie Sanders has been a frequent critic of Amazon. He has “introduced legislation titled the Stop BEZOS Act, which would tax large corporations for every dollar their employees received in federal assistance” (“Amazon’s $15”, 2018) and has criticized the corporation’s low median yearly compensation to workers (Weise, “Amazon To”, 2018). However, after the minimum wage increase was announced, he heralded Bezos as a model corporate leader (as quoted in Weise, “Amazon To”, 2018). Amazon is bound to get even more nods from some liberal policymakers, as it announced plans to push for a raise in the federal minimum wage concurrently with its own wage hike. Worker reaction to the minimum wage hike has been decidedly mixed, despite Amazon marketing the move as a universal win for workers and using its announcement to tout its healthcare, parental leave, 401k, and career training services as well (“Amazon Raises”, 2018). Fausto Martinez, a new Amazon worker in Miami, explains: “I feel very excited...I can give to my family a better life quality...I can spend more time with my family...I don't have to be looking for a second full-time job. It's going to change my life” (as quoted in “Amazon Employees”, 2018). A fulfillment center in Southern California burst into applause when hearing news of the hike (Weise, “Amazon To”, 2018). However, a fulfillment center in Murfreesboro, Tennessee had a tepid reaction to the news: longtime workers there were upset that temporary workers would see the bulk of benefits (Long, 2018). Another concern is succinctly relayed by a West Coast worker: “What's concerning us mainly is we're given a monthly bonus...we're worried about not getting our payout and making less” (as quoted in “Amazon Employees”, 2018). Amazon has repeatedly stated that all affected workers will benefit from the new $15 minimum wage (“Amazon Raises”, 2018). It has also introduced higher raises for already above-minimum wage workers and new bonus programs for longterm workers (Soper, 2018).

Amazon may have business-oriented reasons for the minimum wage hike as well. The corporation has been criticized for its predatory pricing tactics. Using these tactics, the firm provides an extremely wide variety of products at low prices: it makes slim profits on each product, but with low wages makes huge profits overall. Predatory pricing is a way for Amazon to outcompete smaller competitors: critics say that the practice is monopolistic. Amazon may have raised its minimum wage in order to ease public criticism and hurt its competitors. If the firm succeeds in its push to raise the federal minimum wage, its smaller competitors who rely on slim profit margins may be pressed out of business (“Amazon’s $15”, 2018). Amazon has other ways of cutting costs besides low pay. It uses subcontractors to provide work such as security: contracted workers are not able to sue Amazon for issues in the workplace (Cunningham, 2016, 1674-1675), nor are they subject to the wage hike (Weise, “Amazon”, 2018). Amazon also planned to recieve 1-3 billion dollars "in tax breaks and grants from New York” as part of the now-defunct deal that allowed it to build a headquarters in the area (Eidelson, 2018 & Goodman, 2019). Raising wages provides benefits to individual workers: However, the monopolistic and anti-worker possible motives for the move put into question, according to Duke scientist Matt Johnson, why executives like Bezos are making important decisions for American workers that should be made by a government not focussed solely on profit (quoted in “Amazon’s $15”, 2018).

This essay often presumes that a higher minimum wage is a net positive: Is it really? Proponents of raising the minimum wage state that it is needed to help Americans in deep poverty earn extra money they can use to support themselves and their families. However, opponents of a raise state that it would cut small business profits as well as prevent new workers from being hired (“The Complex”, 2018). Scholars are divided on the issue. Jesús Fernández-Villaverde cites research that claims that a slight raise in the minimum wage causes a slight reduction in total jobs: he advocates for a negative income tax as an alternative (2018). Alan Manning argues that a minimum wage hike would be neutral: it increases the supply of labor by making jobs more attractive, as well as decreases the demand for labor. Therefore, he believes that a modest increase in the minimum wage is agreeable if combined with an earned-income tax credit (2018). Robert Atkinson argues that, on a big-picture level, increasing the minimum wage in stages helps the economy grow: although minimum-wage jobs may become rarer, when they are replaced by automation the profits that result will be used to create new and better paying jobs (2018). Atkinson’s reasoning effectively shows why Fernández-Villaverde’s arguments against raising the minimum wage are incomplete, but Fernández-Villaverde and Manning’s points that wage hikes are not the only solution are valid.

Amazon undoubtedly rose its US minimum wage to $15 to ease mounting and warranted public criticism of its treatment of workers. The firm also has a business strategy that allows it to retain its profit motive in the USA while raising the minimum wage: it concentrates facilities in the South where organized labor is less familiar, it restructures work (in sometimes problematic ways) in order to increase efficiency, it lures money from governments because of its promise to bring economic growth, it externalizes some costs by utilizing contractors, and its great size allows it to continue predatory pricing. Nevertheless, the minimum wage increase will improve the lives of workers and arguably the economy as a whole. And Amazon has showed some willingness to help its workers by meeting with the Somali workers in Minnesota and addressing the original concerns about the hike of veteran workers. Overall, Amazon’s actions in raising the minimum wage will benefit the majority of workers affected by them. However, the hike does not solve the problem of inadequate working conditions at warehouses or the issue that Amazon workers are in the unfortunate but trending state of not being unionized.

Luckily, there are people like reporter Jessica Bruder who are shedding the light on adverse working conditions at Amazon warehouses (Bruder, 2017) and the Staten Island, Minnesotan, and Whole Foods workers who are beginning to bring labor activism to the firm. What are some strategies that help workers’ rights advocates at Amazon in the future? Establishing groups such as worker centers and workers’ councils, respectively, can increase collaboration of workers and communication with employers in settings where unionization is unlikely (Hannah, 2016). Workers who are women or identify with an ethnic or racial minority can use intersectional activism to invigorate themselves in their struggle for workplace rights, and Southern workers can take advantage of the AFL-CIO’s commitment to helping organized labor in the region (Brown, 2017). Workers can join their firm in pressuring governments of localities and states as well as the federal government to raise the minimum wage: while doing so, they can advocate for other measures such as a negative income tax, an expansion of the earned-income tax credit, and reforms to the NLRA that help protect workers in the USA’s modern, service-focussed economy. Finally, they can creatively protest and spread awareness, therefore standing up to a corporation that should listen to them over the profit motive.

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