Amazon’s Wages Wager

The trillion-dollar firm surprised everyone by announcing it will raise its minimum wage. But what is it really up to?

Photo by Chris Liverani on Unsplash

The news that Amazon is raising the minimum wage for its UK and US workers has been widely welcomed. Starting this month, the e-tailer has substantially improved on its previous starting rate of £8.20 an hour with a living wage of £10.50 an hour in London and £9.50 in the rest of the UK. Amazon’s CEO Jeff Bezos said: “We listened to our critics, thought hard about what we wanted to do, and decided we want to lead.”

This apparently charitable move, coming at a time when neither UK nor US governments are putting sustained pressure on the firm, blindsided many commentators. According to its critics, Amazon’s fixation on productivity has consistently come at the expense of its warehouse staff, who work in infamously poor conditions while being held to standards that are “unreasonably high” according to the company’s own handbook. The popular perception of the firm running modern-day workhouses has proved difficult to shake. So has it really just had a change of heart?

The reality is that this news comes with significant caveats. Since its initial announcement, Bloomberg revealed that to offset costs Amazon rescinded some of the incentives that were previously awarded to workers who stayed with the firm for at least six months. The removal of stock options and bonuses is a big knock for the firm’s longest-serving staff, some of whom will actually take home less pay with these changes.

Broadly speaking, Amazon’s announcement increases benefits for new staff at the expense of permanent employees. Amazon heavily relies on agency staff on flexible contracts during its peak season ahead of Christmas. Its claim is that around 20,000 seasonal UK workers are affected by the change, on top of 17,000 permanent staff, yet on their own such figures can only exaggerate the social impact it might have. Crucially, they lack the context of data on staff turnover, which is known to be unusually high. Utilising performance metrics to rank and then yank underperforming staff, former Amazonians have called its culture “purposeful Darwinism”. The move to frontload benefits in the employee lifecycle gives this flywheel another spin.

In classical terms, Amazon’s decision suggests that with unemployment low, the jobs market is working as it should — pushing up the price of labour with increased demand. While already a monolith, Amazon is still one of the UK’s fastest growing employers, bringing another 5,600 staff onto its books between 2016 and 2017. It is entirely possible that it is struggling to attract workers at the rate it needs.

However, Amazon’s designs extend beyond its own purview to the economy at large. As part of its announcement, Amazon has also committed to using its significant lobbying muscle in Washington to push for a higher national minimum wage, which hasn’t risen in the US since 2009. While Amazon certainly has the resources for this, its wager may be that its competitors don’t. Should it get its way, a national rise would consolidate Amazon’s advantage by upping the price of admission for companies that don’t have its head-start in automation. As a case in point, Amazon’s heavily automated warehouses allow it to accommodate a high staff turnover with a minimal outlay on training per head. Across the economy, a wage rise would incentivise innovation as companies seek to slash costs — so good news for accelerationists. What is unclear is whether less but better remunerated work would really redistribute power to workers or further concentrate it with capital.

As the prospect of a Corbyn government grows, Amazon’s wage rise symbolises a compromise at the same time as acting as a foil for investment in a hyper-flexible gig economy that is unpopular with workers but on which its retail arm depends. Contrary to the headlines, there is a solid commercial logic to the move. This is business as usual.