What’s behind Amazon’s increases in minimum wage?

3 Oct 2018

Amazon building in Santa Clara, California. Image: wolterke/Depositphotos

E-commerce giant Amazon raises the minimum wage for its UK and US workers, but why now?

Amazon has raised its minimum wage for workers in the US and UK, which is a massive step for campaigners who had been pushing for payment increases.

The firm said it would increase its minimum wage in the US to $15 an hour, while its 40,000 UK staff (both temporary and permanent) will get an increase to £10.50 an hour in London and £9.50 elsewhere.

Amazon CEO wants competitors to step up

Future Human

CEO Jeff Bezos said: “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.”

Critics included US senator Bernie Sanders, who had lobbied for the company and for other firms to set a standard with the $15 minimum wage in the country.

There are no plans to increase pay rates in countries other than the UK and US. The company faced major criticism in the last few months, with warehouse workers striking to demand better pay and working conditions around the world.

Trade Union Congress secretary Frances O’Grady told The Guardian that raising the minimum wage should not be viewed as an act of kindness. She said: “If Amazon is really serious about looking after its workforce, it must recognise trade unions. And it must end the exploitative working practices that have seen hundreds of ambulances called to its UK warehouses.”

The company has rejected claims about its working environment, insisting it is a safe place to work and that it respects the right of its staff to join labour unions.

A tight labour market ahead of the holidays

While the move is a positive one for Amazon workers, some economic experts are putting the increase down to labour shortages in both the US and UK.

According to Wired, the company will need to attract tens of thousands of seasonal temporary staff as the festive season approaches. Economist Sylvia A Allegretto told Wired that pay increases such as Amazon’s are common “around tight labour markets”. Unemployment in the US recently dipped below 4pc, so there are fewer jobseekers out there for the company.

Fabio Rosetti, CEO of Snag, a job website for hourly workers, told the Houston Chronicle that nine out of 10 retailers are struggling to fill seasonal positions this year. Negative reports about the workplace atmosphere could also have affected people’s perceptions of the company.

While the pay increase will cost the company due to its high staff turnover rates, more disposable income paid to its employees could result in an increase in sales on the e-commerce platform. Major US retailer Walmart increased its minimum wage to $11 an hour this year, while other major stores such as Costco and Target are phasing in their own increases.

Amazon also said it would like to see the federal minimum wage raised from its current $7.25. The company said it expects to see the effects of the pay increases in its next quarterly earnings report.

Amazon building in Santa Clara, California. Image: wolterke/Depositphotos

Ellen Tannam was a journalist with Silicon Republic, covering all manner of business and tech subjects