Amazon has announced that it will raise salaries for over 500,000 employees, but it will not raise the $15 per hour minimum wage.
Amazon (AMZN) pushed up its annual fall pay review for those teams in light of a new push to recruit for tens of thousands of positions across its consumer, distribution, shipping, product sortation, and fulfillment teams, and expects to phase out pay rises beginning in mid-May, according to Amazon executive Darcie Henry in a blog post Wednesday. It would raise hourly wages by $0.50 to $3, totaling more than $1 billion in expenditure.
“This is on top of our already industry-leading starting wage of at least $15 an hour and the more than $2.5 billion that we invested last year in additional bonuses and incentives for front-line teams,” Henry, Amazon’s vice president of people experience and technology, worldwide consumer, said.
The step comes after several weeks of criticism of Amazon’s labor practices, which included a historic union push at a warehouse in Bessemer, Alabama. Union organizers were defeated by a wide margin in the election; although they are challenging 500 ballots, Amazon’s vote lead is greater than the total number of challenged ballots.
Despite winning this time, Arindrajit Dube, an economics professor at the University of Massachusetts Amherst, told CNN Business in an email that “there are several reasons for Amazon to be worried about potential unionization efforts—especially in areas of the world where an Amazon job doesn’t pay reasonably as well as it would in Alabama.”
Last year, Amazon added 500,000 additional employees to its global workforce, bringing its total to over 1.3 million people as it scrambled to meet increased demand caused by the pandemic. In the midst of a tight labor market that has left other companies, such as restaurants, struggling to recruit jobs, pay raises could help the company retain more employees.
“An increasing tightness in the labor market means its $15 minimum wage is decreasingly effective at recruitment and retention of qualified workers, and a substantial raise can help with that,” Dube said.
Despite efforts to increase wages for nearly half a million employees, the organization has not said if it will raise the $15 minimum wage. This will bring it in line with Costco, which raised the starting hourly rate for hourly store employees to $16 per hour in February.
Although some wage rises are likely to be needed for recruiting, “the bottom line is they can afford a wage hike more than just about any major retail [or] e-commerce business,” according to Molly Kinder, a Brookings Institute fellow. Amazon made a $21 billion profit in 2020, and its market capitalization was $1.74 trillion at the close of business on Wednesday.
“As I have written about Amazon, $15 is a floor, not a ceiling,” Kinder said.