Amazon's $15 Minimum Wage Proposal is A Brilliant Way To Get The Government to Hammer Amazon's Competition
Amazon.com on Tuesday said it was raising the minimum wage it pays all U.S. workers to $15 an hour, a move that comes as the company faced increased criticism about pay and benefits for its warehouse workers.
The new minimum wage will kick in Nov. 1, covering more than 250,000 current employees and 100,000 seasonal holiday employees. The company said it also will start lobbying Congress for an increase in the federal minimum wage, which was set nearly a decade ago and is currently $7.25 an hour.
“We listened to our critics, thought hard about what we wanted to do, and decided we want to lead,” said Jeff Bezos, Amazon’s chief executive, in a statement. “We’re excited about this change and encourage our competitors and other large employers to join us.”
Here is the cynical view of this: Amazon likely is being pressured by the tightening labor market to raise wages anyway. But its call for a general $15 minimum wage is strategically brilliant. The largest employers of labor below $15 are Amazon's retail competitors. If Amazon is successful in getting a $15 minimum wage passed, all retailers will see their costs rise but Amazon's competition will be hit much harder.
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The reason is that due to its internet sales model, Amazon's revenue per employee is MUCH higher than for most retailers -- you can see this in the chart above in a comparison to Sears. If we had data on revenues per employee in small retail, the numbers would be even lower. So a minimum wage increase raises costs to Amazon's competitors by a much larger percentage of revenue than it does for Amazon. In short, Amazon's cost advantage over bricks and mortar retailers would be enhanced by a $15 minimum wage.
