AP Photo/Ross D. Franklin
Amazon announced last week that they’d finally compensate their warehouse employees more fairly, with $15/hour wages. However, they left details out of their celebratory press release. Employees no longer receive bonus pay or company stock options. Between the two, many employees who have been at the company for multiple years will see a reduction in pay. Furthermore, employees will lose holiday pay. With the holiday season approaching, and Black Friday just around the corner, it’s no wonder Amazon cut holiday bonus pay now. The timing was no mistake.
Amazon’s cost cutting measure doesn’t just hurt the employees they bring in for the holiday rush. Those who have been at the company for multiple years say that, despite the pay bump, they’ll actually make less money this year, some by thousands of dollars.
Did Amazon increase employee wages as a coverup for a cost cutting measure?
Amazon Employee Compensation
Amazon stock is incredibly valuable
Prior to Amazon’s wage hike, Amazon employees were making, on average, $13/hour. The average yearly salary, including developer salaries which are often over $100,000, is $34,123. A person couldn’t support themselves in a large city on that salary. Yet this is the average, hiked up by employees in Seattle that make well over $100k. It gives you an idea of the scope of Amazon’s workforce. Most of it is in warehouses across the U.S.
These employees received compensation in a few ways. First, was a paycheck. This varied from state to state, between $10 and $19, with the latter being reserved for only the most senior employees in the highest paying warehouses. Beyond this, they also receive stock every year after their second year at the company. Amazon stock is currently worth $1,851. That’s nearly $2,000 every year, and the value of that stock grows as Amazon grows. Finally, employees could receive bonus pay, either for exceptional work (Amazon does track their warehouse employees everywhere they go), or for working holiday hours, helping the company during its busiest time of year.
With the minimum wage going from $10 to $15, many employees are getting raises. However, those who were already close to or over $15/hour will see diminishing benefits. The wage increase was not uniform across pay levels. Furthermore, these employees are more likely to use stock and bonuses as a key part of their income. Now it’s gone. Some employees say they could lose as much as $300/month, and, due to not receiving stock, they could see $1,400 less per year. Those who aren’t receiving a substantial wage increase from Amazon due to their seniority and loyalty will likely lose money under Amazon’s new compensation system.
Amazon’s Cost Savings and Response
“The significant increase in hourly cash wages more than compensates for the phase out of incentive pay and [restrictive stock units]. … We can confirm that all hourly Operations and Customer Service employees will see an increase in their total compensation as a result of this announcement.”
– Amazon in an email to CNBC
Amazon claims that workers will prefer having their compensation in cash. The idea being, the money is more liquid and easier to use in your daily life. Which makes sense if you’re living paycheck to paycheck, but less sense if you were building up a savings. They also state that all “hourly Operations and Customer Service employees” will see a total compensation increase, but they don’t clarify if this covers all warehouse employees, or merely a subset.
Amazon is likely hoping that the higher wage will keep new employees from forming a union. It could increase turnover rate, as Amazon won’t reward employees for staying with the company. Amazon may have decided that experience is less valuable than a placated, young workforce. Amazon might not save money directly through this measure now, but, as turnover rates increase, they’ll be able to keep benefits and wages lower. In the long run, Amazon’s move may have been profitable for the company.
While most employees will also see more pay, a lack of benefits and competition from other employers may push out more experienced employees so Amazon can bring in newer, often younger employees. Perhaps that’s what Amazon wanted all along. Amazon has placated employees with better pay so they won’t get frustrated or stay at the company long enough unionize. Plus, Amazon gets a much needed PR benefit. Win-Win for Amazon, partial victory for some Amazon employees, over $1,000 lost every year for others.
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