$15 per Hour at Amazon: Are Workers Better Off?

By James Dail (CMC ’20)

If a company voluntarily raises its minimum wage to $15 per hour, will its workers be better off because of it? At first, this might seem like a ridiculous question. Any criticism of minimum wage increases usually relates to workers getting laid off because companies cannot afford the added expenses. If a company raises its wages voluntarily, then it can be assumed that this is a non-issue. Though even if this wage increase was mandated by the government, the workers who were still employed in the company and earning the $15 per hour wage would definitely be better off. This is not just a hypothetical question. Amazon has done exactly this, voluntarily increasing wages, and the experience of its workers in the aftermath proves that raising the minimum wage can lead to complications that do not necessarily make all workers better off. In fact, a better way to address the wealth disparity in the United States might be to reward all employees with shares in addition to wages.

Amazon recently made news for increasing its minimum wage to $15 per hour. Given that many Democrats want the federal minimum wage to be $15 an hour, Amazon has been widely lauded for this move. Though overall compensation increased for some of Amazon’s workers, this is far from true for all of its employees. Wages are not the only way that Amazon pays its workers. It also gave substantial bonuses to its top performers, and it would reward employees with one company share for every year that they worked in the firm. In order to lessen the expenses that it would have to incur to finance the wage increase, Amazon has ended its productivity-linked bonuses and share compensation. Because of this, total compensation actually decreased by thousands of dollars for many Amazon employees.

This recent debacle demonstrates that focusing on the wages workers are paid might not be the best way to address wealth disparity. Even if wages were raised to $15 per hour, firms can devise crafty schemes to get around such requirements that could hurt workers just as much as it would help them. The reason why Amazon’s longer-term employees are losing thousands of dollars is because when it comes to Amazon stock, stock compensation is more valuable than wage compensation. Much has been made of the fact that, over the past several decades, the wealth gap between the upper middle-class and the remainder of the U.S. population has grown substantially. Yet the disparity in wages is not the only, or even the primary, driver of income inequality in the United States. People like Mark Zuckerberg and Jeff Bezos did not become tremendously wealthy because they are paid hundreds of thousands of dollars an hour. They made their fortunes as the value of  their substantial blocks of company shares skyrocketed, along with their company’s overall stock market performance. As such, a better solution to address worker compensation might simply to be to pass legislation requiring large firms, those that are traded on the S&P 500 for example, to give their workers a certain amount of company shares. This does not have to be an outrageously exorbitant amount. Amazon has a little more than 500,000 workers, and roughly 471,000,000 outstanding shares. To give all of their workers a baseline of five shares that they could exercise after one year would be a marginal sum for Amazon. If workers were given stock options in addition to an hourly wage, they too could see the financial benefits of their company’s growth, just like the executive leadership does.

Stagnant wages have become a tremendous problem, as they have led to a decline in consumer purchasing power. However, examining it through the lens of a $15 per hour minimum wage is not the only way to address this issue. Giving all workers corporate shares could do just as much, if not more, to address inequality in the long run, without any of the adverse effects associated with a minimum wage increase.

 

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