Amazon Gives Into Pressure

Written by Jennifer Clark
Posted October 4, 2018 at 10:20AM

Becoming a trillion-dollar company puts a lot of pressure on a CEO. Amazon recently reached that trillion-dollar valuation. And that milestone has resulted in even more criticism of the company to pay its employees a reasonable wage.

This week, Amazon announced that it is going to increase its minimum wage to $15 for all its U.S. employees. That new minimum wage will benefit more than 250,000 Amazon employees. That includes part-time, temporary, and 100,000 seasonal employees.

This new minimum wage is going to go into effect next month. That's just in time for employees to receive a better pay during the holiday season, which tends to be one of the busiest seasons for retail companies.

Giving its employees a minimum wage increase before the holiday season was an excellent decision on Amazon's part. Amazon said the higher pay would be reflected in its forward-looking quarterly guidance.

During Amazon's announcement about the minimum wage increase, the company mentioned it would be lobbying for an increase in the federal minimum wage, which is currently set at $7.25 an hour...

Giving In to Pressure

Recently, Amazon has been subjected to backlash over its treatment of its warehouse workers. Senator Bernie Sanders (I-VT) has mentioned that Amazon's ~$28,000 median salary means half of the company's workers earn less than that.

Jeff BezosIn a statement, Amazon 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.

According to the Bureau of Labor Statistics (BLS), wages of retail sales workers in the U.S. average around $13.20. An employee who makes a $15 an hour salary and works 40 hours per week would have a gross yearly income of $31,200 before overtime.

This is a step in the right direction.

Sanders had this to say in response to Amazon's statement:

Today, I want to give credit where credit is due... What Mr. Bezos has done today is not only enormously important for Amazon's hundreds and thousands of employees, it could well be a shot heard around the world.

Target announced in its holiday hiring release that it would raise its minimum hourly wage to $15 by 2020. And Walmart announced plans to raise its minimum wage to $11 in January...

Amazon Redirects Bad Press

Amazon is the second-largest private employer in the U.S. So, in a sense, the e-commerce giant was obliged to serve as an example for other companies. And that's especially true because the company was being targeted by politicians and the public directly.

On Tuesday, October 2nd, Amazon opened the market with $2,004.36 per share price. As of 3 p.m. that same day, shares were trading at $1,981.73 — down by 1.12%.

Big U.S. tech firms like Amazon have received an increase in government scrutiny over how much they pay in taxes.

Tom Gimbel, CEO of recruiting firm LaSalle Network, said:

With the Trump administration having previously taken aim at Bezos and Amazon, they need to be proactive to position themselves positively in the court of public opinion.

Through this announcement, Amazon hopes to convert its recent negative attention into positive attention. Instead of people scrutinizing working conditions at Amazon's warehouses or how much the company pays in taxes, they could see it as the company pioneering the way to higher wages.

Until next time,

Jennifer Clark
Pro Trader Today

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