Amazon’s Minimum-Wage Hike Barely Makes Dent In Operating Costs

Last November Amazon increased its minimum wage for its hourly workers but according to its reported 2018 financial reports, it hardly made a difference in its operating expenses.

Amazon increased wages from $10 to $15 in the US and between £9.50 ($12.40) and £10.50 ($13.70) in the UK for all its permanent 267,000 workers and its 200,000 seasonal employees.

Seasonal employee’s salaries jumped from $10 in October to $15 in November. And yet employees say in spite of their salary increase they are making less.

You would expect this $5 increase would have an outstanding impact on Amazon’s operating costs but year end annual reports show just the opposite. It’s made hardly a dent. 

A breakdown of Amazon’s 2018 operating costs is listed by Business Insider:

Q4: $68.6 billion (up 17.7% year-on-year)

Q3: $62.8 billion (up 17.6%)

Q2: $49.9 billion (up 33.7%)

Q1: $49.1 billion (up 41.5%)

This breakdown includes not only employee salary compensation but a lot of other expenses as well, such as marketing and technology.  And marketing and technology costs are not consistent but subject to fluctuation which could have affected the lack of substantial increase in numbers for Amazon’s operating expenses.

But there is another reason that kept Amazon’s operating costs down in spite of their employee salary hike the last two months of 2018.

And this is why employees are saying they actually made less in 2018 than they did in 2017 – their bonuses were cut and their restricted-stock program (RSU) was ended.

This has had a tremendous impact on employees especially during the last two months of 2018 and will continue to do so into 2019.  An Amazon employee was contacted by Wired who estimated they would lose approximately $1400 annually in spite of the pay raise due to the loss of bonus compensations.

The trade unions also confirmed the discontinuation of incentives and stock options previously made available to employees. Tim Roache who is the General Secretary to UK’s GMB union said that Jeff Bezos, the richest man in the world, should continue to allow hard working employees to keep their share options while at the same time having their hourly pay rate increased.

Last year when Business Insider contacted Amazon regarding its pay raise increase to its employees but with incentive and stock option losses, the company responded by saying, 

“The significant increase in hourly cash wages more than compensates for the phase out of incentive pay and RSUs. 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. In addition, because it’s no longer incentive-based, the compensation will be more immediate and predictable.”