Amazon’s move to increase minimum wage could boost sales, as it did Walmart in 2016

A
worker collects orders at Amazon’s fulfilment centre in Rugeley,
central England.
REUTERS/Phil
Noble

• Amazon says it’s raising the minimum wage for its workers to
  $15 an hour.
• Walmart, Amazon’s biggest rival in online shopping, increased
  its minimum wage back in 2016. That same year, the retailer saw a
  boost in sales, which the CEO attributed to the pay raise.
• It’s possible Amazon could see similar results as Walmart in
  reaction to its pay increase.

Amazon could see a spike in sales after raising its minimum wage,
if a similar move one of its biggest rivals took two years ago is
any indication.

The company announced
Tuesday it would increase the pay of more than 250,000
minimum wage employees to $15 an hour. The raise, which will go
into effect on November 1, is more double the federal minimum
wage of $7.25 an hour. 

Although Amazon may be the most recent company to raise its
minimum wage, one of its biggest competitors has also taken steps
to increase hourly employee pay in the past, with interesting
results. Back in February 2016, Walmart
raised its minimum wage to $10 an hour for more than 1
million of its employees.

Just three months after announcing the pay increase, Walmart
reported that its sales were better than expected, while similar
retailers such as Target and Macy’s saw a decrease. On a call
with reporters in May 2016, Walmart U.S. CEO Greg Foran
attributed his company’s boost in sales to the minimum wage
raise, which he said made it possible for employees to spend more
of their money in Walmart stores.

“The simple answer is yes, we are seeing improved associate
purchasing in our stores,” Foran told reporters. “Associates are
feeling more engaged.”

Walmart’s minimum wage, however, only increased by $1 in 2016
(since then, it’s been raised
to $11 an hour). This 2016 pay raise seems tiny compared to
that of Amazon, which raised its hourly pay by $7.75. These
companies
are two of the biggest retailers for online shopping and are
continuously vying for each other’s customers. 

Both companies also share in the continued criticism that’s been
heaped on them as symbols of
everything that’s wrong with big business. Both have been
shamed by critics for their alleged treatment of employees and
working conditions, their destruction of small rival businesses,
and for the growing net worth of their CEOs.

But while Walmart has taken a more concerted effort to
improve its image since it was tarnished in the mid-2000s,
Amazon has
gotten mostly bad press. CEO Jeff Bezos was
named the richest man in modern history with a record-setting
net worth of $150 billion. In Amazon’s announcement Tuesday of
the minimum wage raise, the company said it was responding to
critics of its pay practices, which has notably and
vocally included
Sen. Bernie Sanders. (In the hours after Amazon’s
announcement of the pay increase, Sanders held a press conference
and
praised the company’s move.)

Despite the criticism, Amazon continues to make more than ever.
As another holiday season approaches, it’s worth noting that the
company
brought in about half of all online holiday sales in
2017. 

While it’s not guaranteed, Amazon could see similar results as
Walmart in light of its pay raise. Walmart is not the only
retailer that has attributed its success to higher wages. Costco,
which
raised its minimum wage to $14 an hour earlier this year, is
continuing to
see an increase in sales.