Amazon raises minimum wage to compete in ‘war for talent’

Amazon’s wage increase
will impact thousands of workers.
AP
Images / Peter Wynn Thompson

• Amazon announced
  that it would be raising its
  minimum wage for all employees to $15 an hour effective
  November 1. 
• Analysts say that Amazon has both political and
  economic incentives to raise wages. It is
  responding to pressure from politicians and activists who
  have attacked Amazon and CEO Jeff
  Bezos over the company’s low wages while making itself more
  attractive to workers in a tight labor market.
• Several major
  retailers including Target,
  JCPenney,
  and Kohl’s
  are also ramping up efforts to attract workers. 

Amazon
just signaled that it’s preparing for retail’s so-called
“war for talent.”

The retailer announced on Tuesday that it would be
raising its minimum wage for all employees to $15 an hour
effective November 1.

While CEO Jeff Bezos implied
in a statement about the wage hike that the change is coming
in response to recent attacks
from politicians and activists over the company’s treatment
of workers, analysts say that there is likely some
economic motivation behind the decision. 

“Amazon’s superior growth necessitates a lot of recruitment
which is becoming increasingly difficult in a tight labor market.
This is especially so over the holiday season,” Neil
Saunders, managing director of GlobalData Retail, said in a
note to clients on Tuesday. 

Amazon’s new wage increase will impact not only the
company’s more than 250,000 full- and part-time employees, but
also the more than 100,000 seasonal staff members who work for
Amazon over the holiday shopping season. 

“Without a rise in wages, Amazon would be placing itself at
a disadvantage in the labor market,” Saunders added. 

The retail sector is currently being hit by a labor shortage
crisis driven by high demand for workers and low unemployment
rates in the United States.  

According to Bureau of Labor Statistics data cited by
The Wall Street Journal, there were 757,000 retail-job
openings across the United States in July, which is about 100,000
more than a year ago. Meanwhile, unemployment is low, at
3.9% in August.

As a result, stores have been scrambling to figure out how to win
over workers.

Kohl’s announced 15% discounts and “associate shopping days” for
seasonal workers. JCPenney is offering some workers paid training
and paid time off, and it is even making some eligible for 401(k)
benefits. Macy’s, which is looking to hire 80,000 workers for
this holiday season,
said its part-time workers would be eligible for its “Path to
Growth Incentive Plan,” which awards employees a quarterly bonus
based on performance.

“With so many companies looking to hire tens of thousands of
seasonal employees, employee engagement needs to be put first,”
David Mallon, the chief analyst at Bersin by Deloitte Consulting,

told Business Insider in September.

For Amazon, this means making a big statement to attract
talent. 

While the wage hike will impact its bottom line, analysts believe
that the returns will outweigh the costs. 

“Attracting, and then retaining, quality employees is critical
for the ultimate success of any
retailer,” Moody’s lead retail analyst
Charlie O’Shea wrote in a note to clients on Tuesday
morning, adding that improved worker morale ultimately leads to
better service for the customer.