Amazon's $15 an hour wage hike could pressure other retailers and employers

Amazon’s move to boost its U.S. workers’ minimum wage to $15 per hour next month could put pressure on large retailers and other employers to follow with similar increases, especially amid a tight labor market where job openings often outnumber applicants.

Employers in areas where Amazon operates warehouse and fulfillment centers like Baltimore may be forced to raise wages to keep and attract workers, economists and other experts said Tuesday. That may be true even in areas without Amazon centers because of the high profile of the world’s biggest online retailer, some believe.

“It’s a very significant move that continues the trend of retailers raising their minimum wages,” said Paul Sonn, state policy director for National Employment Law Project. “This will be implemented very quickly. It will leapfrog ahead of Target and will make Amazon one of the base pay leaders in retail.”

Target raised its starting hourly pay to $12 in the spring and plans to increase it to $15 an hour by 2020. Walmart boosted its base wage to $11 an hour in January and Costco raised its to $14 an hour in May.

“Amazon’s announcement shows large, profitable retailers can pay a $15 minimum wages,” Sonn said. “It puts pressure on other chains.”

Amazon announced its plans Tuesday and said it will push for an increase in the federally mandated minimum wage, which now stands at $7.25 per hour. The company, whose value topped $1 trillion briefly in September, was facing political and economic pressure to raise pay for its thousands of employees.

“We listened to our critics, thought hard about what we wanted to do, and decided we want to lead,” said Jeff Bezos, Amazon's founder and CEO.

The wage hike also comes at a time when Amazon needs to hire holiday workers amid the tightest job market in nearly two decades, making it more difficult to lure workers who have a lot more job choices than just a year ago. Amazon said it plans to hire more than 100,000 holiday workers, who will pack and ship boxes in its more than 100 warehouses around the country, including several in and around Baltimore.

With a low unemployment rate, companies are competing for workers, said Daraius Irani, chief economist at Towson University's Regional Economic Studies Institute. Other companies will be forced to pay more to attract new workers and keep the ones they have, he said.

Higher wages also might bring back people who left the labor market, Irani said. With a 62 to 63 percent labor participation rate, an estimated 5 million to 6 million workers have stepped out of the market.

“This increase might attract people on the sidelines now that wages are a little higher,” Irani said.

But he also said it could have other effects, including encouraging some companies to adopt more automation as they look to save money.

“So more people will get $15 an hour, but there will be fewer of them,” he said. “Amazon can afford this but say a franchisee with a McDonald’s in Baltimore may not. Or grocery stores, which run on slim margins.”

And consumers might see higher prices, Irani said, which might chase away customers. But employees of Amazon will benefit, and possibly others if their employers follow suit, he said.

“It’s good news for the individuals, who have more income and can spend it on goods and services and boost the economy,” he said. “Individuals and households making these wages spend almost 100 percent on consumption because they have to pay rent and buy goods.”

Amazon said Tuesday that the raise will benefit more than 350,000 workers, including those in full-time, part-time, temporary and seasonal positions. Employees at Whole Foods, the upscale grocery chain Amazon owns, will get the same pay hike. Some hourly Amazon employees who already make $15 per hour also will see a wage increase, the Seattle company said.

The online seller has more than 5,000 full-time employees in Maryland. That includes more than 4,000 full-time employees at a distribution center and sorting center on Broening Highway, and nearly 1,000 full-time employees at a warehouse in North East in Cecil County. The company opened another distribution center in Sparrows Point, where it expects to employ more than 1,500 full-time workers by the end of the year.

Amazon has faced criticism from labor rights groups and others over pay and working conditions at its warehouses. One of its harshest critics has been U.S. Sen. Bernie Sanders. His Twitter account, which has nearly 9 million followers, frequently points out the disparity between Amazon's median employee pay and Bezos' vast fortune.

Despite its market dominance, Amazon shares one potential hurdle that is growing higher for almost all employers. The unemployment rate is 3.9 percent, near an 18-year low. The most recent statistics from the U.S. Labor Department showed that in August, the pace of hiring rose again and wages grew at their fastest pace in nine years.

Average hourly pay jumped 0.4 percent in August and increased 2.9 percent compared with a year earlier. That's the fastest annual gain since the Great Recession ended. There are now more available jobs than unemployed people, the first time that has happened in the 18 years that data on open jobs has been tracked.

As competition among companies for qualified workers grows more intense, they are increasingly willing to pay more wages.

“If you’re an employer in a place where Amazon jobs are available, it’s going to put upward pressure on wages you have to offer to attract workers,” said Heidi Shierholz, a senior economist with Economic Policy Institute.

Even in places where Amazon is not a direct competitor, she said, “there’s this pressure to raise wages to match this now very publicly announced wage that Amazon is giving… It becomes a ‘Why are you not treating us as well as Amazon?’ ”

About 35 percent of hourly and salaried wage earners make less than $15 an hour, in jobs in such sectors as retail, hospitality, warehouses and other service areas, she said.

“It’s great that Amazon is doing this,” said Baltimore City Councilwoman Mary Pat Clarke, who pushed unsuccessfully for a $15 minimum wage in the city. “It makes a big statement nationally that this is the way to go and this is inevitable… I hope it sets a standard that we in this city and state can match.”

While the Baltimore City Council passed a $15 an hour minimum wage last year, it was vetoed by Mayor Catherine Pugh. Pugh said at the time she supported such a wage, but it needed to be enacted at the state level so city employers might not be disadvantaged by higher costs.

The minimum wage in Maryland increased to $10.10 an hour on July 1. Elsewhere in the state, only Montgomery County has adopted a $15 an hour minimum.

Some argue that raising starting wages can help major retailers save money that would be lost as trained workers leave for higher pay elsewhere.

Both Walmart and Target say their businesses have benefited from their moves to raise wages. Walmart, the nation’s largest private employer, has seen lower turnover among its employees and has said that its higher pay helped improve customer experience in the stores. Target said that it has seen a better pool of applicants after its move to hike hourly pay.

Pay for warehouse workers at Amazon can vary by location. It was offering at least $12.25 an hour in Omaha, Neb., $13 in Baltimore and $16.50 in New York, according to recent job postings. The median pay for an Amazon employee last year was $28,446 worldwide, according to government filings, which includes full-time, part-time and temporary workers.

Sun reporter Meredith Cohn and the Associated Press contributed to this story.

lorraine.mirabella@baltsun.com

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