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Three Questions

Three Questions: Prof. James Baron on Amazon’s New Minimum Wage

In October, Amazon said it would pay U.S. workers a minimum of $15 an hour, responding to criticism about difficult working conditions and low pay in its warehouses. We asked Prof. James Baron, an expert in human resources and labor markets, what the change would mean for workers at Amazon and other companies.

An employee at an Amazon fulfillment center in Robbinsville, New Jersey. Photo: Bess Adler/Bloomberg via Getty Images.

Is a $15 minimum wage enough for Amazon employees to be financially secure?

No. For a full-time employee, $15 an hour works out to $31,200 annually, which definitely does not provide financial security, particularly in the urban labor markets in which Amazon tends to operate.

What is the likely effect of this change on Amazon and its workforce?

Amazon is likely to have an easier time recruiting and retaining entry-level people, but it is not clear what will happen to those who are a bit above the new minimum wage, who have seen their relative standing eroded somewhat by the bottom being raised. In research my colleague Amy Wrzesniewski and I have done on a firm that did something similar, they saw increased turnover among employees who were exempt from the pay change, who were presumably disgruntled about their loss of relative status within the firm.

Are other employers likely to follow Amazon’s lead?

Not all firms have been subjected to the bad press about labor issues that Amazon has, and so may not be so inclined to jump on this bandwagon. On the other hand, Amazon is presumably making this change in part because they are finding it difficult to recruit and retain people in a tight labor market, and their competitors (a number of whom have already raised minimum pay) may be forced by the labor market to comply. And having now decided voluntarily to go to $15 an hour, Amazon now has a strong interest in using its lobbying power to try and get the minimum wage raised so as to impose this burden on their competitors.

Department: Three Questions