Amazon’s minimum wage hike barely made a dent in its operating costs, and it might explain why some workers say they’re actually earning less

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Amazon announced in October 2018 that it was raising its minimum wage to $15 per hour.
But the rise for hundreds of thousands of workers has barely made a dent in its operating expenses, which grew at a similar or slower rate than the rest of the year.
One theory is that Amazon balanced out the increased salaries by slashing bonuses and ending its restricted stock unit program.
Some workers told Business Insider that they were actually worse off over the holiday period.

Amazon’s minimum wage hike has barely made a dent in the online retail giant’s operating expenses — and it might explain why some workers say they are out of pocket.

In November last year, Amazon increased its minimum wage to $15 in the US and between £9.50 ($12.40) and £10.50 ($13.70) in the UK, impacting 267,000 permanent workers and 200,000 seasonal employees.

A seasonal worker who joined Amazon in October told Business Insider that their salary jumped from $10 to $15, but it would have been different for different workers.

It would not be outlandish to expect such pay raises to be reflected in an increased cost of doing business, but for Amazon, it hardly made a difference to the growth in its operating expenses.

According to the company’s earnings for the three months to the end of December (so including two months of higher salaries for hundreds of thousands of employees), Amazon’s operating expenses grew at a similar or slower rate to the rest of the year.

Here’s a breakdown of Amazon’s operating costs across the year:

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%)

Amazon’s operating expenses include a ton of other cost lines beyond staff salaries, including things like marketing and technology. These are of course prone to fluctuation, which could have played a part in expenses not rising at a particularly remarkable rate.

But there is another theory as to why the minimum wage increase has barely made a dent — it has been balanced out by Amazon slashing bonuses and ending its restricted stock unit program (RSU).

Amazon workers in the US and the UK told Business Insider that the minimum wage increase had actually had a negative impact on their pay packets over the holiday period. Meanwhile, Wired spoke to an Amazon employee last year who estimated they would lose at least $1,400 a year following the pay rise.

Trade unions also noted the removal of incentives and stock options. "If Jeff Bezos — the richest man in the world — really wants to give hardworking staff a pay rise, he should let them keep their share options as well as increasing their hourly rate," said Tim Roache, the general secretary of the UK’s GMB union.

Business Insider has contacted Amazon for comment. In a statement last year, the firm said:

"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."

Amazon announced its new minimum wage of $15 per hour following pressure from politicians like Bernie Sanders, who demanded that CEO Jeff Bezos pay Amazon staff a fair wage.

As a result of the change, Amazon said on Thursday that it received 850,000 applications for hourly work in October 2018 — more than double its previous record. Amazon did not say how many of those applications were successful.

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Source: Business Insider