Amazon increases hourly wages: Pragmatic or Philanthropic?

A catalyst for change

The Financial Times published a very interesting article this week, an extract of which is in particular worth sharing:

‘Jeff Bezos, chief executive, said the company had “listened” to its critics as he announced on Tuesday that new wage floors — $15 per hour in the US and £9.50 in the UK, with a higher £10.50 rate in London — would go into effect next month. About 250,000 regular employees, as well as more than 100,000 seasonal workers hired for the holiday shopping season, would benefit in the US, the company said. In the UK, the raises benefit about 17,000 employees and 20,000 temporary staff. Amazon employs more than 575,000 worldwide. Anthony Chukumba, analyst at Loop Capital Markets, estimated the higher wage would add between $900m and $1.8bn in annualised incremental costs in the US. “In terms of financials, it doesn’t move the needle all that much,” Mr Chukumba said, estimating it would at most amount to less than 1 per cent of the $235bn in revenue Wall Street analysts are forecasting for this year. Unions say Amazon ‘must do better’ Amazon has come under scrutiny for its work conditions, especially as it has enjoyed greater financial success. Last month it became the second US company in history whose market capitalisation topped $1tn.’ [Source: The Financial Times, 2018]

Changing your mind is not tantamount to changing your beliefs. Amazon operate under the belief system that the consumer desires products cheaply and quickly; they will not pay heed to where they come from or by whom they are made. They do not concern themselves with how many suppliers are run to the ground, or the burgeoning gap between executive and employee pay. And, for now at least, Amazon may well be right.

It is quite telling that over the last decade, Amazon’s wage policy has not changed, even when the brand has been faced with continued pressure regarding its treatment of employees and suppliers. Until this week that is, now that the brand’s ability to provide a good service is finally being compromised. It is no secret that without the necessary human capital, such as staff to package and deliver goods, Amazon’s model will deteriorate, and ultimately collapse. This ugly truth has clearly struck a nerve with the board, and as such has served as a catalyst for change.

How does this effect the UK supply chain?

Our own Supply Chain are already feeling this fulfillment squeeze.  The visionary organisations are actively communicating with their staff and supply chain about the ever-developing matter of Retention and Performance. The truly innovative will view this as a challenge from which to find solutions by taking a collaborative and interdepartmental approach, engaging in equal measure operations, engineering, procurement, HR, employees, leaders and suppliers.

The age-old methods of driving down wages, eroding margins and focusing on one-dimensional, price-based procurement are failing, and will continue to do so. This fact alone is a step in the right direction towards real and meaningful benefits for the entire supply chain.

Ultimately, the UK’s labour force is dwindling and our workers are fleeing, with many having their pick of where and whom to work for.  This Brain Drain cannot be solely blamed on Brexit, or the vulnerability of the pound sterling; in reality, we must pay more attention to the fog of instability and insecurity that lingers over all aspects of British working life.

The right thing to do…

I call upon our leaders and those in power to take this opportunity to design our very own British model: not only because it is necessary, but also because it’s right.

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