The retailer announced on Tuesday that it would raise its minimum wage for all US employees to $15 an hour, effective November 1.
While CEO Jeff Bezos implied in a statement about the wage hike that it was in response to recent attacks from politicians and activists over the company’s treatment of workers, analysts said there was most 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,” Neil Saunders, the managing director of GlobalData Retail, said in a note to clients on Tuesday. “This is especially so over the holiday season.”
Amazon said its new wage increase would affect not only its more than 250,000 full- and part-time employees, but 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 US retail sector is being hit by labor shortages driven by high demand for workers and low unemployment rates.
According to Bureau of Labor Statistics data cited by The Wall Street Journal last month, there were 757,000 retail job openings across the US in July, about 100,000 more than a year ago. Meanwhile, the unemployment rate was 3.9% in August.
As a result, stores have been scrambling to figure out how to win over workers.
Kohl’s has announced 15% discounts and “associate shopping days” for seasonal workers. JCPenney is offering some workers paid training and paid time off, as well as 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 affect Amazon’s bottom line, analysts said they thought the returns would outweigh the costs.
“Attracting, and then retaining, quality employees is critical for the ultimate success of any retailer,” Charlie O’Shea, the lead retail analyst at Moody’s, wrote in a note to clients on Tuesday morning, adding that improved worker morale ultimately leads to better service for the customer.