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Amazon paying higher wages is smart—forcing everyone to do so is dumb

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Amazon recently announced the company will pay all of its U.S. employees a minimum of $15 an hour—more than double the federal minimum wage of $7.25.

“We listened to our critics, thought hard about what we wanted to do, and decided we want to lead,” said Amazon’s founder and CEO Jeff Bezos. “We’re excited about this change and encourage our competitors and other large employers to join us.”

The decision is a smart move for Amazon. Unfortunately, the megacompany wants to force everyone else to do the same:

In addition to committing to higher minimum pay, Amazon says it will push Washington, D.C., policymakers for a higher federal minimum wage.

Dave Clark, Amazon’s senior vice president of worldwide operations, told NPR that the company believes $7.25 is too low for a federal minimum wage, though it’s not specifically advocating for $15.

Amazon can afford higher wages and benefits from pricing out their competition. If I’m a warehouse worker getting paid $15 an hour to work at Amazon, I’m not likely to leave to take a job at another company for $7.25 an hour. But if every warehouse (and every other job in my area) is required to pay $15 an hour, then I’ll make the decision to leave based on non-monetary factors.

But there is another element that is often overlooked in discussions about minimum wage increases. Because of the labor price differential, Amazon can be more choosy about who they hire; their willingness to voluntarily pay a higher minimum pay gives them an advantage over other employers since they’ll have more applicants to choose from. Unless their managers are incompetent, Amazon will only be hiring people whose labor is truly valued at $15 a hour. In other words, they will be getting what they are willing to pay for.

That is why conservatives are right when they say government-mandated pay floors kill jobs. Not only will businesses that were willing to pay more lose their advantage in hiring, those not willing to pay more will fire/not hire people whose labor is valued at less than $15 an hour. Once minimum wages are raised, turnover rates also increase as people decide to stick with or leave a job based on other factors. And the people who will never be hired (e.g., low-skilled workers, new immigrants) are shut out of the labor market completely.

So Amazon is making an intelligent business decision. But it’s only smart because they are free to make that choice for themselves. Mandating the government require a “living wage” is not only economically dumb, it’s counterproductive and harmful to the poor.

Source: Flickr

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Joe Carter Joe Carter is a Senior Editor at the Acton Institute. Joe also serves as an editor at the The Gospel Coalition, a communications specialist for the Ethics and Religious Liberty Commission of the Southern Baptist Convention, and as an adjunct professor of journalism at Patrick Henry College. He is the editor of the NIV Lifehacks Bible and co-author of How to Argue like Jesus: Learning Persuasion from History's Greatest Communicator (Crossway).

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