Was the Amazon increase to $15 dollars a good move?

There's a big movement in many countries to increase the minimum wage to a livable standard. For many, this ideal is $15 an hour. Amazon decided to do this for a lot of their workers! For liberals this is a wonderful and positive development but for conservatives this seems like a bad move on Amazon's part. So which is it?

Well, like most economic policies, it depends on which group you are in.

For the worker:

According to the WSJ article: "The new minimum wage will kick in Nov. 1, Amazon said on Tuesday, covering more than 250,000 current employees, or more than 40% of its global workforce. Another more than 100,000 seasonal holiday employees will be granted the higher pay."

What Amazon effectively did here was increase their costs by paying workers more. This looks like a good benefit just for the workers. However, Amazon has to cover those increased costs by a combination of three ways - Not actually increasing the workers compensation (doing it for PR reasons), passing the costs onto their consumers, or bearing the cost fully and being less profitable - (These reasons assume there is no increased efficiency on the workers end).

So far, we can only really look at one thing - the workers total compensation. Even in the WSJ article on the subject, we see that, their compensation was docked. "But the company is doing away with certain incentive pay and stock compensation for hourly warehouse and customer-service employees, potentially helping offset the cost to the company of the wage increase." Hopefully, for the workers' sake, the $15 dollar increase was enough to fully offset or put them ahead of the loss of incentives and benefits. Although, without data, or a Amazon worker affected by this change, I can't say for sure whether it's positive or negative for the workers. My first impulse is to say this is actually a negative change. As being compensated with Amazon stock has a much higher future return potential than the dollars they are paying you - which lose value due to inflation. Further, Amazon's stock has utterly destroyed the overall market - Amazon last 5 years has gained 523%, SPY has gained 92% the last 5 years. However, which you prefer fully depends on your time preferences as an individual.

For the company:

Obviously, the company is going to find a way to pay for this wage increase. This could be, as stated above, through not actually raising the wages (which seems like what they might be trying to do), increasing the costs to consumers, or possibly forcing employees to be more productive. However, it seems like Amazon is already doing all of this. A few months ago Amazon increased their prime membership to 119 for Americans.. Was this in preparation for the move to $15 an hour? I don't have anyway of knowing without getting into the board meetings. But there is always one thing consumers are more sensitive too than horrific employee working conditions, that's prices. And we already know that Amazon working conditions are suppose to be oppressive to say the least.

But even the analysts aren't liking it much either, a quote from the WSJ article says "Analysts said the wage changes are likely to result in a small ding to profitability." But this will likely be offset by the good will garnered by praise from politicians and a positive public perception going into the holiday season. As trump's economic advisor, after the announcement, said this "Good for them. I’m in favor of higher wages." And with a positive public perception consumers are likely to purchase more from them.

Conclusion:

I think from the company's perspective, the wage increases have already started paying dividends. With only a small price to pay from a dip in profitability, that should be easily offset by the increased workers they are able to draw during the christmas season, the political goodwill, and the possible ethical consumers they just won over with this policy.

Although, I think the worker probably got screwed with this policy. Depending how much the stock compensation raised their hourly rate. However, apparently "The overall median annual salary for Amazon workers world-wide was $28,446 last year, which works out to a median of about $13.68 an hour." That previous $13.68 an hour was accounting for the old stock compensation and incentive program. So I'm hopeful that the $15 an hour will actually be a increase.

Either way, it's helpful to analyze things from a full perspective, rather than just narrowly accepting that a wage increase for workers is a good thing. And the most important thing that economics teaches us is that there are always trade offs with any policy, some good, some bad.