Amazon’s push for a $15 minimum wage is a new weapon in the company’s battle against Walmart

Amazon worker
Amazon is lobbying for a $15 minimum wage.

Amazon says that its push for a $15 minimum wage is good business. Experts say it is also a new weapon in the retail giant’s battle against rivals like Walmart. 

The company has been lobbying Congress to raise the federal minimum wage since 2018, when Amazon raised its starting wage to at least $15 per hour.

Following the election of President Joe Biden, Amazon has thrown its support behind the Raise the Wage Act, which would bring the federal minimum wage to $15 per hour. The company is running ads in support of the new regulation everywhere from The New York Times to podcasts.

“We believe $15 an hour is the minimum anyone in the U.S. should be paid for an hour of labor,” Jay Carney, Amazon’s senior vice president of global corporate affairs, wrote in a blog post in late January. “We also believe it’s good for business.”

Carney writes in the post that Amazon saw applications for hourly positions more than double when it raised its starting wage and that there was an immediate positive impact on worker morale and retention. 

“We were thrilled when several other major companies – including Target, Best Buy, and Costco – also increased wages to at least $15 an hour for their employees,” Carney wrote. “We are hopeful that more follow suit.” 

Experts say that Amazon’s advertising campaign and political lobbying around a federal $15 minimum wage is also a strategy that will disadvantage rivals such as Walmart. 

“Amazon has already implemented a $15 minimum wage so it has little to fear from this becoming a federal minimum,” GlobalData managing director Neil Saunders told Insider. “In fact, it is to Amazon’s commercial advantage if rival retailers also have to pay more – particularly Walmart.” 

An economist explains how Amazon’s push for a $15 minimum wage can be weaponized against Walmart

walmart worker
Walmart’s starting pay is still under $15 per hour.

Michael Farren, an economist at the right-leaning, generally anti-regulation think tank The Mercatus Center, told Insider that Amazon’s efforts lobbying for a higher minimum wage can be better understood through public choice economics. 

“It may sound a little cynical, but it’s probably pretty accurate that Amazon sees this as a tool to help it essentially drive a wedge against competitors – specifically against smaller competitors, but also against Walmart itself, who arguably is Amazon’s largest competitor,” Farren said in a recent interview. 

Farren says that Amazon’s efforts around a $15 minimum wage are an example of regulatory capture, in which a company – consciously or unconsciously – pushes for laws in the interest of regulated businesses, as opposed to general welfare.

In this case, a $15 federal minimum wage would not cost Amazon any extra money, since it already pays employees $15. However, it would cost some rivals, including Walmart, a significant amount to raise all workers’ pay to at least $15 per hour. 

“Essentially anybody in retail that … isn’t paying $15 an hour already is a competitor with Amazon that would be harmed by a federal mandate of $15 an hour,” Farren said. “Given that Amazon has already built this increased cost into their operations and into the amount that they charge for products, then anybody else that has to build that in – it’s going to drive the cost of their products up.” 

“That makes Amazon look better by comparison,” Farren added. 

Lobbying for $15 minimum wage offers “social street cred”

Jeff Bezos
Amazon CEO Jeff Bezos has spoken out in support of a $15 minimum wage.

Amazon has been quick to criticize Walmart for not paying $15 per hour. But, comparing Walmart’s workers and Amazon’s employees is an indirect juxtaposition. 

Across the industry, warehouse workers traditionally make more than in-store retail workers. As a result, it likely cost Amazon less to increase its workforce’s minimum wage to $15 per hour than it will ultimately cost Walmart, as Amazon has very, very few stores. All Walmart warehouse workers already make at least $15 per hour, a representative for the company told Insider.

“We will raise our starting wage rate over time, and I think our history proves that,” Walmart CEO Doug McMillon said on a call with investors earlier in February, when the company announced raises for 425,000 workers. “Since 2015 from $9 to $10 to $11, we’re up over 50% in our starting wage rate.”

Lobbying for a higher minimum wage also helps Amazon’s reputation at a time in which the company has been criticized for its opposition to workers’ efforts to unionize. 

“Amazon is keen to show that it is treating workers fairly and well,” Saunders said. “The company comes in for a lot of criticism for various things and not all of that criticism is justified. So where it has a worker-friendly policy it is keen to showcase it.” 

“Amazon is acting like a rational economic agent and trying to promote something that is relatively cost-less to it, but gives it social street cred, so to speak,” Farren said. “That gives them social capital than to try to push back on something else that would raise their costs elsewhere.” 

Read the original article on Business Insider