An Amazon fulfillment center in India. The tech giant now has about 575,700 full-time employees globally. Photo: Ruhani Kaur/Bloomberg News
Once known for fashioning its office desks out of unused doors, Amazon.com AMZN -1.65% can no longer afford to play it cheap.
The world’s second most valuable company has long stood apart from its Big Tech peers for its reliance on a large base of relatively low-skilled labor. These workers run the company’s vast network of fulfillment centers, deliver orders to customers and, thanks to last year’s acquisition of Whole Foods Market, now run the company’s retail stores. Amazon now has about 575,700 full-time employees globally—more than four times the respective workforces of tech giants like Microsoft , Apple and Oracle .
But the nature of that work also means Amazon ranks at the bottom of tech’s pay scales. Excluding the pay of CEO Jeff Bezos, Amazon’s median employee compensation last year was $28,466—about 14% the median pay of Google-parent Alphabet Inc. That has helped make the company the subject of numerous, unflattering reports about the conditions faced by many of its workers. It also has made Amazon a frequent target of a rather diverse range of critics that include once-presidential hopeful Bernie Sanders and current President Trump.
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So Amazon’s new plan to boost the minimum wage of its U.S. workers to $15 per hour makes for smart politics. Mr. Sanders, for his part, has already congratulated the company for the move. It also could come at a high price, though. Amazon said Tuesday that the change will include more than 250,000 full-time employees as well as 100,000 seasonal or part-time workers. The company didn’t detail an impact to its bottom line, though it noted that it will be included in the next earnings projection due with its third-quarter report later this month.
Investors should expect a hit, at least relative to the rapidly expanding bottom line Amazon has been delivering of late. Analysts had been expecting an operating margin of 4.7% this year compared with 2.3% last year. Amazon’s margins also were expected to climb steadily to top 11% by 2022, according to FactSet. Cutting bigger checks to workers will likely slow that expansion.
But for Amazon, paying up now may lessen the chance of regulations that pose a bigger cost down the road.