Amazon.com and the move to a $15 base wage
update
So, I wrote this whole thing this morning immediately following the announcement of the wage increase. I haven't been to work since, but I have heard from my fellow employees that Amazon will be removing VCP bonus pay and no longer awarding us stock units. VCP is a variable bonus us typically ranges from 0% to 8% as a monthly bonus on your earned wages. This doubles to up to 16% during oct-dec (also known as "peak season"). Half of the bonus (4% normally, 8% during peak) comes from personal attendance, the other half is granted if your facility hits or exceeds production numbers for the month. For perspective on how much this matters compared to their "wages boost" - prior to this announcement I was earning my maximum wage for my Tier 1 position at $15/hr. After this, I will now be earning $16/hr, however no longer be eligible for VCP. Should I have attained the maximum VCP before, my effective hourly wage would have been $16.20 rather than $15. Should my facility not perform well then at least my own attendance is under my control and I would receive a 4% bonus putting my effective wage at $15.60. On the other extreme side of things, if I got maximum VCP of 16% during peak season my effective pay would be $17.40/hr. Well now, thanks to the removal of VCP, I can only earn $16/hr and never a penny more in my Tier 1 position, regardless of anything. On top of that, I no longer receive company stock no matter how many years I've worked with them. They announced they will be looking into options for employees to buy stock starting next year but no details have been released. Effectively, this "wage boost" has ended up being more of a pay cut than anything for me. I'm sure it's helped out people who live in areas where Amazon can pay less (based on average wages in the area, more on that later in the article below), but it's only hurt me overall. On the plus side, this is a massively positive PR move for Amazon, so I guess that's all that matters for them.
Anyway, point is, our "Total Compensation" which I talk about in great detail in this article has gone down. Particularly, it has gone down in ways that effect EVERYONE. It's not just the removal of something more "obscure" or specific, such as paid parental leave (something that a small percentage of employees might actually take advantage of), this is the removal of stocks units which until now, EVERYONE got, and the removal of VCP, which is something EVERYBODY can/does receive. Anyway I am too tired to fit all of this stuff into the article or rewrite the damn thing, but please keep the above thoughts in mind while reading the below in order to get an even BETTER understanding of Amazon's philosophies.
Thoughts on base pay increase from a seasoned Amazon employee
So, Amazon has decided to increase their personal "minimum wage" for employees to $15 across the United States. https://blog.aboutamazon.com/working-at-amazon/amazon-raises-minimum-wage-to-15-for-all-us-employees
I think I'm glad, but the idealist in me can't stop thinking that Amazon has only come to this decision based on two factors: 1, public face and 2, avoiding potential money sinks such as the Stop BEZOS Act (https://money.cnn.com/2018/09/05/technology/business/bernie-sanders-amazon-walmart-worker-pay/index.html)
I have still yet to see Amazon make a decision that comes from a place that isn't based on maximum company growth/profit or maximum public face. Yes, obviously that's what a business should be primarily concerned with, and maybe the fact they nearly only focus on these two things has a lot to do with the fact Amazon has become so successful. But so heavy a prioritization of these two things comes at a cost. While you may offer the best services in the world to your customers, what you end up offering to your employees falls to the wayside. While your business no doubt becomes a huge financial success on paper, you raise concern over your fairness as an employer and questions over whether or not you care more about the people (customers OR employees OR the public) or more about turning a profit, expanding your business, and seemingly taking over the world.
I have been working at an Amazon warehouse for 3+ years. Every year we have 3–4 (roughly quarterly) meetings called "All Hands Meetings" where upper management will discuss with all of the front line employees major happenings within the company, achievements, new goals, community involvement, upcoming changes, etc. Basically an assembly to get everybody "in the loop" with what's going on and what is possibly coming next. At every meeting, wages are a topic of discussion. Every time we have one of these meetings, we are told that our warehouses are constantly becoming more productive and efficient and that we are constantly breaking records. But we are also told that despite this, our wages are not increased as a result. While the increases in efficiency are largely due to infrastructure improvements or decisions being made by management and higher level figures in the company, the fact that employees continue to "produce" more and more each year (also evident in ever increasing demand for productivity "rates) while we receive no further compensation is upsetting.
So if this has no bearing on our wages, then what does?
Total Compensation
To preface, Amazon does not look at employee pay rate simply in terms of wages. They use a term called "Total Compensation" which is an concept which takes all ways that Amazon offers something to its employees into consideration. So obviously pay rate is important, but they also take other factors into consideration such as health insurance, 401k, educational assistance (limited), VCP (a potential monthly bonus based on attendance and productivity of the building as a whole), paid parental leave, and awarding of RSU (restricted stock units). So while an Amazon employee's pay rate may be below the state average for similar jobs, they aim to offer higher overall "Total Compensation". Amazon considers how much it compensates their employees with the idea that every employee has equal access to these benefits and whether they opt for all of them or not it should be viewed as though they receiving the full benefit of each of these avenues.
The issue here is that not all employees take advantage of all of these means of compensation. In fact, I would wager that very few of us take advantage of every one of them. In this, our "Total Compensation" probably doesn't exceed the state's average and may very well fall below it. While the healthcare options Amazon provides are arguably quite good, there are some people who will not need them due to spousal support or other reasons. There are many people who have no interest in a 401k (like myself) and some who may be interested but cannot afford to put money into it. The educational assistance they offer is limited to very few select fields of study, so if you were interested in pursuing a career that isn't' on Amazon's approved list of things, you will not be eligible to receive any benefit. Furthermore, there are many people who work here that have no interest in further formal education anyway. If you don't plan on having any children while working at Amazon, the potential 20 weeks of paid parental leave is irrelevant. There are more examples of what Amazon considers part of its "Total Compensation" but it becomes immediately obvious that most employees are not actually receiving the total of this compensation. If you're a person who doesn't want or isn't eligible for their educational assistance, isn't involved with their 401k, and doesn't opt into their healthcare options, your compensation is mostly limited to your hourly wage plus the stock units which are awarded after the passing of years of employment. Total compensation starts to feel quite lacking. Of course, if you happen to be a person that is interested in pursuing higher education that is within Amazon's list of approved options, you contribute to a 401k, etc etc, then total compensation is quite good. But few people do.
The concept of Amazon's "Total Compensation" is great for the company for two reasons. First, Amazon is able to boast over their figures and proudly decree that they offer compensation well beyond that of the "state average". But additionally due to the fact that few take full advantage of everything included in "Total Compensation", they simultaneously actually end up actually "paying out" a figure that is in actuality probably more in line with the state average or perhaps below it.
How Total Compensation and Wages are Determined
Amazon has made it very clear and reiterates that our pay rates (Total Compensation) are based on wage surveys which are conducted on a state by state basis (so for me, Pennsylvania) which tell them the average pay rates of similar jobs across the state. Amazon then aims to offer competitive compensation based on these numbers.
Differences in hourly wages within the warehouse setting (one employee vs another) are based on two factors: how long you have been employed and what "Tier" of an employee you are. Differences in wages are NOT determined by skill set, training, experience, productivity, or any other factor.
Duration of employment is simple enough. Amazon offers you a starting wage and then every 6 or 12 months you receive a pay rate increased usually between $0.25 and $0.50. This caps off after a certain period of time. So after two or three years you will no longer receive any raises, period. Another interesting thing is that your raises based on how long you've worked in the company reset if you are promoted to a new tier. For example, if you are a Tier 1 front line associate and have worked with the company for 3+ years you will be making the maximum wage for your tier. If you are promoted to a supervisory Tier 3 role, you will begin receiving a wage as though you had just begun working at Amazon (no raises considered). Due to this, a Tier 1 who has reached maximum raises actually makes the exact same wage as a new Tier 3. You can be promoted 2 full tiers but you won't actually receive any more compensation because they reset your raises. So if you have been working at Amazon for 2+ years and you don't think you will work there for several more, it may actually be in your interest to avoid the added stress and workload of "moving up" to a Tier 3 position as you will ultimately receive little or possibly no increased wages.
Tiers offer higher pay for higher levels and revolve around the idea that higher tier jobs are either or both more difficult or require more intelligence/experience. Different "jobs" within the facility are given different tiers. For example, the majority are considered Tier 1, including picking, packing, stowing, and much more. Tier 2 seems to be for human resources and non direct warehouse functions. Tier 3 is mostly for supervisory positions - think team leads or production assistants. Tier 4 and up is where you start getting into management and high operational roles. Anything above Tier 1 is generally very specific, whereas Tier 1 is considered a general "warehouse associate" and can end up being very broad.
One example of a Tier 1 employee is a packer. A packer will stand at a packing station and put items inside of boxes, seal them, and label them for shipment. He will receive Tier 1 pay. Another Tier 1 position is an Inventory Control / Quality Assurance (ICQA) associate, who needs to understand how to use a computer, how to use Amazon's internal software tools, the mechanics of how inventory enters/exits and exists in the systems, and more. Another is a "divert worker" who for sometimes hours at a time will constantly move totes of items generally weighing 5–20 lbs though sometimes in excess of 30 lbs off of a conveyor and onto carts so that they may be stowed in the warehouse. Even though these are different jobs with completely different physical and/or knowledge/skill demands, they will each receive the same Tier 1 pay. Furthermore, Amazon is very fond of "cross training" but regardless of how many positions you are knowledgeable of and/or excel at, you will always receive Tier 1 pay. You can be a picker who has worked at Amazon for 2 years with full knowledge of being able to "problem solve" inventory in ICQA who sometimes assists in the pack and stow departments and is able to work the physically demanding receive ship dock area or as a divert worker, but you will actually receive less pay than somebody who has worked for 3 years but only counts/scans inventory in ICQA and does nothing else, because you are both still Tier 1 employees.
Another interesting thing is that some Tier 1 employees are trained to be "backups" for Tier 3 Process Assistants. They learn how to perform the job so that in the absence of the PA (process assistant) whether that be for vacation leave, sickness, etc, there is a substitute person to take their role and ensure the continued normal workflow for their department. However, a Tier 1 will receive exactly zero compensation in any way for either learning or actively performing these roles. They will always continue to receive Tier 1 compensation. Amazon contests that the "compensation" is the knowledge/training/experience afforded to the associate and that it is beneficial for those looking to "move up" within the company.
Problems with Pay Structure
The wage surveys that are conducted give Amazon an arbitrary figure that is completely outside of their company. It's irrelevant to what its employees do, how much and what they offer Amazon, and the cost vs value of aspects of the job. Furthermore, Amazon is not a company that is based in a single state. They are, in fact, a world wide company. Does a Tier 1 picker in California offer anything more to the company than a Tier 1 picker in Minnesota? Why are their pay rates different? Because the Walmarts in California pay more than the farming jobs in Minnesota? How is that relevant to anything? It's because if Amazon doesn't offer "competitive" wages with the Walmarts in California, people would of course prefer to work with Walmart instead. And if there are no higher paying jobs around (like Minnesota), Amazon can "get away with" paying less so that they can turn higher profits.
The Tier system is in itself not an issue, but the fact that Tier 1 associates can take on such a varying array of tasks with such a difference in what is required of the associate yet all still be paid the same amount is insane. The fact that a Tier 1 associate employed 3+ years will earn the same wage as a fresh Tier 3 is troubling. The fact that a Tier 1 can be trained across a multitude of tasks in the facility INCLUDING fulfilling the role as a substitute Tier 3 PA and still be earning the same compensation as a Tier 1 who performs only a single Tier 1 role is certainly ridiculous as well.
Lastly, "Total Compensation" is a device that allows Amazon to appear as though they "pay" each associate a higher amount than their average employee actually takes advantage of. I think it's high time their associates start being compensated fairly instead of under some umbrella idea that can't include everyone anyway.
Closing Thoughts
This move for the raise in pay rate also brings up some other concerns. Here are some additional thoughts I've gathered from https://news.ycombinator.com/item?id=18120221:
This move will massively reduce the negative PR and attention they have recently been getting from the media and people like Bernie Sanders. This also removes/reduces the target that Amazon has had on their back to stop being such a money hungry machine. This makes it far less likely for Amazon to make more moves in a positive direction, as people are going to stop caring about it as much. :
This will make competitors bleed, because either they pay $15 per hour or face similar PR wrath or outcry of their own employees, all while trying to catch up with Amazon who is already ahead of almost every other similar company out there in almost every aspect. Amazon is now lobbying for the national minimum wage to be raised to $15/hr. This is something Amazon is fully ready to handle. But this could mean death for smaller competitors. Jeff Bezos even said in the announcement. “We’re excited about this change and encourage our competitors and other large employers to join us" Is this an attempt to pressure its competition with less money in the bank to do the same? To lobby for a higher minimum wage and drive them out of business?
Anyway Amazon is not a monster. They are simply trying to "win" as a business. But when you do the things that they do, you set yourself up for being hated. People like to be treated fairly. People like to be compensated adequately for the things that offer to a company. But these are largely non issues for a company like Amazon. Amazon cares about two things:
- Maximum company growth and profit
- Pubic face (which can also affect profit)
They have in the past and will continue to only make decisions based on these two ideas. And until that changes they will never cease to be criticized.
Sorry this post is mostly a wall of text. I'm not a very good web writer.
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