A week ago Amazon.com Inc in a press release said it would raise the minimum wage of its workers to $15 per hour. But after the announcement, Amazon also said it would cut monthly bonuses and stock grants for hourly employees. Amazon had wanted to phase out its restricted stock unit program it many of its warehouse workers suggested they “prefer the predictability and immediacy of cash.”
But as a result of this decision many longtime workers who already make $15 per hour or slightly more became worried that their total pay may actually decrease. So dozens of employees emailed the CEO Jeff Bezos directly and request the old incentive schemes be restored. This is the problem with rising the minimum wage either at a company level or the State level. When the minimum wage is creased to a higher number, it’s not fair for everyone who was already making that new wage because other workers who produce less for the company will be paid the same as them.
Earlier this week Amazon responded to the new concerns saying it would adjust compensation in a way that that all employees would see the benefit of the wage increase. Basically employees who already earn $15/hour will see their wages increased by $1.25/hour. In a statement made on Wednesday the company claims that they will “quickly to get this information to [its] teams as fast as possible knowing there would be certain cases that would need to be adjusted between the announcement and November 1st when this new $15 minimum wage takes effect.”
“Some employees have benefited from a bull market and the unusually strong appreciation of Amazon’s stock price in recent years. This is a good outcome for those employees, but such stock price appreciation is by no means guaranteed to continue. Stock markets and individual stocks can go up, but they can also go down,” Amazon said.
“For employees who want to invest in stock for the possibility of future growth, we will be rolling out a direct stock purchase plan in 2019. We are continuing to roll out the details of all these changes to employees this week.”
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First Amazon was criticized by labor activists and Vermont Senator Bernie Sanders for not paying its lowest wage workers enough money, while the CEO has literally become the richest person in the world. Income inequality was the main focus of Sanders’ 2016 presidential campaign. But after promising to raise the minimum wage Amazon was hit the backlash. It seems that finding the right balance of paying its lowest skilled workers a decent wage, and not upsetting more qualified and experienced workers is not a easy task for a large company like Amazon which employs over 150,000 workers worldwide.
As of Thursday after trading Amazon stock was down about 12% over the past trading week. On Friday the stock did bounce back 4% to end at 1,788.61 per share. I would wait until the volatility lessens before getting in on this stock. But if you already hold AMZN like me, then it’s best to wait and see what happens. It’s better to stay invested rather than jumping out and back in all the time. As billionaire investor Warren Buffett explains in Berkshire’s 2012 letter to shareholder: “Since the basic game is so favorable, Charlie and I believe it’s a terrible mistake to try to dance in and out of it based upon the turn of tarot cards, the predictions of ‘experts,’ or the ebb and flow of business activity. The risks of being out of the game are huge compared to the risks of being in it.”
This author owns 10 shares of AMZN as of writing this post.