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Comment by mikeash | Hacker News Reader

It’s more like blaming the local power company for local energy prices. Nobody is blaming Amazon for wages worldwide. They’re blaming Amazon for the wages of their own workers.

And why not? “The market” isn’t a magic answer here. The market provides a floor on wages, not a ceiling. If Amazon pays below market wages, they won’t get enough workers. If Amazon pays above market wages, nothing bad happens aside from reduced profits.

When you say “you can’t blame Amazon, they’re just paying market wages” what you’re saying is “profit is the only thing that could possibly matter.”

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> When you say “you can’t blame Amazon, they’re just paying market wages” what you’re saying is “profit is the only thing that could possibly matter.”

You put your finger on the thing that bothers me most about the free-market critique of labor conditions. They all hand-wave away the responsibility that corporations have as entities run by (presumably) empathetic humans. Amazon does not have to automate away jobs instead of giving workers fairer conditions and wages. In fact, they may find that the boost in productivity that comes from happier, more rested, more focused workers more than makes up for the marginal decrease that comes from less pressure in the workplace.

The point is that we don't have to accept that corporations are, and should be, perfectly "rational" economic actors. They don't have to pursue profits at every conceivable avenue unless the market tells them otherwise.

>Amazon does not have to automate away jobs instead of giving workers fairer conditions and wages.

I'm Amazons competitor, I automate away the jobs and pay the lowest wages possible. Now my goods are cheaper than Amazons and you buy from me instead.

True, but I bet there would be at least a small percentage of people who would still not buy from you because you don't treat your workers well. Most people would still shop with you, as their own wages are crap and they are looking for cheapest places to shop. But if they were paid well, they will at least consider shopping with ethically sound companies.

It is like a circle - lower wages lead to lower purchasing power, so companies pay their workers low to lower prices to sell to low earning customers, and so on...

Amazon is the second most trusted institution in the USA, behind the military.

It's fairly obvious how the above "draconian" conditions benefit customers. Employees that take long breaks or pick items slowly leads to delayed deliveries, having to employee more staff per delivery, having to raise prices or reduce range to cover this cost.

This is really the flip side of "customer obsessed", when you are focused on customers you don't particularly care about any individual employee (all the way up the chain).

For a counterexample, google and facebook mostly treat their employees well (with the exception of some contractors). However customers don't trust them as much, because they know they are profit/employee focused.

Why don’t you do that now? Amazon takes in billions in profit, meaning that their prices are substantially higher than they could be. Why aren’t you (or some other competitor) taking advantage of this?

It’s funny how this sort of argument never comes up in the context of taking profits.

Competitors do take advantage of this! There is vicious price competition for most of the kinds of goods that amazon ships from its warehouses. This competition has pushed profit margins into the single digits (probably low single digits). There's really not any room for prices to fall further with given technology.

Retail is BRUTALLY competitive.

And yet some retailers make tons of profit. If it were so easy to swoop in and defeat the top dog with lower prices, how is Amazon still dominating?

As I said before: "This competition has pushed profit margins into the single digits"

This is not tons of profit. Your assertion is incorrect.

It’s more than enough to pay their warehouse workers substantially better without making any changes to their prices.

I do not believe that this is true.

Again, profit margins for this sort of work are tiny. Adding significant wage costs would almost certainly consume a huge percentage of profits at which point the suppliers of capital will invest their money elsewhere.

If you are going to make such a strong claim, you probably need to back it up with data.

Google Amazon profit ($11 billion and change last year), workforce size (650,000ish) and divide. That gives you a lower bound for the worst case where all Amazon employees are warehouse workers.

Amazon earns a lot of money from quite a few things that have nothing to do with warehouse workers. In particular I have read that half their profits come from AWS. I don't think that is enough data to support your claim.

A better set of numbers to look at might be Walmarts (more of a pure retail company). They make maybe 10B in profit per year (it varies a little) with 2M workers. That's $5,000 per worker which isn't much wiggle room.

Money is fungible. Amazon can afford to pay better. The only data you need to know that is what I gave.

You’re giving a reason why they might not want to. I don’t think anyone here is arguing that they want to. If they wanted to, they would be doing it already.

So they are to run at a loss? Why not simply close down the warehouses and liberate these poor people from these terrible jobs?

Who said anything about running at a loss? I’m just stating that they can pay more by taking less of a profit, “the market” doesn’t stop them.

They only make $5000 per worker per year or so, given that the stock market has consistent returns of about 7% lately it's getting to the point that it would be better to put that money there was opposed to paying workers with it for such small returns.

$11 billion divided by 650,000 workers isn’t $5,000.

In any case, the point is that they can pay more. You can quibble over the amount. You can argue about whether or not they should. But they can, in the same way that I can buy an entire truck full of peaches if I decided that would be a good idea.

We are back at run the warehouses at a loss. The profits from AWS have nothing to do with the guys packing boxes and moving the profits from there to them is running it at a loss.

Amazon profit from non AWS biz is in small billions and less, while it may be large in absolute, it is not high as percentage of revenue or by employee. Only way to beat Amazon in profit is have ridiculously high efficiency which is very difficult, or have a different business model which is normally a niche and will not be amazon scale.

That analysis is wrong because it ignores two facts (1) Retail is a highly competitive, low margin business; and (2) Economic systems are dynamic, not static. Amazon’s profit margins are in low single digit percent. If Amazon pays above market wages and keeps prices the same, that creates an opportunity for Wal-Mart to come in and lower prices by using lower cost labor. Customers will go to Wal-Mart instead, because the Internet and things like Google Shopping make it trivial for consumers to chase marginal savings. As a result, Amazon’s workers are out of a job.

Note, by the way, that the minimum wage in our competitor countries (France, Germany, UK) is about $11.50 per hour adjusted for cost of living. That’s much lower than what Amazon is laying.

If Amazon pays their workers more but keeps prices the same, how does that create an opportunity for a competitor?

Yes, because Amazon would no longer exist.

Why?

Because they will lose money, since their margins are already very slim now with at their current labor cost.

I am saying that they could use some of their approximately $10^10 yearly profits to pay people better.

How would that cause them to lose money?

They could indeed use their other businesses to fund running their retail/fulfillment business at a loss. But at that point it would be just as rational to jettison those businesses (by spinning them off into another company), and now we're a step behind square one: they lose whatever economies they get from being a single company, their cost basis gets worse, and they're in an even poorer position to pay more.

These are descriptive, not normative, observations.

It's also a descriptive observation that they can afford to pay more without destroying the company. Whether they should is a separate question I haven't even attempted to address.

I'm not saying they shouldn't, only that it doesn't follow from the economics of their retail/fulfillment business (to which those employees belong) that they rationally can.

Paying someone materially above market value creates a precarious situation for the employee in which they are operating with an income they can’t hope to replace if the employer leaves. It happened where I live with an auto assembly plant. There are deleterious effects on the local job market as well, in which lical companies can’t pay enough to compete.

All told it’s probably better to put the money in the hands of an employee, but there are certainly negative consequences that can arise.

If we want unskilled laborers to have more money, it's much more economically efficient for governments do this through taxation and transfer payments then for individual companies that happen to employ people in this category to pay above market wages.

If society does it through taxation, it's everyone's responsibility.

If only certain companies are responsible, then only a portion of the population is responsible.

I completely agree. If Amazon pays their workers better, that won’t fix the millions of other workers stuck with bad pay and abusive jobs.

But that doesn’t mean we should ignore the individual companies. Certainly, our energies should be focused on bigger societal changes. But it’s not misplaced ore to also mention the fact that some companies could already do better, and choose not to.

I completely agree. If Amazon pays their workers better, that won’t fix the millions of other workers stuck with bad pay and abusive jobs.

That's not what I meant by "more efficient." If every company employing low skilled labor suddenly raised pay above market wages it might help all those workers. But it would mean that prices for things produced by unskilled laborers were artificially high and prices produced by higher skilled laborers would be artificially low. This would cause the market to produce the wrong mix of goods and services and we would all be worse off for the difference.

I don’t understand, how is that different from taxing and giving workers money that way? They should have the same effect in terms of economic efficiency. The only reason we use taxes for this sort of thing is because it’s harder to cheat.

If you do it by pushing wages around artificially then you artificially change the prices of certain goods relative to others.

If you do it via taxes and transfer payments then you don't distort the prices of goods.

How are taxes not artificial? How do taxes not distort the prices of goods?

Because the taxes fall on everyone and not just the buyers of low paid labor.

You are arguing the unstable limit case. There's likely some smaller wage increase that wouldn't impact the prices of goods...

You're talking about a company that makes its money on volume. They have more than 600K employees and thin margins. It's not just a matter of converting profits into wages, they don't have that much in profits in proportion to the number of employees.

Take their average annual profit from retail divided by number of employees and see for yourself what the difference in hourly wage would be.

To pay significantly more they would have to raise prices, which they can't do because they're in competition with Walmart and everyone else.

Amazon has a profit of over $11 billion last year. They can definitely afford to pay their warehouse workers better.

When you eat out you can probably afford to tip better, why don't you? Do you hate restaurant workers?

I try to tip well. If you think I should tip better, make your case. If I disagree, I’ll make my case. I can guarantee you that if that happens, my argument won’t be that I’m tipping the market rate.

Waitresses make less than minimum wage, don't they deserve healthcare, to raise a family, to live in the center of some of the most expensive real estate in the world and have at least two weeks paid vacation per year? If you were to tip say $50 to $100 each time you ate out this could be a reality. How much would $50 be compared to your net worth, less than 1%? Greedy capitalist.

“If you were to tip say $50 to $100 each time you ate out this could be a reality.”

Exactly how often do you think I eat out?

Doesn't matter, like Amazon it doesn't matter that everyone else pays much less than you (market rate) instead you are personally responsible for the lives of anyone you pay for a service. If the amount you are willing to pay doesn't result in a great standard of living then you are at fault.

Doesn’t matter if your claim is actually correct or not? That’s a hell of an argument.

I’m responsible for the tips waiters receive from me. Amazon is responsible for the wages their workers receive from them. Makes sense to me.

>Doesn’t matter if your claim is actually correct or not? That’s a hell of an argument.

If you eat out once in a lifetime or every day an effective wage can still be calculated. In NY or CA you are talking something like 30 - 50 dollars a meal[0], even more if you want to provide healthcare and all the rest. Its likely you aren't leaving $20 - $50 bills on the table for your morning coffee so why don't you think baristas deserve a living wage? It would be such a small percentage of your net worth.

[0]https://www.citylab.com/equity/2017/06/rent-is-affordable-to...

I don’t see what giving myself $50 for making coffee has to do with any of this.

Could you please not post in the flamewar style to HN? It leads to degraded discussion, we're trying for a bit better than that, and I'm sure you can make your substantive points without it.

https://news.ycombinator.com/newsguidelines.html

Did you actually try doing the math? $11 billion divided over 650k employees is roughly $17k which amounts to $75 per day assuming the employee works around 225 days a year which in turn amounts to less than $10 an hour assuming the employee works for 8 hours a day.

So you’re saying they could afford to give their workers a $5/hour raise and still retain a healthy profit? Why the snide question at the beginning, then?

For context: if Amazon were to use all of its profits from FY18 (~$11B) to pay its ~650K workers more, it would come out to just under $17,000 per worker.

I knew I should have been more specific to begin with.

Last year was neither a typical year nor is that the profit from retail.

https://www.thestreet.com/opinion/amazon-is-losing-money-fro...

AWS makes good money, but you can't really expect them to use it all to subsidize retail (even more than they already do) forever.

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