Why a Higher Minimum Wage Doesn’t Always Equal a Bigger Paycheck for Retail Workers

The same day Walmart announced that it would raise its hourly minimum wage from $10 to $11 last January, it also announced — with much less fanfare — plans to lay off nearly 10,000 workers.

The cuts came with the closure of 63 of the retailer’s then-660 Sam’s Club stores, part of its efforts to streamline its brick-and-mortar business and invest further in e-commerce. (In fact, several of the shuttered warehouse club stores have since been converted into distribution centers.)

While the news came alongside announcements that Walmart — the nation’s largest private employer — would also expand parental leave benefits and offer one-time bonuses to some workers, some labor groups were unimpressed, calling it a PR stunt timed to camouflage the job cuts.

Likewise, in the months since Amazon raised its minimum wage to $15 per hour — and CEO Jeff Bezos challenged other retailers to do the same — some have speculated that the company will ultimately shrink its payrolls by introducing more automation into its warehouses and distribution centers.

“Make no mistake, any type of gain for a Walmart or Amazon worker now will likely mean layoffs and jobs replaced by automation down the road,” said a spokesperson for Making Change at Walmart, a project of the United Food & Commercial Workers labor union. “From announcing wage increases only to lay off thousands of workers after, to refusing to provide fair schedules and adequate benefits, Walmart and Amazon are destroying what a good job means for America’s working class.”

Today, according to Reuters, Amazon employs 125,000 full-time warehouse workers at 110 warehouses, 45 sorting centers and around 50 delivery stations in the U.S. Where there are robots, they only play a supporting role, as technology has not yet advanced to the point where one could process a single order. (Scott Anderson, director of Amazon Robotics Fulfillment, told the news agency that fully automated fulfillment is still at least a decade away.)

In a separate report about new technology in Amazon’s warehouses that will pack boxes four to five times faster than human workers, the company also dodged claims that such advancements will lead to lost jobs, saying instead that the costs savings will allow it to create new positions elsewhere. A source told Reuters that Amazon will avoid layoffs by relying on attrition, as packing roles tend to be grueling work with high turnover.

An Amazon spokesperson emailed the following statement to FN: “We consistently pilot and implement new technologies with the goal of increasing safety, speeding up delivery times, and adding efficiencies within our network. With those efficiency savings, we are able to re-invest in new services for customers that lead to the creation of new jobs. In the long-term, this means continued job growth and a new sector emerging of warehouse environments in which employees work in technologically rich environments. We have not laid off any associates because of our robotic deployments and we continue to invest in upskilling programs, such as Career Choice, designed to re-train people in high-demand fields like robotics and software engineering.”

As many retailers shrink their physical footprints and invest more in e-commerce, they’re relying less on cashiers and sales associates, which are typically among the industry’s lowest paid roles. According to outplacement firm Challenger, Gray and Christmas, retail has cut more jobs than any other industry for three years running, eliminating 46,061 positions in the first quarter of 2019 alone.

But even as they do so, said Andrew Challenger, a vice president at the firm, many are also beefing up staffing in areas that typically offer higher wages because they’re in such high demand. “There’s a shift in where they need employees,” he said. “We’re seeing a lot of job cuts because these brick-and-mortar retailers are closing, but all of these major retailers are doing hiring in operations, in their warehouses and distribution centers, in programming the e-commerce infrastructure for their company.”

As for the much-feared robot takeover, he said, “The jobs that are being automated away, they’re the ones with the lowest wages in the infrastructure of any company anyway, and so by eliminating some of those jobs, it raises the average wage for jobs that can’t be automated away.”

Nevertheless, Walmart last year reduced its labor costs by replacing 3,500 store co-manager positions with 1,700 lower-paying assistant manager jobs, while Amazon’s wage hike was accompanied by an elimination of monthly bonuses and stock options for hourly workers, according to Bloomberg. At Whole Foods, which Amazon acquired in 2017, workers told the Guardian in March that they saw their hours reduced following the Nov. 1 move to $15 per hour. (A spokesperson for the company denied these claims, saying the store’s full-time employees averaged the same number of hours in the beginning of 2019 as they did in the beginning of 2018.) The grocery chain’s workers have been pushing to unionize since last fall, seeking better pay, benefits and profit sharing.

Research is divided on what impact minimum wage increases ultimately have on employment, but most recent studies have found that low-skilled workers will see some job losses. At the same time, workers who receive pay hikes will have more disposable income to spend, and research has shown that these tend to affect not just minimum wage workers, but also those making up to $3 more per hour, making the ripple effect on the economy even more dramatic.

Cities and states are increasingly pressing for minimum pay above federal level of $7.25 per hour (a number that hasn’t changed since 2009, marking the longest period in history it has stayed stagnant). By 2022, at least 17 percent of Americans will live in a city or state with a $15 minimum wage, according to a report from UCLA’s Anderson School of Management, and the “Fight for 15” movement could push that share even higher. Along with the tight labor market driving up competition for workers, we’ll likely see more retailers raising pay to meet the demand.

This story has been updated with a statement from Amazon.

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