Amazon is one of the largest employers in the United States and globally. With over 1.6 million employees worldwide, Amazon’s compensation and benefits policies impact a huge number of workers. In recent years, Amazon has faced criticism from some employees, activists and politicians who argue that the company does not pay many of its workers a living wage. This has led to scrutiny of whether Amazon will increase pay across its workforce in 2022.
Background on Amazon’s Compensation
Amazon utilizes a variety of compensation structures for its corporate and fulfillment center employees. For example:
- Amazon pays many corporate employees a base salary plus stock options and performance bonuses. Software engineers and other corporate workers at Amazon make an average total compensation of $150,000 per year.
- For fulfillment center and delivery drivers, Amazon uses hourly wages. The current minimum starting wage at Amazon is $15 per hour. The average Amazon fulfillment center worker makes around $17 per hour.
- Compensation can vary significantly based on job function, seniority, and location. For example, corporate salaries at Amazon’s headquarters in Seattle tend to be higher than at other offices.
Amazon says that its minimum wage of $15 an hour provides for more than double the federal minimum wage in the United States. However, critics argue this is still not a living wage in many parts of the country after factoring expenses.
Prior Amazon Wage Increases
Amazon has incrementally increased wages for fulfillment and delivery workers several times in recent years:
- In 2018, Amazon raised its minimum wage for all U.S. workers to $15 per hour. This applied to about 250,000 Amazon employees and 100,000 seasonal workers.
- In 2020, Amazon implemented wage increases between $0.50 to $3 per hour for many fulfillment center workers during the COVID-19 pandemic. The raises applied to 175,000 Amazon employees.
- In 2021, Amazon increased average starting wages for fulfillment and transportation workers to $18 per hour, up from $17 previously.
However, critics say Amazon’s increases have not always kept pace with the higher cost of living faced by many of their employees in expensive metro areas.
Will Amazon Increase Wages Again in 2022?
Whether Amazon will implement further broad-based wage increases in 2022 is unclear. Here are some key considerations:
- Labor Market Conditions: With low unemployment and labor shortages, wages are rising across many industries. This will put pressure on Amazon to raise pay to attract and retain workers.
- Inflation: High inflation is significantly reducing real wage gains for many Amazon workers at the current pay scales.
- Unionization Efforts: After an unsuccessful union vote in Alabama, labor unions are pushing for higher pay as they try to organize other Amazon facilities.
- Government Pressure: Democratic politicians have called for federal legislation like a $15 per hour minimum wage that would impact Amazon.
- Company Profitability: Amazon produces strong profits and cash flows, providing funds to support higher compensation.
On the other hand, factors like rising costs will make pay increases tougher for Amazon. The company has to balance employee pay with its bottom line.
Amazon’s Response
In response to criticism, Amazon points to their prior wage hikes as evidence of the company’s commitment to paying competitively. An Amazon spokesperson states:
“Amazon already offers industry-leading pay, comprehensive benefits starting on day one, and training programs for in-demand jobs through our Career Choice program. We’ll continue to invest in wages and infrastructure across the country.”
Amazon argues that critics unfairly target the company and underestimate the quality of their compensation package.
Interpreting Amazon’s Job Listings
Some analysts point to Amazon’s job listings as a clue to future wage plans. In recent months, Amazon has advertised many fulfillment and transport jobs at starting pay of up to $22 per hour:
- Fulfillment center roles in California, New York, Arizona with pay up to $22.50 per hour
- Delivery driver openings with starting pay at $21 per hour
- Fulfillment center jobs in Texas, Virginia, and other states at over $20 per hour
However, these represent maximum starting wages not minimum pay. Not all facilities offer pay scales this high currently. Listings well above existing average wages may signal intent to broadly raise pay across the company. But it is not definitive.
Forecasts from Analysts
Analysts who follow Amazon closely differ on whether significant wage increases are likely in 2022:
- Morgan Stanley – Wage increases expected: “We believe Amazon will have to embark on a more aggressive wage hike cycle starting in 2022 to deal with labor supply shortages.”
- JPMorgan – No forecasted raise: “We ultimately do not expect Amazon to increase their $15 minimum wage meaningfully higher.”
- Cowen – Targeted raises possible: “We expect targeted wage increases in key markets where talent acquisition is more challenging.”
Overall, analyst opinions on the topic vary widely from bullish to skeptical on broad wage hikes.
Scenario Analysis
Here is an analysis of potential scenarios that could unfold for Amazon’s compensation in 2022:
Minimum scenario
- Amazon maintains $15 per hour minimum wage
- Small targeted raises of $1 – $3 per hour in tight labor markets
- No change to corporate employee pay
Moderate scenario
- Increase minimum hourly wage to $16 – $17 per hour
- Average raise around $2 per hour for fulfillment center workers
- Pay adjustments for select corporate roles
Aggressive scenario
- Increase minimum wage across U.S. to $18 – $20 per hour
- Minimum starting pay above $20 per hour in high cost metros
- Average raise of $3+ per hour for fulfillment center workers
- Structural increase to corporate pay bands
The most likely scenario is somewhere between the minimum and moderate forecasts above. However, a more aggressive wage hike by Amazon cannot be ruled out as the labor market remains tight.
Potential Impact on Financials
Substantial wage increases would negatively impact Amazon’s profit margins in the near term. For example:
| Raise Amount | $1 per hour | $3 per hour | $5 per hour |
| Annual Cost | $100 million | $300 million | $500 million |
However, the compensation impact would be partially offset by:
- Lower turnover costs from higher retention
- Increased productivity from higher worker morale
- Reduced new hire and training costs
Importantly, shareholders would likely support reasonable pay raises as a prudent long-term investment in the labor force.
How Pay Compares to Other Employers
Compared to major retail and logistics competitors, Amazon’s compensation for warehouse workers is fairly middle of the pack:
| Employer | Average Hourly Wage |
| Amazon | $15 – $17 |
| Target | $15 |
| Walmart | $16.40 |
| UPS | $20 |
However, critics argue many of these rival employers offer more generous benefits than Amazon provides its fulfillment center staff.
Public Perception Considerations
Public relations impacts will also factor into Amazon’s wage decisions. Major pay raises would generate positive headlines and public sentiment. It fits Amazon’s desired image as an progressive employer.
In contrast, stories about employees struggling on low wages undermines Amazon’s reputation. The company will likely feel pressure to increase compensation for PR reasons alone.
Local Government Impact
Amazon also negotiates tax incentives and subsidies with local governments to support building new facilities. Guarantees around job quality and pay are often part of these deals.
For example, Amazon committed to a minimum $15 per hour wage as part of its agreement for New York’s HQ2 campus. Similar compensation requirements in future municipal deals could force Amazon’s hand on wage increases more broadly.
Legislative Outlook
While unlikely in the near term, federal legislation mandating a $15 minimum wage would require Amazon to implement nationwide pay raises. Such a bill passed the Democrat-controlled House of Representatives in 2021 but failed to clear the Senate.
With Democrats holding narrow control of Congress following the 2022 midterms, progressives will continue pushing to enact a $15 federal minimum wage. However, the proposal still faces long odds in the Senate.
Employee Messaging
In communicating pay policies to its workforce, Amazon stresses that compensation levels are competitive and determined based on local labor market conditions. The company points to its well-publicized $15 minimum as evidence it is responsive to employee needs.
Here are some examples of messaging Amazon has directed at its workers regarding pay and benefits:
“Amazon is proud to offer one of the highest entry wages in the industry. Employees see regular pay increases based on tenure and job performance. We encourage anyone to compare our pay, benefits, and workplace to other retailers.”
“Amazon benefits start on day one and include health, dental, and vision insurance, 401K with 50% company match, and up to 20 weeks paid parental leave.”
This messaging aims to reassure workers that Amazon’s compensation is fair and reinforces the company line that it is a leader on pay issues.
Union Perspective
Labor unions trying to organize Amazon employees strongly advocate for higher compensation. Unions argue low pay and poor working conditions provide justification for union representation.
Specifically, unions make the case that:
- Wages are too low for the physically demanding work required at fulfillment centers
- $15 per hour is not enough in high cost-of-living cities
- Health and safety concerns at facilities necessitate higher pay
- Stock and bonus pay is concentrated among corporate employees
In its opposition to unions, Amazon states it already provides excellent compensation and benefits. But unions counter that higher pay is needed regardless.
Historical Context
Looking historically, Amazon has incrementally raised fulfillment center wages over time. Average hourly pay has risen from around $11-12 per hour in 2016 up to approximately $17 per hour today.
However, some argue that Amazon’s increases have lagged behind the rapid growth in its profits and stock price. Critics advocate for more aggressive compensation growth to reflect Amazon’s financial success.
| Year | Average Hourly Wage |
| 2016 | $11 – $12 |
| 2018 | $15 |
| 2021 | $17 |
Conclusion
In summary, Amazon faces growing pressure to increase compensation, especially for its fulfillment center workers who earn hourly wages. However, the magnitude of Amazon’s 2022 pay changes remains uncertain.
Small to moderate wage increases look likely as the labor market tightens further. But widespread raises above $18 per hour could hurt Amazon’s profits unless offset by productivity gains.
While Amazon says their pay rates are already generous, persistent activism and union drives could force the company’s hand to make a bold move on wages as a political statement. Regardless, compensation will remain a hot topic around Amazon in the year ahead.