Why Progressives Need to Embrace Innovation: Amazon’s $15/hr minimum wage

By / 10.2.2018

Amazon just announced that it would raise the minimum hourly wage for all of its US workers to $15 per hour, including workers employed by temp agencies.  This is good news for Amazon’s workers, obviously.  But it’s also a sign that we’ve moved into a new era, where technology is driving rising real wages for everyone, not just the well-educated.

Ecommerce is proving to be a positive force for labor. For 30 years, retail workers struggled with a horrible status quo that suppressed any growth in retail wages and forced workers of color into the lowest paying retailing jobs. Between 1987 and 2017, real hourly earnings for production and nonsupervisory workers in retail went up a grand total of 2%.

Amazon and other ecommerce sellers have decisively disrupted that horrible status quo, and created hundreds of thousands of better paying jobs. Even before the Amazon wage hike, PPI research found that ecommerce fulfillment centers typically pay 30% more than brick-and-mortar retail in the same area. Labor share in warehousing rose from 75.8% in 2007 to 83.2% in 2017, coinciding with the rapid growth of ecommerce fulfillment centers. Amazon’s latest move will only push the labor share up further.

These higher wages don’t make Amazon a philanthropic organization, anymore than Henry Ford was being benevolent when he boosted wages for workers in his factories in 1914. Ford needed to pay more to attract a competent workforce because his introduction of the assembly line boosted productivity, lowered prices, made cars affordable to the masses, and created an auto boom and an insatiable demand for skilled workers.

In the same way, Amazon and other ecommerce firms are using technology to transform the previously expensive process of getting products from manufacturers into the hands of consumers—what we call the “Internet of Goods.” These technological improvements have created benefits for both consumers and workers. For example, BLS data shows that real margins in the electronic shopping industry (NAICS 4541)—defined as prices received by retailers less their acquisition price of goods—have fallen by 13% since 2007. That means consumers are gaining from lower prices.

Progressives need to embrace innovation. It’s the only road to the best future for everyone.