In local markets throughout America, the e-commerce giant’s facilities have an impact on inflation, job markets and labor standards

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Amazon Emerges as the Wage-and-Benefits Setter for Low-Skilled
Workers Across Industries
In local markets throughout America, the e-commerce giant’s facilities
have an impact on inflation, job markets and labor standards
Wall Street Journal
Dec. 7, 2021
About two years ago, Amazon.com Inc. AMZN -0.00% employees
rigged a vehicle to carry a makeshift billboard advertising starting pay
of roughly $16 an hour. They drove the truck all over the small Texas
city where Mr. Ramirez helps run a rival warehouse operation.
Within a few months, a handful of the employees at his company,
mattress manufacturer Serta Inc., had decamped to Amazon. “We had
no choice but to compete,” he said. The company raised its starting
pay by roughly $2 to about $15 an hour and has since raised it about
another dollar, he said.
As companies across the U.S. fight to find workers, Amazon is
emerging as a de facto wage-and-benefit setter for a large pool of low-
skilled workers. Business experts have long researched what is known
as the Amazon effect in disrupting traditional retailers. Now Amazon’s
every move is causing ripple effects well beyond the retail space in
local markets throughout America, including on inflation, regional job

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markets and labor standards, according to an examination of federal
labor data and interviews with economists, researchers, local
employment officials and current and former Amazon employees.
The nation’s second-largest private employer is planning mock
fulfillment centers in high schools to plant the seeds of future careers,
sending recruiters to local fairgrounds and bombarding job boards
with promises of large sign-on bonuses and pay—in some cases nearly
triple the federal minimum wage.
The effect is magnified because Amazon churns through hundreds of
thousands of employees each year, creating an even more voracious
appetite for labor that often compels the company to push up
compensation or improve recruitment in other ways—especially
during peak times such as the holiday shopping period now under
way.
“Amazon has the economies of scale,” said Jesse McCree, a workforce
development official in Harrisburg, Pa., an area of the country where
Amazon is competing heavily with other large logistics and warehouse
companies. “They are influencing the market because of scale and
name recognition and can afford to pay more than the smaller guys.
As they go, even the big companies are going to pay attention.”

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Similar effects are evident in areas near Austin, Los Angeles, Cincinnati
and Louisville, Ky., according to a Journal review of local data and
interviews with employers and workforce officials.
Inside an Amazon fulfillment center in Country Club Hills, Ill., a
worker scans at wrapped product.
Photo: Sebastian Hidalgo for The Wall Street Journal
At produce distributor Castellini near Cincinnati, Chief Executive Brian
Kocher can’t get away from Amazon. The company has wrapped job
advertisements around cars, buses and billboards. And recently, when
Mr. Kocher went to play his favorite Solitaire game on his iPhone,
Amazon ads popped up there, too.

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Castellini in the past year has raised wages three times, with its pay
now starting around $16 an hour. Since many of its employees in the
area are Spanish speakers, Castellini has recently focused on hiring
and promoting managers who speak the language to better connect
with workers. The company also implemented $750 bonuses for any
employee who refers family and friends to work there.
Amazon has had a significant impact on the area since 2017, when the
company struck a deal with the Cincinnati/Northern Kentucky
International Airport to open a $1.5 billion air hub. Paul Verst, chief
executive of Verst Logistics, which provides warehousing,
transportation and packaging services for clients such as
manufacturers and consumer-goods companies, said construction
costs have risen by at least $30 a square foot to a range of about $90
to $100 due to increased demand for building space.
Mr. Verst recently gave employees a $3-an-hour raise to compete with
Amazon. Starting pay now ranges from $16 to $19 an hour. He said his
family-owned company aims to retain employees by connecting with
them personally. He signs a birthday card for each worker. Tenures for
many workers have averaged 10 to 15 years, he said. Still, the
company has lost a handful of employees to Amazon, which has
advertised pay of $20 or more an hour and $1,000 sign-on bonuses in
the area.

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Verst Logistics has had to raise wages to compete with Amazon.
Photo: Philip Heidenreich
“It was for economic reasons that they left,” he said.
There have been about two job openings for every unemployed
person in Cumberland County, the Harrisburg-area county where
several Amazon facilities are located. Warehouse competitors include
pet food retailer Chewy Inc., United Parcel Service Inc. and food and
agriculture giant Cargill Inc.
Wage wars in the area have been fierce ever since Amazon raised its
starting pay nationally by several dollars to $15 an hour in 2018, local
officials said. Much of the battle for hourly employees has played out

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near a stretch of the area’s Interstate 81 highway, where companies
have erected billboard after billboard advertising sign-on bonuses and
“immediate openings.”
On occasion, Chewy workers have left the company to work at
Amazon almost immediately after receiving new training, according to
a former area manager. During the Covid-19 pandemic, a period when
Amazon hired workers as aggressively as any company in modern
history, Cargill was at times so short of employees that it flew workers
in from other locations, according to the company. Both Chewy and
Cargill now advertise pay near $20 an hour in the area.
Employee turnover in Cumberland County rose after Amazon’s arrival
spurred competition among local firms for workers. Three years ago,
around the time when Amazon bumped its starting pay to $15 an
hour, wages for warehouse employees in Cumberland averaged from
$10.50 an hour to $12.50 an hour. Now, they range between $15 to
$21 an hour, according to the Cumberland Area Economic
Development Corporation.

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The scene in an Amazon fulfillment center on Cyber Monday in
Robbinsville, N.J.
Photo: Michael Nagle/Bloomberg News
“Amazon is the standard-bearer,” said Zach Pasquariello, a former
Chewy area manager in the region. “Chewy was always following in
Amazon’s footsteps and trying to do what Amazon does, but we were
always a little bit behind.” Chewy declined to comment.
Job openings across the U.S. outnumber the people who are
unemployed, Labor Department figures have shown, demonstrating
an unusual tightness in the labor market that has seen a sharp rise in
wages. How much of this is due to Amazon’s influence is difficult to

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pinpoint, due to limited data and the unique influence of the
pandemic.
But as Amazon’s footprint has grown rapidly across the country, the
potential for the company to influence wages or other market
dynamics has increased, economists say. Amazon, which had around
1.4 million total employees at the end of September, hires hundreds
of thousands of people every year, putting it on pace to
surpass Walmart Inc. as the nation’s largest employer in a matter of
years.
Shipping containers wait outside a Walmart warehouse in Redlands,
Calif.
Photo: Roger Kisby/Bloomberg News

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“If they are not leading [a wage increase], they are reinforcing it,” said
Lynn Reaser, a professor at Point Loma Nazarene University and
longtime economist at financial institutions that include Bank of
America Corp. “Everyone is comparing job offers, and they always
have Amazon as a benchmark.”
Even Amazon’s own internal employee challenges ripple through the
market. The company’s turnover rate has exceeded more than 100%
across many of its facilities, according to an analysis by The Wall Street
Journal.
Amazon has recorded higher injury rates than the national average,
and its speedy delivery requirements can quickly burn workers out.
The company has faced lawsuits, union challenges and government
intervention related to the treatment of its workforce, which has
pushed it to introduce new safety measures such as body mechanics
training for employees and vows from its top leaders to better listen
to workers.
Amazon has said it is working to better understand the needs of its
employees and has opposed unions because it prefers to negotiate
with workers directly. The company also has said that many of the
people it adds are re-hires, demonstrating that many workers return
to the company after having earlier left.

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Amazon’s wage increases pass through to workers outside the
company, researchers have found, as many employers raise their own
pay to combat churn. In September, Amazon announced that its
starting wage now averages $18.32 an hour, an amount that’s nearly
triple the federal minimum wage of $7.25 an hour.
To fight off Amazon, competitors have tried to offer lighter workloads,
more flexible schedules, bonus pay and other perks. But Amazon is
rolling out new plans to compete in those areas as well.
In the ship dock at an Amazon fulfillment center in Garner, N.C.,
boxes and packages are added to a pallet to be taken by a truck for
delivery.
Photo: Jeremy M. Lange for The Wall Street Journal

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Amazon wants to use its size and scale to make its jobs as flexible as
possible, J. Ofori Agboka, an Amazon senior human-resources
executive, said in an interview. Having hundreds of thousands of
employees makes it easier to offer workers different work hours, a
perk many have requested, he said. Amazon recently broadened a
program that allows some employees to switch schedules and pick
their own work hours, or cancel a shift at the last minute. The
company also offers a child-care network to employees and flexible
hours for a few weeks for employees transitioning back to work.
“What does flexibility mean for each employee, and how can we meet
that?” Mr. Agboka said.
Candidates are now essentially being hired on the spot, Mr. Agboka
said, with many workers able to see their start date less than half an
hour after beginning an application online. Amazon is also working to
fix common retention issues, he said, such as employees who are
dismissed after a minor incident like missing work due to an
emergency.
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It is too early to know how well some of Amazon’s new initiatives to
increase flexibility will be felt in the labor force, but its pay increases
are already having a widespread impact.
LaShay Moran, who lives near Louisville, joined Amazon during its
current hiring spree. Ms. Moran, 42, left her job at auto parts
distributor Premier Performance LLC in part because Amazon offered
more money—$17.50 an hour versus $16 at Premier—and a $3,000
sign-on bonus.
“Everybody knows what it is,” she said of Amazon’s name recognition.
The Great Labor Shift, Explained in One Chart
0:00 / 5:53
1:49

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The Great Labor Shift, Explained in One Chart
The American workforce is rapidly changing. In August, 4.3 million
workers quit their jobs, part of what many are calling “the Great
Resignation.” Here’s a look into where the workers are going and why.
Photo illustration: Liz Ornitz/WSJ
A 10% increase in Amazon’s advertised hourly wages in 2018 led to an
average increase of about 2.6% among other employers in labor
markets where Amazon is located, according to a paper this year by
researchers from the University of California, Berkeley and Brandeis
University.
Amazon’s influence on wage increases had a big effect because a large
fraction of similar jobs then were below $15 an hour, researchers
concluded. In comparison, when Walmart
and Target Corp. announced $9 starting pay in 2015, the effect was
smaller because there was a larger fraction of employers that were
already at or above that pay level. Walmart in September raised its
minimum wage to $12 an hour.
At the same time, the researchers found Amazon’s increase in pay
failed to raise overall employment levels and actually led to a small
decline. While some employers that raised wages hired additional
workers, others cut back on employment or hours. In Amazon’s case,
the company’s increase to $15 an hour led to an average decrease in

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“probability of employment” by 0.8 percentage point, the paper says.
Other research showed similar results.
In response to its overall effect on employment, Amazon has
previously pointed to the billions it has invested in infrastructure and
the amount of jobs it creates.
An Amazon employee organizes crates delivered by a robotic car at
a fulfillment center.
Photo: Sebastian Hidalgo for The Wall Street Journal
In San Marcos, Texas, Amazon established its first fulfillment center in
2016 and soon approached the nearby Texas State University as the
area’s largest employer.

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Other warehouse operators in the area quickly felt the company’s
presence. Amazon advertised on radio stations hundreds of miles
away and attracted workers from competitors in short order.
Amazon staffs more than 4,500 workers in three facilities throughout
the surrounding Hays County, and a fourth site recently opened that
will employ at least hundreds more. The company has added more
than 2,000 employees during the Covid-19 pandemic, according to
local data.
Worker churn has been high at the facilities. Turnover in Hays County,
which is located southwest of Austin, swelled to 101% in 2017, the
first full year Amazon operated there. The rate plunged to 68% by
2019, according to a Journal analysis. That decrease happened after
Amazon reduced the number of employees at the San Marcos
warehouse, according to the Greater San Marcos Partnership, a local
business group.
Since Amazon raised its starting pay in 2018, wages in the San Marcos
area are also up substantially. Pay for employees in the warehouse
and storage industry in Hays County grew by 12.7% in the two years
after Amazon’s move to $15, compared with 4.3% in the two years
preceding it, according to labor market research firm Emsi Burning
Glass.

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Walmart and others matched and sometimes exceeded Amazon’s pay
at their facilities to stay competitive, said Jason Giulietti, president of
the Greater San Marcos Partnership. A large sign recently hung from
a Walmart distribution center south of Amazon’s San Marcos facility
advertising pay of up to $20 an hour.
At lighting manufacturing giant Signify, which has a warehouse in Hays
County, plant manager Haiver Montenegro said he competes with
Amazon using flexible schedules, including usually not requiring
employees to work on weekends.
“If we were just to compete with hourly rates with Amazon, we would
never get there,” he said. “The biggest discussion around resources in
this area has to be around what an employer has to offer as a whole
package.”
Still, he is short about 15 production associates, with roughly 120
manufacturing employees at the warehouse, according to the
company. Signify recently raised starting wages there to around $15
an hour in part because of Amazon’s wage hikes, and he is considering
putting up job advertisements on billboards for the first time.
—Shane Shifflett contributed to this article.
Write to Sebastian Herrera at Sebastian.Herrera@wsj.com