Amazon's profits may fall as labor costs rise

According to foreign media reports, in order to compete with other retailers, Amazon announced in early September that it would adjust its average salary. The adjusted salary rose to $18 per hour , and a signing bonus of up to $3,000 was provided for some positions . Foreign media reported that Amazon 's salary level after the salary increase is close to three times the federal minimum wage ( $7.25 per hour ) , which will enable Amazon to hire an additional 125,000 warehouse and transportation workers .

The report said that while increasing the number of employees will help Amazon to speed up delivery , rising wage costs may weaken the company's profits . On Monday, the target price of Amazon's stock was lowered from $4,300 to $4,100, with the reason being that rising wages will threaten its revenue, thus lowering market expectations for it.

Although Amazon can still afford the average price in the labor market, some analysts predict that Amazon's labor costs will increase by 60% to $4 billion in the fourth quarter of 2021 compared with the same period last year . This is also a considerable expense for the powerful Amazon.

According to the report, compared with Amazon, small and medium-sized retailers without sufficient funds will face greater recruitment pressure, and the industry is also experiencing serious labor turnover. According to data from the U.S. Bureau of Labor Statistics , an average of 4% of retail workers have resigned every month since April this year . In July, the number of retail employees lost reached a record high of 678,000.

In order to solve the labor shortage problem, in addition to raising wages, retailers also need to solve many problems, such as the arrangement of working hours , welfare benefits, employee rights protection and improvement of work regulations, etc. These factors are also important reasons for the current labor loss of foreign retailers. Some of Amazon’s employee rights protection issues have not been properly resolved.

According to statistics, during the 2020 epidemic, Amazon hired more than 400,000 employees in the United States, and the salary of employees above 60% was higher than their previous jobs. According to the plan in early September this year, Amazon will also open 55,000 jobs worldwide. For Amazon, it is more important now to increase sales by increasing the labor force, so as to make up for (equal to or greater than) the cost spent on labor.

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