Amazon's $15/Hour Wage Could Give Competitors a Chill

Summary

---

WSJ Your Money Briefing

Episode: Amazon's $15/Hour Wage Could Give Competitors a Chill

Date: October 4, 2018
Host: J.R. Whalen (Wall Street Journal)
Guest: Elizabeth Winkler (WSJ Heard on the Street columnist)

---

Episode Overview

This episode of WSJ's Your Money Briefing examines Amazon’s decision to raise its minimum wage to $15 an hour, the ripple effects this move is expected to have on both brick-and-mortar and online competitors, and its broader implications for the retail labor market. The discussion also touches on current wage trends among competitors, recruitment challenges, and potential impacts on consumers.

---

Key Discussion Points & Insights

1. Context: Tight Labor Market and Rising Health Costs

• Rising Health Coverage Costs (00:36–01:41)
  • Employer-provided health coverage for a family averages nearly $20,000 a year, a 5% increase from the prior year, reflecting rising health care costs.
  • Employees are paying higher deductibles and a greater portion of their premiums (29% on average).
• Employer Recruitment Benefits (01:41–02:13)
  • Companies are offering education benefits, like student loan repayment and college funding, to attract workers in a competitive labor market.

2. Amazon’s Minimum Wage Increase: Market Impact

• Amazon's Move (02:13–02:30)

  • Announced a minimum wage increase to $15/hour effective November 1, 2018.
  • Seen as an aggressive step in a very tight labor market.
  • Could force competitors to reconsider their own wage policies.

• Competitive Wage Landscape (02:50–03:19)

  • Competitors have raised wages: Target up to $12/hour (with a plan for $15 by 2020), Walmart to $11/hour.
  • Amazon’s $15/hr leads the pack:
    “Yes, Amazon leads the pack.” — Elizabeth Winkler (02:56)

3. Pressure on Retailers During Holiday Season

• Rush to Hire Seasonal Workers (03:18–03:31)

  • Some retailers, like Kohl’s and JCPenney, started hiring holiday staff as early as June due to hiring pressure.
  • Demonstrates the competitiveness and urgency to attract enough workers.

• Potential Consequences for Shoppers (03:31–03:47)

  • Insufficient staffing could lead to crowded stores and long lines, pushing customers to online alternatives.
  • “If stores can’t hire enough staff, let’s say cashiers, shoppers could face crowding and long lines ... That’s the last thing they want to experience.” — J.R. Whalen (03:31)
  • “The real value that brick and mortar retailers can offer ... is the value of expertise... if they don’t have that, shoppers will happily go on Amazon.com.” — Elizabeth Winkler (03:47)

4. Worker Choices: Location vs. Compensation

• Warehouse vs. In-Store Work (04:05–04:21)
  • Workers may have to choose between better pay in an Amazon warehouse or lower pay but potentially more comfortable in-store retail jobs.
  • “If you’re looking at $15 an hour versus $11, it might not be such a hard one.” — Elizabeth Winkler (04:15)
  • “Money talks.” — J.R. Whalen (04:21)

---

Notable Quotes & Memorable Moments

• Amazon's Wage Decision:

  • “A few years ago, retailers were cutting staff in an attempt to reduce costs, but now they're short staffed and they're scrambling and unemployment is low. So a lot have started raising wages to lure workers back into stores, but none have raised minimum wages quite as high as Amazon.” — Elizabeth Winkler (02:30)

• Impact on Brick-and-Mortar Stores:

  • “The real value that brick and mortar retailers can offer over online shopping like Amazon is the value of expertise ... so if they don’t have that, shoppers will happily go on Amazon.com.” — Elizabeth Winkler (03:47)

• Decisions for Workers:

  • “That is a decision they’ll have to make. But I think if you’re looking at $15 an hour versus $11, you know, it might not be such a hard one.” — Elizabeth Winkler (04:15)

---

Important Timestamps

• 00:36–01:41 | Health coverage costs and rising premiums
• 01:41–02:13 | Employer-paid education benefits as recruitment tools
• 02:13–02:30 | Amazon’s minimum wage announcement and its significance
• 02:50–03:19 | Comparison of Amazon’s wage hike to competitors (Target, Walmart)
• 03:18–03:31 | Early seasonal hiring (Kohl's, JCPenney)
• 03:31–03:47 | Impact of staffing shortages on consumer experience
• 04:05–04:21 | Worker choices: warehouse vs. in-store, wage consideration

---

Tone and Language

The discussion is direct, concise, pragmatic, and rooted in real business economics. Both host and guest provide clear data-driven insights, using a conversational yet authoritative tone, reflecting Wall Street Journal's analytical style while remaining accessible to general listeners.

---

Summary

Amazon’s move to a $15 minimum wage is a watershed moment in U.S. retail, likely to pressure competitors, intensify holiday hiring wars, and potentially shift power toward workers during a period of low unemployment and rising benefit costs. Brick-and-mortar retailers may struggle to compete not just for customers, but for talent, with consequences that could reshape the in-store shopping experience.

---

Transcript

[Small Business Owner]

Access to affordable credit helps me pay my employees, but I don't really need it.

[Retail Industry Advocate]

Inflation is killing me, but who cares? Big retailers are making record profits. That's why we support the Durbin Marshall credit card bill.

[Small Business Owner]

See banks and credit unions help small businesses make payroll. This bill would cut the vital resources

[Retail Industry Advocate]

they need while increasing megastore profits. They deserve it, don't they?

[Electronic Payments Coalition Representative]

Tell Congress, stop the Durbin Marshall money grab for corporate megastores Paid for by the Electronic Payments Coalition.

[J.R. Whalen]

With your Money briefing. I'm J.R. whalen at the Wall Street Journal in New York. Amazon's decision to raise its minimum wage to $15 an hour could usher in a wintertime chilling effect on its brick and mortar and online competitors alike. We'll explain in just a moment. First, these money in market stories you should know. The average cost of health coverage offered by employers rose to nearly $20,000 for a family, and that caps years of increases that experts say are tied to rising prices paid for health care. Annual premiums rose 5% to $19,616 for an employee family plan in 2018. Employers also continue to boost the deductibles that workers must pay out of their pockets to help blunt the premium increases. Nationwide, employees paid on average $5,547 a year or or 29% of the premiums for a family plan in 2018. And the wall Street Journal Management and Careers Bureau reports that as companies compete for workers in the tightest labor market in years, and with student loan debt nationwide at $1.5 trillion, they're rolling out new education benefits like college coaching and student loan repayments to recruit employees. Research from the Society for Human Resource Management shows About half of U.S. employers offer to help fund undergraduate education for employees up to $5,250 of which can be excluded from taxable income per year. Amazon's decision to raise the minimum wage for its workers to $15 an hour is good news, unless you're the competition, in which case the fourth quarter could be filled with wintertime blues. Wall Street Journal Heard on the street columnist Elizabeth Winkler is here to explain. So, Elizabeth, the move by Amazon and is an aggressive step in a very tight labor market.

[Elizabeth Winkler]

Yeah, that's right. A few years ago, retailers were cutting staff in an attempt to reduce costs, but now they're short staffed and they're scrambling and unemployment is low. So a lot have started raising wages to lure workers back into stores, but none have raised minimum wages quite as high as Amazon.

[J.R. Whalen]

And among its competitors, Amazon's $15 per hour rate that takes effect November 1st. It leads the package.

[Elizabeth Winkler]

Target has raised theirs to 12. Just last month, Walmart to $11 an hour. But yes, Amazon leads the pack.

[J.R. Whalen]

And Target raised its hourly rate, but it doesn't take effect for a couple of years.

[Elizabeth Winkler]

Well, it has raised it to 12 for now for newly hired employees, and it says it plans to get to 15 an hour, but not till 2020.

[J.R. Whalen]

Okay. And some retailers actually started recruiting holiday season staff at the start of the summer. That tells you how competitive this is.

[Elizabeth Winkler]

Exactly. That's right. Kohl's and JCPenney started in June trying to lure in workers.

[J.R. Whalen]

Amazon's move could really ramp up the competition between brick and mortar and online merchants. And if the stores can't hire enough staff, let's say cashiers, shoppers could face crowding and long lines. That's the last thing they want to experience when they walk into a store.

[Elizabeth Winkler]

Exactly. The real value that brick and mortar retailers can offer over online shopping like Amazon is the value of expertise, of having people there on hand to help you. So if they don't have that, you know, shoppers will happily go on Amazon.com

[J.R. Whalen]

and it'll also require some thinking on the part of the employee. Are they willing to work in a warehouse or settle for a lower rate and work maybe more comfortably under the roof of a store?

[Elizabeth Winkler]

That's true. That is a decision they'll have to make. But I think if you're looking at $15 an hour versus 11, you know, it might not be such a hard one.

[J.R. Whalen]

That's true. Money talks. And that's Wall Street Journal heard on the street columnist Elizabeth Winkler joining us here in our. Elizabeth, thanks for being with us.

[Elizabeth Winkler]

My pleasure.

[J.R. Whalen]

And that's your money briefing. I'm JR Whalen in New York at the Wall Street Journal.

[Small Business Owner]

Access to affordable credit helps me pay my employees, but I don't really need it.

[Retail Industry Advocate]

Inflation is killing me, but who cares? Big retailers are making record profits. That's why we support the Durbin Marshall credit card bill.

[Small Business Owner]

See, banks and credit unions help small businesses make payroll. This bill would cut the vital resources

[Retail Industry Advocate]

they need while increasing megastore profits. They deserve it.

[Electronic Payments Coalition Representative]

Don't tell Congress. Stop the Durbin Marshall money grab for corporate megastores paid for by the Electronic Payments Coalition.