Amazon’s minimum wage policy is failing.
In only four months after Amazon implemented a $15 minimum wage for all employees under its banner, its Whole Foods subsidiary is reducing worker hours.
Whole Foods workers revealed to The Guardian that the hourly increase in wages are often offset by the reduced hours.
One Illinois Whole Foods employee said that work hours “went from 30 to 20 a week.” Under this new minimum wage policy, Whole Foods workers “have to work faster to meet the same goals in less time.”
An internal email shared by one of Whole Foods employee explained that these work hour cuts were “the direct result of guidance from our regional team.”
The minimum wage picture looks bleaker as a Whole Foods worked based in Maryland described the minimum wage raise as “pointless” because “people are losing more than they gained and we rely on working full shifts.”
Some employees have noted that the wage increases have caused staffing shortfalls. One California Whole Foods employee commented, “Things that have made it more noticeable are the long lines, the need to call for cashier and bagging assistance, and customers not being able to find help in certain departments because not enough are scheduled, and we are a big store.”
And there you have it.
Minimum wage policy sounds nice on paper, but the devil is always in the details. The only solace that could be gathered from this situation is that this minimum wage policy is only confined to Amazon.
Labor markets, just like any other segment of the market, operate according to the laws of supply and demand. When a minimum wage is decreed, the supply of labor increases, while the business demand for labor will decrease as a result. This leads to an excess supply of labor, also known as unemployment.
Seattle is Exhibit A of minimum wage failure. The city received praise from the mainstream media for imposing a $15 minimum wage on every business with over 500 employees.
In 2015, Seattle gained notoriety for forcing every business with over 500 employees in Seattle to pay a $15 minimum wage. And the results have not looked promising so far.
A University of Washington study shined light on the negative effects of Seattle’s minimum wage policy:
The UW researchers found a 9.4 percent drop in hours worked by low-wage workers both in and out of the restaurant industry — resulting in the equivalent of a whopping 6,317 full-time jobs eliminated. Even with a higher wage floor, the average low-wage worker’s monthly pay dropped by $124 — a 6.6 percent pay cut — because of lost hours.
Government-mandated minimum wage increases force employers into a corner. Employers generally have four options:
- Turn to automation.
- Favor skilled workers over low-skilled workers.
- Cut hours.
- Lay-off workers altogether.
These sub-optimal consequences are the result of governments trying to play god and break the rules of basic economics. Government imposed ceilings on wages or the sale of goods and services fail everywhere—from Venezuela to a developed country like the United States.
Advocates of a higher minimum wage better be careful with what they wish for. We already have the Seattle and Amazon examples before us demonstrating the pitfalls of government intervention. At the end of the day, governments cannot legislate their citizens into prosperity.
However, governments can get out of the way by lowering taxes and de-regulating all facets of the economy at the federal, state, and local levels. This will free up the private sector and lower the cost of living for all citizens.