Amazon Raised Its Minimum Wage — Will Its Rivals Do the Same?

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MIT SMR Strategy Forum

Each month, we pose a question about business, management, technology, or public policy to our panel of academic experts. Here you can see what they think and why.
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We asked our panel of strategy experts to tell us how strongly they agree with this statement:

Amazon’s new $15 per hour minimum wage will force other companies to follow suit.
RAW RESPONSES
WEIGHTED BY CONFIDENCE

Raw Responses

Responses weighted by panelists’ level of confidence

Panelists

Panelist Vote Confidence Comments

Richard Holden

University of New South Wales
Profile
Agree 9 “As a big employer, the upward pressure on wages will make other employers compete for workers. In addition, this might well provide ‘air cover’ for moves to increase state and city minimum wages in various parts of the country — an issue in the last presidential campaign.”

Ashish Arora

Duke University
Profile
Agree 8

Joshua Gans

University of Toronto
Profile
Disagree 7 “Amazon, while an important employer in some localities, is not as important for the entire labor market. This will allow them to select better employees more than [it will have any] additional market effects.”

Scott Stern

Massachusetts Institute of Technology
Profile
Agree 9 “The Amazon minimum wage will exert real pressure on entry-level wages for service-sector employees in labor markets, encourage the adoption of higher minimum wages in many metro areas, and leave at least some large retailers to conclude that getting ahead of the curve as a ‘good jobs’ company makes strategic and economic sense.”

Steve Tadelis

University of California, Berkeley
Profile
Neither Agree nor Disagree 10 “In markets with a large supply of labor that can do warehouse-type jobs, this will have little or no effect. In tighter markets, however, this will put pressure on competing employers to raise their wages.”

Anita McGahan

University of Toronto
Profile
Disagree 2 “The labor markets in which Amazon offers $15 per hour are not constrained in supply.”

John Van Reenen

Massachusetts Institute of Technology
Profile
Disagree 6

Shane Greenstein

Harvard University
Profile
Disagree 5 “Amazon already was feeling pressures from the difficulties of staffing at such a large scale, and from the difficulties limiting turnover in a heated labor market. Other firms that hire in similar markets have to raise wages too, but not just because Amazon did it. Because the labor market puts pressure on all of them. It appears it will be difficult to get temp workers for the holiday season.”

Richard Florida

University of Toronto
Profile
Agree 5 “I think Amazon’s move to a $15 minimum wage signals a change in the environment. It is likely due to mounting competition for talent in a tight labor market, and it may also be about trying to reposition the company as a better employer. Regardless, I think more companies, especially large companies, will follow suit.”

R. Preston McAfee

Economist
Profile
Neither Agree nor Disagree 7 “Amazon’s effects will be primarily local and, while it has many fulfillment centers, overall employment is not enough to cause a large effect. Some companies will follow suit, for morale and retention, primarily because the blue-collar market is getting quite tight.”

Rebecca Henderson

Harvard University
Profile
Disagree 8 “Amazon’s move will help to persuade other firms to follow suit, but it won’t force them — only a tightening labor market will do that.”

Barry Nalebuff

Yale University
Profile
Agree 10 “Sure. But the question is how many others? And how fast? And what will they take back with the other hand as they raise wages?”

Petra Moser

New York University
Profile
Disagree 9 “Even after Amazon fills all their jobs, they’ll be workers left who would work for less than $15. So unless Amazon competes in a very tight local market, other firms won’t be forced to follow.”

Olav Sorenson

Yale University
Profile
Agree 6 “I do not think that these spillovers would come from direct competition in the labor market but rather from political pressure. If a firm that has been pushing prices for consumers down can still pay a reasonable wage, what excuse do others have for not doing so?”

Joel Waldfogel

University of Minnesota
Profile
Agree 7 “Amazon is one of the GAFAM ‘internet monopolies’ with an enormous market valuation and pays its skilled employees well. They are viewed as a big source of income inequality, so visibly paying a high minimum wage is both virtuous and good PR. I would expect similarly situated companies — GAFAMs and companies with respected consumer brands — to follow suit.”

Joanne E. Oxley

University of Toronto
Profile
Disagree 8 “This move by Amazon will likely prompt some companies to raise wages if (and only if) they are close competitors in the relevant labor market. However, the impact will be quite localized and, since Amazon already pays significantly above the federally mandated minimum, there will be negligible impact on most minimum-wage workers and the companies that employ them.”

John Roberts

Stanford University
Profile
Disagree 6 “Amazon is active in too few local labor markets to have a big impact.”

Meghan Busse

Northwestern University
Profile
Disagree 4 “It may well be that other companies will also be increasing their minimum wages, but if so, it is more likely because of a tight labor market than it is a direct, causal response to Amazon’s decision to do so.”

Melissa Schilling

New York University
Profile
Strongly Disagree 10 “First, Amazon is not the largest employer in any state (Walmart, by contrast, is the largest employer in 22 states). Second, Amazon’s employment is geographically consolidated in each market, which means it doesn’t really compete for employees against more decentralized employers like Walmart, other retail, fast food chains, etc.”

Rajshree Agarwal

University of Maryland
Profile
Disagree 8 “By itself, Amazon lacks the ability to influence labor markets to this degree. Similar to Ford raising its ‘minimum wage’ in the early 20th century, Amazon will attract better talent at the higher price, but this does not mean it will set price for all firms. It cannot ‘force’ as a business organization. Only governments have a legal monopoly on force.”

Erik Brynjolfsson

Massachusetts Institute of Technology
Profile
Agree 7 “The word ‘force’ is too strong, but employers do need to meet the competition when they offer wages. More importantly, it also sends a visible signal and symbol that will affect perceptions of what a fair wage is. That said, the effect will be small for any one firm, even a big one like Amazon.”

Timothy Simcoe

Boston University
Profile
Neither Agree nor Disagree 1 “I am no expert in the reputational impacts of raising wages (or not), but in the current labor market, it will be hard to distinguish ‘responding to Amazon’ from a competitive price.”

Lori Rosenkopf

University of Pennsylvania
Profile
Disagree 7 “ ‘If’ other companies raise their minimum wage, Amazon’s move will be but one of several competitive, institutional, and sociopolitical forces. In other words, Amazon’s move would be a correlate rather than a cause.”

Jennifer Brown

University of Utah
Profile
Disagree 7 “Amazon may pitch its new policy as ‘doing the right thing,’ but those headlines don’t disentangle benevolence and a firm’s push to get out ahead of a tightening labor market. After all, turnover may be costly for Amazon — especially if automation has already replaced some of its lowest-skilled workers. Other firms may follow the changing labor market more than they follow Amazon’s policies.”

Tom Lyon

University of Michigan
Profile
Agree 6 “Not all firms will feel a need to follow, but Amazon has gotten a lot of attention for this. There will be increased pressure on other large, well-known companies that have a wide range of skill levels (and pay levels) within the company.”

Yael Hochberg

Rice University
Profile
Neither Agree nor Disagree 6

Topics

MIT SMR Strategy Forum

Each month, we pose a question about business, management, technology, or public policy to our panel of academic experts. Here you can see what they think and why.
Learn more about this series

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Comment (1)
Eduardo Ligeiro
With such only  step, i do not see Amazon influencing the competitors, but .. it will clearly attract and retain the best employees, thus increasing Amazon productivity, and make it even more profitable, by providing better wages to its workforce.