Amazon’s announcement that it will increase it’s hourly minimum wage to $15 may be felt beyond the company’s seven Indiana distribution centers, experts say, possibly rippling through the retail economy.
The new minimum wage announced Tuesday will go into effect on Nov. 1 and apply to all full-time, part-time and temporary jobs, including positions at Amazon subsidiaries such as Whole Foods.
Nationally, the wage increase is expected to affect more than 250,000 Amazon employees and 100,000 seasonal holiday workers, according to an Amazon press release. However, Melanie Etches, a spokesperson for Amazon, said the company does not currently have an estimate of how many Indiana employees will directly benefit from the increase.
The company employs more than 9,000 full-time workers in Indiana, but she would not say how many of them work in hourly positions.
In addition to its seven Indiana Fulfillment and Sortation Centers, Amazon also has five Whole Foods stores in the state and a Prime Now Hub in Indianapolis.
Amazon’s announcement came following recent criticism from Sen. Bernie Sanders, who suggested Amazon does not fairly compensate employees in lower level positions.
“We listened to our critics, thought hard about what we wanted to do, and decided we want to lead,” Amazon CEO Jeff Bezos said in the Tuesday press release. “We’re excited about this change and encourage our competitors and other large employers to join us.”
Amazon did not previously have a set minimum wage in place, Etches said, but rather aimed to pay wages 30 percent higher than those of traditional retail stores.
Michael Hicks, an economics professor at Ball State University, said overall the wage increase is a good move for Amazon. He said higher wages will lead to greater job retention, which will save Amazon money in the longer run on hiring expenses, such as background checks and training.
The state, however, may see less of an effect, Hicks said, considering that Amazon, by his estimate, likely only employs a couple hundred minimum wage workers in Indiana.
“It’s a big employer,” Hicks said, “But it’s not ubiquitous.”
Still, the announcement continues a trend among large retailers that could prove lucrative to Hoosiers searching for competitive wages.
In Indiana, the minimum wage is currently set at $7.25, the same as the federal minimum. But, Hicks said, it’s become more common in the state for positions typically considered to be minimum wage jobs to offer $11 or $12 an hour.
In January, Walmart increased it’s hourly minimum wage to $11. In March, Target announced plans to bring its hourly employees to $12 this year with a goal of hitting $15 an hour by 2020.
Grant Monahan, president of the Indiana Retail Council, said he expects there to be a ripple effect among retailers in response to Amazon’s announcement.
“Retailers are always going to react to what the competition is doing,” Monahan said. “They’re competing for the same relatively small pool of talent.”
Hicks said increasing retail wages could put pressure on other local industries that have not moved as quickly to raise wages.
“This is part of what we’re going to continually see as businesses are facing the fact that failure to raise wages is the primary cause of the labor shortage that so many of them are complaining about,” Hicks said.
Amazon also announced Tuesday that its public policy team will begin working to gain Congressional support for an increased federal minimum wage.
This has raised red flags for some in the state, who defend Amazon’s right to increase its own wages, but question the need for a federal wage increase.
Monahan suggested Amazon’s federal advocacy announcement could be an attempt to use federal minimum wage law to compete with other retailers.
Stephanie Wells of the Indiana Manufacturers Association said in a statement to IndyStar that the association does not support an increased federal minimum wage.
“Wages should always reflect true market demand,” Wells said in the statement, “And not a mandate on employers that will hurt the economy.”
Amazon’s wage increase comes as the company is expected to announce the location of its much-anticipated second headquarters, known as HQ2, before the end of the year.
Among the 20 HQ2 finalists are large metropolises like Washington D.C., Los Angeles and New York City, as well as a couple Midwestern cities like Nashville, Columbus, Ohio, and of course, Indianapolis.
In many large cities, the cost of living is too high to make a low minimum wage seem attractive. So the wage increase may provide insight into Amazon’s intentions.
“That part is Amazon getting ready for a huge public relations problem when it announces its new headquarters,” Hicks said of Amazon’s advocacy for a higher federal minimum wage. “If Amazon’s paying $10, $11, $12, $13 an hour, that’s not a living wage in Washington D.C.”
Amazon has not yet said when it will announce its HQ2 location, expected to bring as many as 50,000 jobs, and said simply in it’s press release that the company is seeking a higher federal minimum wage because, “we believe $7.25 is too low.”
Whatever Amazon’s intentions, Abby Gras, a spokesperson for the Indiana Economic Development Corporation, said in an emailed statement the company’s wage increase comes as good news for all Hoosiers employed by Amazon.
“Indiana is the Crossroads of America and as such, a hub for logistics and distribution companies need to reach customers across the world,” Gras said. “We look forward to the industry’s continued growth thanks to the commitment of companies like Amazon.”
Amazon is hiring in its Indiana locations. And, Etches said that although Amazon hasn’t officially begun additional hiring for the holidays, this process will likely begin in a few weeks.