Jeff Bezos's Critics Throw Around 'Cronyism' Irresponsibly

Jeff Bezos's Critics Throw Around 'Cronyism' Irresponsibly
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As is well-known now, last week Amazon announced a $15 companywide wage minimum in concert with a plea from CEO Jeff Bezos for a federally-mandated $15 minimum wage. The Bernie Sanders crowd naturally cheered the Seattle internet retailer’s alleged enlightenment after having threatened it with legislation, while a typical op-ed from the right pointed to a “scramble for workers in our booming economy” as the source of the wage boost. Supposedly it’s “economic competition, not political pressure, that’s got wages rising at Amazon.”

In truth, Amazon has always paid well; albeit differently than others. If it truly short-changed its employees, then it’s certainly true that it wouldn’t have very many. Let alone good ones. Left out of most of the hysterical op-eds about Amazon’s supposedly cruel pay structure is that the company has always paid in company shares at all levels. Indeed, even warehouse and hourly workers receive two shares upon hiring, plus an additional share each year. As it raises wages Amazon will phase out the stock-grant program while phasing in a stock-purchase plan. One can only guess that the new plan will be generous. Successful companies pay well. Period. But the story doesn’t end there.

Some Amazon critics are suggesting that Jeff Bezos's is talking up a federally-imposed $15 minimum wage as a way to squeeze the competition. As one opinion piece laughably put it:

“Amazon's goal is to automate as much of its business as possible. That's why its warehouses are filled with robots and it's rolling out checkout-free stores. Even as it expands its physical presence across the country, Amazon is relentlessly engineering people out of its operations.

Raising the minimum wage, as Bezos is advocating, sounds like a pro-worker move, but Amazon is really trying to put competitors like Walmart, Target and other traditional retailers in a bind. These businesses rely much more heavily on physical stores employing, you guessed it, people earning the minimum wage.”

For one, it’s debatable why Bezos is proposing what’s he’s proposing. Arguably a bigger factor in his call for a $15 wage is that he saw what happened to Bill Gates and Microsoft in the 1990s when the Justice Department brought the force of the federal government upon it. Presumably fearful of the Washington mob, and the time that would be wasted fighting it in court, Bezos is talking up politician-appeasing wage minimums as a way of avoiding Gates’s fate.

Regarding the impact of a $15 federal minimum wage, it’s already known. Stated simply, it’s “settled science” that wage floors can harm workers not worth the floor. Still, Bezos surely knows what’s also true: whenever minimum wages are mindlessly implemented, the number of workers not earning the minimum grows as exemptions are carved out. Government decrees can’t alter reality. The latter is a quick way of saying Bezos is probably too smart to waste his time on the “crony” idea that Washington would abide his wage musings in a way that would take out his competition.

As for the notion that Bezos is calling for wage floors given his singular desire to automate, that’s not serious. Not only is Amazon rapidly expanding in the retail space with its bookstores and grocery stores (Whole Foods is rather labor intensive) as is, the paradoxical reality is that a minimum wage of zero (the proper one) would arguably exist as just as much of an incentive to automate as $15 hourly pay. It would given the basic truth that low-wage workers are incredibly expensive. No business actively seeks to grow on the backs of the poorly paid. They’re poorly compensated for many reasons; most of them having to do with low productivity and a tendency to quit. Successful businesses always and everywhere aim for higher worker wages for what they signal about workforce quality. Automation will boost productivity at Amazon through relentless automation, and with it the company’s ability to hire more and better workers at ever higher pay.

What’s true for Amazon will also be true for Walmart, Target and other traditional retailers. Not only do they not need a law requiring them to pay really well, they similarly don’t need one to force automation. Automation is its own reward, and as history makes abundantly clear, corporations that automate successfully ultimately employ human capital at much greater numbers and much more skillfully. Amazon et al will automate not to "engineer people" out of its operations, but will instead do so in order to attract the best and brightest.

So while it’s accepted that the minimum wage is a childish idea on its very best day, the right’s obsession with it has caused some to pen some opinion pieces that are even more childish. Bezos isn’t a “crony” because he wants to be, but probably feels he must make some rhetorical concessions to keep politicians off of his back. As for the notion that he would think federal wage laws could vanquish his competition, that’s just not serious. Readers can rest assured that Bezos’s competition wants automation as much or more than he does, and that they’ll pursue it with or without wage floors that will never alter reality. 

John Tamny is a speechwriter and writer of opinion pieces for clients, he's editor of RealClearMarkets, Director of the Center for Economic Freedom at FreedomWorks, and a senior economic adviser to Toreador Research and Trading (www.trtadvisors.com). His new book is The End of Work, about the exciting explosion of remunerative jobs that don't feel at all like work.  He's also the author of Who Needs the Fed? and Popular Economics. He can be reached at jtamny@realclearmarkets.com.  

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