If Amazon doesn’t drastically change the way it operates it’s going to run out of people to hire

If Amazon doesn’t drastically change the way it operates it’s going to run out of people to hire

  • A New York Times investigation shows how Amazon’s labor practices are making it harder to grow.
  • The company needs nearly 10 million job applicants a year — over 5% of the entire US workforce.
  • A tight labor market — driven by good federal policy — helps workers demand better conditions.
  • This is an opinion column. The thoughts expressed are those of the author.
  • See more stories on Insider’s business page.

The deeply reported New York Times investigation into Amazon’s workforce issues contains a lot of fascinating data, but one number jumped out at me the most. In 2019, even before the pandemic, the turnover rate for Amazon’s hourly workers was 150%, meaning it needed to hire enough workers to replace that entire workforce every eight months. That’s a staggering amount of hiring and about double the level of hourly-worker turnover that’s typical in the already high-turnover retail industry.

The Times story describes how Amazon intentionally took a churn-and-burn approach in lower-wage employment areas like its warehouse fulfillment centers. The company promotes hourly workers to management much less frequently than Walmart does, and it long had employment policies like buyouts to discourage workers from staying more than a few years. Most stay much less.

The article describes this philosophy as an outgrowth of founder Jeff Bezos’ views that humans are fundamentally lazy (a view that has served the company well when seeking to understand its customers) and that workers grow less engaged in their jobs over time.

This high-turnover staffing model can work for some organizations. Amazon has been a very successful company and, as the story notes, will likely soon be America’s largest employer. Many people really are just looking for a short-term job, not something where they can hope to move up the ladder and become a manager.

But the main message I draw from the story is one it attributes to multiple current and former Amazon executives: however well this model worked in the past, the company is now too large to use it.

If Amazon keeps churning through workers like this — especially with a tight overall labor market — it’s going to run out of people to hire. To keep growing, the company is going to need to keep its employees around longer, and make sure it’s maintaining a positive image with those who might apply to work there.

Amazon needs millions of Americans to apply work there every year

One of the Times’ main sources for its story is Paul Stroup, a data science worker at Amazon who until recently worked on its human resources strategy. He describes the incredible volume of applicants Amazon needs to keep its business running: if you need to fill each hourly job 1.5 times per year, and it takes (as he describes) six or seven applicants to get one filled position, Amazon needs something like 8 to 10 million Americans (a little over 5% of all Americans currently in the workforce) to apply for work at the company each year just to keep all the jobs filled.

Amazon got a surge of applications during the COVID pandemic as other employers shed jobs, but now competition for workers is high and the company’s voracious need to hire is running up against a tighter labor market. And as Stroup also notes that stories of the stress of working at Amazon — and of the insecurity of these jobs, due both to stringent performance evaluation and to the company’s apparent difficulty in properly scaling up its HR bureaucracy — can make that hiring more difficult.

The company, like many others, has been raising pay to induce more people to apply in this worker-friendly job market, which is great. But a good thing about achieving lower turnover is it would mean you don’t have to find so many new workers to hire. This would allow the company to ease off somewhat on the firehose recruiting techniques described in the article as necessary to keep Amazon’s warehouses going.

This is why we want a tight labor market and a pro-worker Federal Reserve

An effort to unionize Amazon workers at a plant in Bessemer, Alabama failed by a wide margin earlier this year. One reason the effort failed is that workers who don’t expect to stay at a workplace long have little reason to invest in a yearslong process to gain more bargaining power within that organization.

A lower-turnover Amazon could become more fertile ground for organizing, but probably only very modestly so — after all, it’s not like Walmart is a hotbed for labor organizing.

And yet what we are seeing in the marketplace right now, with Amazon raising pay and changing at least its tune about its relationship to its workers is a result of the exercise of individual workers’ power. (After declaring its intent to be the “Earth’s best employer” in April, Amazon announced a series of safety and diversity initiatives, along with wage increases.)

The main tool Amazon workers can use to push for positive changes to work at Amazon is the threat to go work somewhere else. And the main tool potential Amazon workers can use to push for positive change at Amazon is not to apply for jobs there in sufficient numbers. Those tools are getting a lot of use lately.

In a seller’s market, prices go up, and we are entering a seller’s market for labor, which means upward pressure on wages and a greater need for employers to be sensitive to their employees’ wishes and desires. This is a good thing and it’s not a result of luck — it’s driven by fiscal and monetary policies set by the federal government that boost demand and cause the economy to run “hot.”

So the most important government policies that will drive working conditions at Amazon over the next year or two won’t be set at the Department of Labor or the Federal Trade Commission or the antitrust division of the Department of Justice. They will be set at the

Federal Reserve
. And over that period, the Fed is going to be under a lot of pressure to reverse those policies, freak out about inflation, raise interest rates, and cool the labor market. It should resist that pressure.

The prospect for more worker-friendly developments inside Amazon if the job market stays tight is just one more reason for Fed officials to stay the course and let workers enjoy their sellers’ market.

https://ragheadnews.com

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