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Abu Dhabi, UAEThursday 13 December 2018

Amazon pay for workers hardly delivers

Some staff are borderline impoverished, and the only way they make ends meet is by turning to government subsidies - but there is a reason for that

Jeff Bezos, CEO of Amazon. And the richest person in the world. Rex Curry/Reuters
Jeff Bezos, CEO of Amazon. And the richest person in the world. Rex Curry/Reuters

We have just learned that the median salary of employees at Amazon.com is $28,446, excluding its chief executive and founder, Jeff Bezos.

That pitiful number raises an intriguing question: Is Amazon a high-paying tech company or a low-wage retailer?

“Both” is the obvious answer, but to this Amazon aficionado that answer is incomplete.

The pay figure, which was disclosed for the first time in Amazon’s annual proxy statement, reflects the large number of low-paid retail and warehouse employees who work for the company. The proxy also disclosed that Mr Bezos was paid $1.68 million, making the ratio of what he was paid and the median pay 59-to-1.

What does that ratio tell us? Really, not very much. Mr Bezos, according to the proxy, had a 2017 compensation of $81,840 in salary. The rest was in the form of perks, much of it for "security arrangements" and travel. But Mr Bezos's pay, which seems rather modest when stacked up against the obscene earnings of many other corporate chiefs, is almost irrelevant. That's because Mr Bezos is the world’s wealthiest person, with a fortune now estimated at $129 billion (depending upon what Amazon stock is trading at this moment).

So that ratio, although accurate, means next to nothing. If you really want to understand the gap between CEO and worker, consider instead the ratio between the net worth of the boss and his employees: I did, and it's beyond measure. Seriously, 100 billion-to-1 is not an outlandish estimate.

Here's how I came up with that ratio. Let's begin with the very realistic assumption that the median net worth of all of those thousands of Amazon warehouse serfs is - like that of the rest of hand-to-mouth America - somewhere between negative and a little more than zero. As Gizmodo recently reported, Amazon’s warehouse workers are among the top 20 recipients of food stamps. These people are borderline impoverished, and the only way they make ends meet is by turning to government subsidies.

How did this happen?

The main culprit, of course, is market forces: stagnant wages; globalisation; the China shock; automation and the rise of software. These created conditions that Mr Bezos skillfully took advantage of - and not just in one market, but many.

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The company’s expansion into so many corners of the economy offers a partial explanation as well. Some of the company's business lines are clearly pure tech: its Amazon Web Services cloud business; the streaming audio, video and content services; the devices group creating gadgets like Echo, Firestick and Kindle; its platform to allow third parties to sell goods and now services to consumers, with Amazon taking a slice off the top. All of these services leverage the technology infrastructure Bezos & Co have built to service online consumers.

But the company’s first and still dominant business is selling physical products and then shipping them to consumers. Although this business relies critically on technology and logistics, it wouldn't exist without a huge physical footprint made up of warehouses and distribution centres much like those of any large retailer. The company's presence in the brick-and-mortar retail industry only got bigger when it bought Whole Foods Market last year for $13.7bn.

To operate in what I like to call the meatspace of warehouses and supermarkets and shipping and physical stores requires hundreds of thousands of employees. These are not highly paid coders, engineers and product managers, but stock clerks and cashiers and drivers. Last year, Amazon passed 500,000 employees (it now has about 566,000, according to data compiled by Bloomberg). Compare that with Alphabet's (Google) 80,000 as of the end of 2017, Apple.'s 100,000 and Facebook's 25,000.

The pay scale is vastly different as well, mainly because of the kind of employees each company has.

Apple’s average salary, according to data research firm Paysa, was $100,733. That includes lots of retail workers at Apple’s stores (although obviously not the low-paid workers at contractors like Taiwan-based FoxConn, which do a lot of the assembly work on Apple's products). At Google, which has no retail workers, the average employee salary is $190,854. At Facebook the average is $203,894.

As we can see, Amazon is a tech outlier. Its investors have given it a pass for generating little or no net income during much of the 21 years since it went public. The same isn't true of its big tech peers, all of which are enormously profitable.

I wonder how much longer its customers like me will continue to look the other way.

Bloomberg