Is Amazon a Corporate Mother Teresa?

Amazon is in many ways a fascinating company and deserves to be defended against most of its mainstream critics. However, it would be simplistic to explain its campaign for a $15 federally-imposed minimum wage by identifying it with a corporate Mother Teresa. Its more obvious reasons to preach for minimum wages are not defendable.

I will not repeat all the arguments against the minimum wage, summarized in a good article by Cato Institute’s Ryan Bourne (“The Case Against a $15 Federal Minimum Wage: Q&A”). My co-blogger David Henderson has also defended many of the standard economic arguments. There exist some disagreements among economists about the employment effect of minimum wages, but they mainly relate to the size and victims of the negative effect (see Bourne’s overview).

One thing is sure: Amazon would benefit from forcing higher costs on its small competitors, including mom-and-pop businesses. A higher minimum wage would have exactly this effect while it would have zero effect on Amazon’s costs. As the company already pays a starting wage equal to the proposed $15 minimum, the latter would be non-binding and irrelevant for the retail behemoth.

One reason why Amazon was able to bid up the wage of its entry-level workforce is that its technology and other capital embedded in its warehouses and distribution network increase the productivity of its employees, which justifies the bidding up from a pure profit-maximizing viewpoint. There is nothing wrong with profits, but there is something wrong wtith using state power to bankrupt one’s competitors. This is what is happening. Jonathan Meer, an economist at A&M University observes:

It’s a lot harder for Joe’s Hardware. We should take note that Amazon—the place with no cashiers—is the one calling for a higher minimum wage.

Other large companies—such as Walmart—have come out in favor of an increase in the federal minimum but not up to $15. In their case, indeed, $15 would be binding for some employees. (Cf. Eric Morath and Heather Haddon, “Many Businesses Support a Minimum-Wage Increase—Just Not Biden’s $15-an-Hour Plan,” Wall Street Journal, March 1, 2021)

Amazon has another reason to be politically correct, that is, to signal its virtue under current faddish and unrealistic ideas. The company can hope to cajole DC’s powerful men to spare it from some regulation that would bite. The systemic effects of such behavior point to crony capitalism and groveling toward the state, which are not good for free enterprise and future prosperity.

It is not clear, to say the least, what kind of acceptable ethics could justify Amazon’s current behavior.

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