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 with 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.
READER COMMENTS
Craig
Mar 3 2021 at 11:10am
Personally I think Amazon is just virtue signalling. Let’s also take AOC’s latest tweet, “$15/hr is a deep compromise – a big one, considering the phase in.” The point of course is that if your company’s minimum wage is $15/hr and the government raises the minimum wage to $15/hr that is likely not going to be very comforting because as AOC’s tweet suggests, the signpost is for more. And they’re already making the case for $20, $22, $24 and $25. I have seen all four bantered about. A $15/hr MW isn’t just a threat to those currently paying less than $15/hr
“Amazon would benefit from forcing higher costs on its small competitors, including mom-and-pop businesses.”
“Amazon would benefit from forcing higher costs on its small competitors, including mom-and-pop businesses.”
I know that this is somehow taken as Gospel. I am not even saying its not true, I do QUESTION that because honestly? If I wanted to blow Amazon out of the water I’d want HIGHER minimum wages because their net margin is absolute garbage. They’re the ones who, in actuality, cannot sustain higher opex. People THINK they’re big and efficient, they’re NOT. My opex as % of sales was ALWAYS FAR LOWER than Amazons.
Pierre Lemieux
Mar 3 2021 at 11:29am
Craig: I fear that businessmen are sort of autistic. At any rate, they are not generally known for understanding the role of ideas and theories. As Samuel Brittan put it charitably in his 1973 Capitalism and the Permissive Society,
Pierre Lemieux
Mar 3 2021 at 11:32am
You have a good point: Amazon does not understand how inept it is at sycophancy. AOC-types will never have enough.
Craig
Mar 3 2021 at 11:37am
Well, they are being played for ‘useful idiots’
Craig
Mar 3 2021 at 11:36am
I do think a higher MW will give Amazon a relative advantage over big box retailers like Walmart.
Phil H
Mar 3 2021 at 7:11pm
“It is not clear, to say the least, what kind of acceptable ethics could justify Amazon’s current behavior.”
The ethic of freedom. Amazon is free to do whatever it wants. And if it’s behaviour becomes a problem, the government is free to do whatever it wants to Amazon, because Amazon is not a person. No one should be looking to a company for ethical conduct – they’re not set up for it. And they are not a proper object of our ethical concern, either.
Mark Z
Mar 3 2021 at 7:40pm
First of all, if the government is free to do what it wants to Amazon, then Amazon is not free to do whatever it wants. Second, Amazon is a group of people, so there’s no reason why personal freedoms should be denied it. If two people decide to incorporate, why is it any less a violation of their rights to bar them from, say, publicly expressing an opinion as a joint entity, or transacting with others, than to do so do either of them individually? Finally, what we should be free to do legally and what is ethical are not necessarily identical sets. I’m not convinced you’re ready to abdicate ethical concern for all activity that is legal (even that you agree should be legal).
Phil H
Mar 4 2021 at 2:59am
“If two people decide to incorporate, why is it any less a violation of their rights to bar them from, say, publicly expressing an opinion as a joint entity, or transacting with others, than to do so do either of them individually?”
Because history, the law, and common sense all say so.
I mean… You can argue that any group ought to have rights, if you want. But it’s an argument that has yet to be made. The things that have rights in this world are people. Individuals. That’s enshrined in all the human rights documents in the world. And past experience has proved this to be a very sensible way of going about things (for example, if you give rights to families, you tend to get lots of intra-family abuse of individuals).
Companies aren’t people, can’t be people. They can be legal persons, but that is a legal fiction, created by a community (government) for the purpose of better serving people. It’s not an underlying reality.
Craig
Mar 4 2021 at 8:05am
“The things that have rights in this world are people. Individuals.”
And those individual rights include the fundamental right of association a subset of which is the fundamental right of contract.
If I say ‘corporations are people’ this is typically considered abhorrent to most people because you are a person and it is self-evident that Exxon-Mobil isn’t a person, right?
But ‘corporations are people’ is a shortcut and its a shame that the shortcut has caused considerable confusion. The actual doctrine is that the corporation is the ‘legal fiction of separate corporate personhood’
Its a fiction based on practicality.
Phil H
Mar 5 2021 at 1:56am
“Its a fiction based on practicality.”
Absolutely. And I note that companies are crucial to the functioning of our economy, and I’m very glad they exist.
But it is a fundamental mistake to think that they are moral creatures. They are legal fictions created within a specific legal framework. And they exist only to make money. It is a category mistake to ask whether the actions of a company are moral or not. When a landslide kills someone, you don’t say, “The mud is evil.” Nor should you make that kind of judgment about companies.
For non-profits the story might be slightly different. I don’t really know how non-profs work, so I’m not sure. But I suspect they’re not that different.
Jon Murphy
Mar 4 2021 at 8:50am
Phil-
There’s a problem with your weird totalitarian-liberal view of rights espoused here, namely that government itself is an organization of people. Therefore, it does not have rights, and thus cannot do whatever it wants.
In other words, government serves no purpose in your world according to your definition.
Phil H
Mar 5 2021 at 1:48am
“There’s a problem with your weird totalitarian-liberal view of rights espoused here, namely that government itself is an organization of people.”
There is a problem, I absolutely agree. This whole question is vexed and difficult. My view is not “weird,” because it’s the standard liberal democracy viewpoint that currently holds sway in the world – but I agree that it’s not exactly theoretically straightforward. The only error you make is that you fondly imagine your ethics could lead to the foundation of a state with a consistent and rigorous ethical underpinning. In fact, if and when someone does try to set up a proper libertarian state, they will find that they run into the same morass of ethical problems.
To address your specific question: government is understood not to be “an” organization of “people”, but to be *the* organization of *all the people*. Because it is in theory supposed to represent everyone, it is handled a little differently. (NB. this doesn’t mean it has to represent “the will of the people”. It can be a universal coordination/dispute resolution mechanism, so long as it has, in theory, universal buy-in. Obviously I know how problematic this is in practice, but this is how the theory of the state works.)
Jon Murphy
Mar 5 2021 at 8:48am
No. No it is not. Outside hard-core socialism, I am unaware of a single person who argues that people lose rights once they are in groups. Indeed it is usually the opposite (that groups cannot possess more rights than their members). The whole point of the “legal fiction” is to codify and protect the rights of individuals to organize into groups.
Pierre Lemieux
Mar 4 2021 at 11:08am
Phil: Rights are either rights to do things or they are nothing. Rights to do things include the right to marry whom you want (and who wants to marry you) and to form other sorts of voluntary associations.
Phil H
Mar 5 2021 at 1:50am
The right to form voluntary organizations, sure. But things like marriages and companies are much more than that. They have legal standing, and that alters the way they work. You can live with any woman you like; marrying her legally changes the picture. You can work with anyone you want to; forming a company with them creates a set of legal rights and obligations. It’s those sets of legal rights and obligations that are at the discretion of the state.
Pierre Lemieux
Mar 5 2021 at 12:00pm
Phil H wrote:
If I understand him well, he is basically defending legal positivism, which claims that there is no law that is not created by the state. Opposite to this view is liberal legal theory, according to which “the contractual parties create their own law” (to quote Georges Ripert). (Note that, in another stage of his life, Ripert was tempted to drift from the strict liberal view of government, with strange consequences.)
One of the (many) implications of Phil’s theory as explained above is that the prohibition of interracial marriages would be totally legitimate–as it was held to be in the United States until Love vs. Virginia (1967). What about the man and women of different races who want to enter into a marriage contract? That’s the crucial question in a liberal perspective.
robc
Mar 4 2021 at 3:45pm
community!=government
MarkW
Mar 4 2021 at 5:37pm
People don’t lose their rights when they join together and decide to form a corporation — especially when forming a (non-profit) organization is about the ONLY way people can legally pool and spend money on political speech without running afoul of campaign laws.
Remember that Citizens United is a non-profit corporation. Why on earth would anybody think it should it have fewer free speech rights than the for-profit New York Times (other than the fact that it was on the wrong side).
Phil H
Mar 5 2021 at 2:04am
“People don’t lose their rights when they join together and decide to form a corporation”
That’s correct. But nor is the corporation endowed with rights because it’s made up of people. If I form a voluntary association with you, my property does not suddenly become the association’s property; my rights do not suddenly become the association’s rights. A corporation is a *new thing*, and what rights it has or does not have depend on the legal framework within which it exists.
To use the Citizens United example, why did all those citizens form CU in the first place? If they all think the same thing, and wish to say so, why not just pool their money and buy ad space together? The answer is because they need a formal framework that can function as a single actor to minimize disputes and protect all participants from fraud. Which they’re welcome to have – but such frameworks, just as part of the way they operate – are also subject to certain legal restrictions that don’t apply to individuals.
MarkW
Mar 5 2021 at 7:01am
If they all think the same thing, and wish to say so, why not just pool their money and buy ad space together?
Good question! A single wealthy person can do exactly that — simply spend his or her money to buy all the political advertising they like. But for like-minded groups of non-billionaires, the government requires them to have a formal structure, to file financial reports, etc. They can’t just casually throw their money into a pot (and ask others to contribute as well) and then spend the money however they see fit without financial reporting and records and tax returns and so on. Hell, when parents at my kids’ elementary school wanted to fund enrichment activities through donations, we had to form a 501(c) non-profit corporation to do it.
For advocacy groups, forming a non-profit is not a convenience, it is a necessity imposed by a thicket of laws and regulations. It is hardly reasonable for government to force such groups into corporate form and then insist that because they’re now incorporated, their free-speech rights are curtailed.
The Citizens United decision was so obviously right that it still stuns me anybody could think otherwise. Recall that what was at issue was that Citizens United wanted to publish a film called Hillary: The Movie. During arguments, one of the justices asked that if the government could prevent that, could it not likewise prevent the same content being published in book form. The answer was — well, yes, theoretically it could, but we wouldn’t do that. IOW, the government was claiming that it had the power to prevent the publication of political books during the period leading up to an election. Holy crap! Stop and let that sink in for a minute. (And no, there’s no bright line between films and books — which is especially obvious now that both are now primarily distributed online and for home consumption).
Mark Z
Mar 5 2021 at 1:03pm
“Because history, the law, and common sense all say so.”
That’s a non-answer.
The rights of groups are the rights of individuals. Restricting the right of voluntary collective action restricts the right of individuals to participate in groups. You can’t restrict the right of teams to play soccer without the restricting the right of individuals to play soccer. ‘Group rights’ as I’m describing them, don’t at all contradict individual rights, inasmuch as group-membership is voluntary (which for corporations, clubs, even families as far as adults are concerned) are.
And groups are not legal fictions. A cooperative enterprise doesn’t cease to exist because the state doesn’t recognize it.
Jon Murphy
Mar 3 2021 at 7:43pm
That’s problematic (and, in the US, unconstitutional reasoning). It would imply that the government could do whatever it wants to publishers and the press because they are not people. Or whatever they want to schools and universities because they are not people. Or whatever they want to churches because churches are not people. Or whatever they want to any group because a group is not people.
Indeed, all a government would need to do is define a certain group as “not people” and then there is anything they could do. That seems to me to be a horrible world
Phil H
Mar 4 2021 at 2:54am
“It would imply that the government could do whatever it wants to publishers and the press because they are not people.”
It can!
“Indeed, all a government would need to do is define a certain group as “not people” and then there is anything they could do. That seems to me to be a horrible world”
It is! And yet it is the world we live in.
The US government does not do certain things to the press because the government chooses to – indeed, has bound itself not to do those things in the constitution. That is government behaviour. There is nothing magic about the press that means governments can’t interfere in them (I live in China, where…). There are only better governments, which choose not to interfere, and worse governments, which make a different choice.
Jon Murphy
Mar 4 2021 at 7:44am
I’m confused. Are you saying that a government merely *can* do anything it wants, regardless of ethical, legal, or practical reasons? In the same way I *can* rob a bank?
Or are you saying as a matter of fact that a government can do anything it wants as a legitimate use of power? In the same way I can drive a car.
If the former, then that’s true but trivial.
If the latter, then that’s objectively false, at least in a non-totalitarian country.
Pierre Lemieux
Mar 4 2021 at 11:05am
If the latter, it seems as if Phil H is defending Hobbes’s Leviathan.
Phil H
Mar 5 2021 at 1:39am
I’m saying that in any mainstream ethical theory, individuals have some rights (whether expressed using the language of rights or otherwise) that constrain the actions of governments (understood to be either a coordinating mechanism or as an expression of the popular will, whatever that might be). So, for example, (pretty much) everyone accepts that criminal law may exist, and that governments may take action against individuals to uphold that law. But the rights of individuals (e.g. to a fair trial) severely constrain the ways in which governments may uphold the law. I’m making the normative claim that any government which failed to respect (a fairly fuzzy set of) individual rights would be universally recognized as illegitimate.
I also make a second descriptive and normative claim that there are no other sets of rights like that. If a government denied the rights of companies to exist, for example, that would be viewed as odd but legitimate; and it should be viewed as odd but legitimate. A country that bans organized religions similarly both is and should be regarded as legitimate.
I think people are special and unique. I’m not convinced that other than the individual is a proper object of ethical interest or can be an ethical subject. And this is, I remind you, very much the mainstream view! This is what “human rights” means. Human rights, the rights of individual humans, are special and fundamental in a way that is not true of any other thing, including organizations made up of people.
Jon Murphy
Mar 5 2021 at 8:52am
Then a government cannot do whatever it wants.
No. At least not in the liberal world, governments cannot arbitrarily deny the right of companies to exist. Indeed, the 5th Amendment of the Constitution helps protect against that, as does the 1st.
robc
Mar 5 2021 at 10:58am
That is clearly illegitimate. I don’t know how you can possibly think otherwise. If the individual has freedom of religion, then they have to be able to have organized services. It is fundamental to most, if not all, religions.
And following from that, banning non-religious organizations follows as also illegitimate.
Jens
Mar 5 2021 at 4:55am
As a footnote only: In Germany, for example, (domestic) companies also have constitutional rights. These are not “derived” because companies are “groups of natural persons”, but quite directly (Article 19.3 of the Basic Law). The legal term “legal person”( “juristische Person”), which comes from civil law, is used for the definition. There is an exceptional clause to the effect that it is only about basic rights, which by their nature can also be applied to legal persons (“life and physical integrity” makes no sense in companies, for example).
MarkW
Mar 4 2021 at 6:42am
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
Well, yes, and one main ways its embedded technology produces productivity is by working its employees hard. There are no slack periods. They become cogs in an efficient machine.
Part of what Joe’s Hardware offers employees that Amazon hardware warehouse can’t is far more pleasant working conditions. Somebody working at the hardware can socialize with customers and other employees, can help customers solve problems, has some slack time, develops and uses knowledge and skills, and does not need to walk miles a day or spend every moment mind-numbingly packing and taping boxes. Would I rather work at an Amazon warehouse for $15 or Joes for $11? Unless I really need the money, I’m taking the Joe’s job every time. What $15/hr does is to hurt Amazon’s competitors who offer lower wages but much more congenial work.
Jon Murphy
Mar 4 2021 at 8:52am
Mark-
You hit on a key and important point: non-monetary benefits matter a lot. Joe’s Hardware cannot compete on price with Amazon, but it can compete in other ways. One of those ways is knowing what its employees value and giving it to them. The unfortunate result of minimum wage (and many other regulations) is that it shuts down that avenue of competition.
Pierre Lemieux
Mar 4 2021 at 11:01am
Indeed. Important point.
Pierre Lemieux
Mar 4 2021 at 11:03am
Mark W: This is certainly part of the reason why Amazon had to bid up wages to attract employees. Nothing wrong with that, as Jon suggests.
Thomas Hutcheson
Mar 4 2021 at 6:52am
If the opponents’ of minimum wages concern is the workers who will become unemployed and the businesses that will fail or be disadvantaged vis a vis Amazon, why do they not advocate a higher EITC instead?
If advocacy of a policy is profitable to the business although bad for the economy (increases deadweight losses), do the firm’s managers not have an obligation to its stockholders to advocate such a policy anyway?
That would explain why Amazon would advocate for a minimum wage and not a higher EITC. What is the explanation for that position by others?
Alan Goldhammer
Mar 4 2021 at 9:56am
If Amazon is a corporate Mother Theresa why are they playing major league hardball against the effort to unionize the Bessemer Alabama warehouse facility? Just my opinion of course, but this Federal effort on the minimum wage front (as well as what happens with a lot of workplace safety regulations) is done because unions have effectively been neutered.
It’s highly doubtful that any readers of this blog currently work in large warehouses but they might have done manual labor of some sort while in college (I worked at both a restaurant and commercial laundry during summers, both minimum wage jobs and still have my union cards). Do you think those employers were benevolent?
Pierre Lemieux
Mar 4 2021 at 11:00am
Alan: Of course not, but don’t forget that employees are not benevolent toward their employees either: it’s an exchange. Don’t forget either that unions are not benevolent against their non-members either and, when they pass a certain number, they are more benevolent toward their executives than toward their members (there is a collective action problem there). Both a corporation and a union is a voluntary association; the problems occur when the government grants anticompetitive privileges to one or the other.
robc
Mar 5 2021 at 11:04am
I think unions neutered themselves.
In some sort of perfect world, unions would provide so much benefit that employees would want to join and employers would want to contract with unions.
Unions aren’t providing the benefits to the companies that would make that happen.
Floccina
Mar 4 2021 at 11:08am
I do not think that is close enough to 100% predictable. For example maybe Amazon workers work harder than other retail workers and so Amazon will need to raise wages to keep workers maybe for many $15 is enough and so would prefer that to working harder even at a much higher wage.
They may be thinking this:
Nevertheless a minimum wage seems to me to be bad policy. It tries to bully a subset of the population (business owners that hire low wage workers in the short sun and consumers who but their products in long run) to provide the lowest earners and can do collateral damage to the least valuable workers.
Pierre Lemieux
Mar 6 2021 at 12:20pm
Floccina: If I understand well your first argument, you are saying that if all Amazon competitors have to pay $15 an hour, then Amazon will have to raise its starting wage above that in order to continue attracting the same number of work horses. That’s an interesting argument but it forgets a crucial fact: among Amazon’s competitors, the minimum wage will have reduced the quantity demanded of labor so there won’t be opportunities there for Amazon workers who would like to have both $15 and a relax hour. On the contrary, many of the newly unemployed will be knocking on Amazon’s door for work, allowing Amazon to pay less (that it would otherwise have to).
On your second argument, employers would not vote for an equal increase in the price of labor more than they would vote for an increase in the price of office space or steel or any other input. And even if, caught in mob hysteria, they would vote for that, who (among economists) cares? We are interested in consumer welfare.
Anders Jönsson
Mar 5 2021 at 2:04pm
Although, having read Hitchens on Mother Teresa, the comparison might be misguided, the bigger point is this: Amazon is behaving rationally from a shareholder value perspective alone.
First of all, Amazon needs good government relations. It operates in a range of activities with unclear, often outdated rules of the game, and constantly risks falling foul of competition law depending on how the relevant markets are defined. As with other tech and platform companies, it has a massive government relations division.
Second, Amazon has the scale and capital needed easily to make workers marginal productivity exceed 15 USD. So no downside: and the upside, of course, is to harm its less efficient de facto competitors.
Third, Amazon needs talent – badly. With starting salaries for computer engineers at times exceeding 200k, it needs to appeal to young graduates with strong concerns and commitments to what we can broadly term social justice. Working for a company that is seen to be fair and to be doing good by those narrow standards is attractive – and it makes perfect sense for Amazon to spruce up their image through more than high salaries.
Returning to Mother Theresa: Hitchens slammed her for her single-mindedness, her obsession with image, her embrace of unnecessary suffering (end stage cancer patients lined up on stretchers with no pain relief), and her willingness to engage with the likes of Duvalier. A cynic might, after all, see parallels with Amazons course of action. Or less cynically: Amazon is simply being the rational and ruthless capitalist actor its shareholders expect it to be.
Pierre Lemieux
Mar 6 2021 at 12:41pm
Anders: Three points. First, the beginning of your reply summarizes my post well. Are you trying to steal my job? Second, your third point is very interesting: signaling social-justice virtue is a way for Amazon to remunerate its employees and pay them less in hard-money wages! Third, on your last point, I just assumed, for the purpose of this post, that Mother Teresa was a pure altruist (I haven’t read Hitchens). I have always doubted that assumption: I read something from her saying that she immensely enjoyed what she was doing (“pure joy” was her expression if I remember correctly): serving others was her way to have fun in life so she was in fact a privileged individual able to get utility cheaply!
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