The decision by retail giant Amazon to raise minimum wage for all its workers to $15 an hour can be viewed as a natural reaction to fundamental supply and demand market trends, but also as a social statement about the adverse effects of income inequality in America.
In both contexts, the company’s efforts are laudable and important, especially if they help propel wage growth on a broader scale and serve to solidify the issue of wealth disparity as a primary political and policy issue.
Just as Amazon made its announcement, a coalition of research institutions, including the University of Utah, embarked on a project to assess ways to restore a healthy middle class to American society. That mission represents a top-down approach to addressing a trend that has resulted in lower-income status for more workers and has expanded the ranks of those at risk of falling into a state of intergenerational poverty. Amazon’s initiative is also a bottom-up result of the fundamental market rule that when something is in short supply, its cost will rise.
The economy is nearing full recovery from the 2008 recession, and even though unemployment levels are at 3.7 percent, wage and income growth are not keeping pace. In fact, negative pressures on wages have been in place now for decades. According to the Economic Policy Institute, a bipartisan think tank, middle-class families had nearly $18,000 less in annual income, adjusted for inflation, in 2007 than they did in 1979. The institute blames that on policies and business practices that have served the interests of employers over employees, and it has launched an initiative called Raising America’s Pay to make wage growth “an urgent national policy priority.”
In a similar vein, researchers from the University of Utah will work with researchers from three other universities to brainstorm ways to imbue economic policy with an ethic of promoting greater educational and employment opportunities for those who would populate a restored middle class.
Up until now, discussion about how government policy can address the problem of wealth distribution has been dominated by arguments over raising the federal minimum wage, now at $7.25 a hour, where it’s been since 2009. But Amazon’s action suggests that wages may rise as a result of natural market pressures, minus any dictates from Washington. While we would prefer solutions to arise from the marketplace, it’s important to recognize that having allowed private interests to wield primary control over the distribution of wealth has led to endemic social and political disruption.
Due to the sheer scope of its influence, Amazon’s wage decision might quickly prompt other companies to consider the benefits of across-the-board wage increases. For companies struggling to staff a workforce, raising pay and adding to benefit packages carry practical benefits, as Amazon has pointed out.
But there is also ideological symbolism in the company’s action. It could be seen as deference to the concern that income inequality is a growing threat to general prosperity and a recognition that it is not healthy for society when the fruits of productivity flow disproportionately upward.