Is Amazon’s holiday hiring foreshadowing the future?
Author: Samantha Summers
Publication Date: November 2018
Newspaper: Reno Gazette Journal
Topics: Minimum Wage
This holiday season, Santa’s little helpers might come with a battery.
While retailers across the country are beefing up seasonal hires to prepare for the holiday shopping apocalypse, Amazon is taking a different tack: hiring 20,000 fewer seasonal hires from previous years and increasing workplace automation.
It may be a frightening preview of holidays to come: As mandated minimum wages across the country continue to rise, retailers are forced to pursue automated alternatives or fewer hires per store.
According to a survey by consultant Korn Ferry, nearly 67 percent of retail respondents said that minimum wage increases have made hiring seasonal staff economically challenging this year. It’s not that retailers aren’t hiring; rather, they’re moving towards business models that require fewer employees than before. For instance, the Wall Street Journal reported this fall that Macy’s has cut 52,000 employees in the past decade — while operating “roughly the same number of stores.”
Similar (or steeper) declines are occurring at other large retailers including Kohl’s, Nordstrom, Target and J.C. Penney. The decline of human personnel on store floors has been replaced by the rise of robotic technology.
Gap has begun using automated arms and other types of artificial intelligence to sort clothing; its VP of global logistics fulfillment explained equivalency of one machine that “would be four people working across four shifts.” Walmart is experimenting with robots that are able to roam store aisles to complete inventory checks and even assist in helping customers find products throughout the store.
Employers aren’t doing this because they’re evil; they’re doing it because customers are price-sensitive. These robots can on average double the speed of what a normal human can do while protecting customers against rising prices associated with increased labor costs. Reducing the number of employees in the store allows retailers to promote and pay higher starting wages to those that remain. Deutsche Bank predicted that Amazon would save roughly $880 million from implementing robots.
But what happens to the less-skilled employees who used to fill those jobs? Many are left without a job opportunity. Researchers David Neumark and Grace Lordan found that higher minimum wages have decreased employment in jobs that are easy to automate. In other words, employers are replacing real employees with robots — and younger employees are among the most likely to be affected.
The loss of seasonal job opportunities, which might be the first job for many, can have negative effects later on. Research from economists Christopher Ruhm and Charles Baum from University of Virginia and Middle Tennessee State University found that teenagers who had prior part-time job experience have roughly 7 percent higher earnings later on in life compared to their peers who lacked early work exposure.
Amazon’s decline in seasonal hiring should come as no surprise. There are trade-offs to most any economic pressures to increase operating costs. As minimum wage mandates continue to rise across the country, more retailers will be opting to implement robots over human capital. When lawmakers push for more wage mandates, they should consider the hidden costs for those who need a job more than they need a raise.