Amazon.com Inc. (AMZN - Free Report) recently announced its plans to increase the minimum wage for U.S. workers to $15 an hour, effective next month.
The move will benefit employees with higher wages, right before the holiday season. Encouragingly, the raised wages will also benefit employees that are usually hired during the holiday season.
Amazon stated that the wage hike should benefit more than 350,000 employees across full-time, part-time and seasonal positions.
Impact of Wage hike
Amazon has been criticized since long for its treatment of hourly employees, especially in its fulfillment centers. The company has been facing strikes by employees, demanding higher pay.
Therefore, a wage hike should definitely give a morale boost to employees, as it heads toward the busy holiday shopping season. The move will keep the workers satisfied and also help improve customer service, thereby encouraging shoppers to spend more.
On the other hand, the wage hike could increase the expense burden on the retailer, impacting its bottom-line growth. However, with increasing focus on automating its activities in almost all fields, including fulfillment centers, the company could somewhat spend less on wages by hiring only a few people.
Investment in Workforce
Labor market conditions in the United States have been steadily improving, with declining unemployment rates and frequent wage hikes by firms across different industries.
The current wage hike by Amazon is expected to force other companies like Alphabet (GOOGL - Free Report) ,Target Corporation (TGT - Free Report) , Wal-Mart Stores, Inc. (WMT - Free Report) , among others, to raise their minimum pay in order to remain competitive, especially during the ongoing holiday season hiring.
The increase in minimum wages will help the company to retain efficient employees and attract more workers, as the company progresses with its expansion initiatives. Moreover, Amazon has always remained committed toward investing in its workforce. In addition to a healthy pay, the company provides a number of other healthcare and full-time benefits such as offering programs like Career Choice to help employees pursue courses related to fields that are in demand.
Share Price Performance
Amazon is one of the largest online retailers in the world, with extensive operations in North America. Although Amazon’s primary product line was of books, it has diversified into a host of other product categories and now wants to have a global presence.
The company’s share price was $71.68 as of Oct 2, 2018, up 0.6% from a year ago. Shares of Amazon have steadily trended upward on a year-to-date basis. The stock has returned 68.6% compared with the industry’s growth of 31.7% during the said period.
The outperformance can be attributed to the company’s growing retail business, solid loyalty system in Prime, Amazon Web Services (AWS) and Internet of Things (IoT).
Currently, Amazon carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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