Oct 2, 2018

The economic side effects of Amazon's wage hike

An Amazon fulfillment center in Kent, Washington. Photo: Grant Hindsley/AFP/Getty Images

Amazon raising wages to $15 an hour from as little as $10 an hour should win it political points and attract difficult-to-find workers.

Yes, but: CEO Jeff Bezos is calling for other companies to follow in Amazon's footsteps, as he said in Tuesday's announcement, and widespread pay rises could cause companies to raise prices, spurring inflation.

Amazon said the pay raises would benefit more than 350,000 workers, which is likely to cut into its thin profit margins.

  • Amazon is very conscious of keeping prices low to attract customers, Aparna Mathur, American Enterprise Institute's resident scholar in economic policy studies, tells Axios. "With the competition that Amazon faces I don't think they will get away with charging higher prices to consumers," Mathur said.

Economists have blamed low inflation on Amazon's cheap products.

  • Walmart, Target and Costco have upped pay for its workers in recent months, but their employees' minimum wages are still below Amazon's planned $15 an hour.

Reacting to the news on Tuesday, White House chief economic adviser Larry Kudlow told reporters that Amazon's "actions are not inflationary," while Federal Reserve Chairman Jerome Powell said "higher wage growth alone need not be inflationary," in a speech unrelated to Amazon on Tuesday.

Wages are finally starting to pick up steam, but inflation has remained below the Fed's 2% target. Powell said on Tuesday the central bank is "ready to act with authority" if anything changes on that front.

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U.S. coronavirus updates: Death toll surpasses 14,800

Data: The Center for Systems Science and Engineering at Johns Hopkins; Map: Andrew Witherspoon/Axios

The novel coronavirus has now killed more than 2,000 people for the second day in a row, and it's infected more than 432,000 others, per Johns Hopkins data.

Where it stands: More than 14,800 people have died of COVID-19 in the U.S. — including over 4,500 in New York. The state's death toll surged to its highest one-day total on Wednesday — beating the previous day's record. 779 people died in New York in 24 hours. N.Y. has reported more cases than the most-affected countries in Europe.

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Zoom in: The update comes as ministers meet to discuss whether to extend the United Kingdom's lockdown and after the country's health officials reported Wednesday the highest daily rise in COVID-19 deaths — 938, taking the total to over 7,300. London Mayor said Wednesday the U.K. is "nowhere near lifting the lockdown," with the virus not expected to peak there until next week.

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Coronavirus dashboard

Illustration: Aïda Amer/Axios

  1. Global: Total confirmed cases as of 3 a.m. ET: 1,484,811 — Total deaths: 88,538 — Total recoveries: 329,876Map.
  2. U.S.: Total confirmed cases as of 3 a.m. ET: 432,132 — Total deaths: 14,817 — Total recoveries: 23,906Map.
  3. Federal government latest: Top Trump administration officials had been developing a plan to give cloth masks to huge numbers of Americans, but the idea lost traction amid heavy internal skepticism.
  4. States latest: New York has reported more cases than the most-affected countries in Europe. Chicago's Cook County jail is largest-known source of coronavirus in U.S.
  5. Business: One-third of U.S. jobs are at risk of disappearing, mostly affecting low-income workers.
  6. World: WHO Director-General Tedros Adhanom Ghebreyesus urged countries to put politics aside "if you don’t want to have many more body bags.”
  7. Environment: COVID-19 is underscoring the connection between air pollution and dire outcomes from respiratory diseases.
  8. Tech: A new report recommends stimulus spending to help close the digital divide revealed by social distancing.
  9. What should I do? Pets, moving and personal healthAnswers about the virus from Axios expertsWhat to know about social distancingQ&A: Minimizing your coronavirus risk.
  10. Other resources: CDC on how to avoid the virus, what to do if you get it.

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