Three predictions for how the giant will address worker turnover, when there’s no one left to hire
Amazon, the giant corporation that handles everything from online physical item sales to ebooks to streaming video to providing the backbone of the internet through AWS, is killing it.
Their stock has significantly outperformed the S&P500 over the last five years. They’ve opened new distribution centers across the United States, and roughly 41% of every single dollar spent online for ecommerce was done through Amazon.
But with all that success comes a problem, one that Amazon execs have known about for a while internally: this behemoth runs off labor. Amazon employs more than a million people in the United States, in almost every state.
And a leaked internal memo from mid-2021 shows that the company is aware of the massive turnover at its warehouses — and the fact that, sooner than they’d like, there may not be any more people left to hire.
The problem? Along with employing a ton of people, Amazon burns through its workers — fast. Among front-line workers, Amazon’s turnover rate is at least double the average, at over 100%. (How can a company have more than 100% turnover rate in a year? It means that, if they employ 1,000 employees at a location, they hire more than 1,000 people per year, due to some people lasting less than a year before they quit or are fired.)
This used to be considered a good thing. After all, workers who stick around too long will probably want pesky benefits and promotions, disgusting demands like “pay me more money” and “stop forcing me to pee in bottles because bathroom breaks are too short”.
But new workers? They’re still grateful to just be hired, and they won’t make any noise about demanding more. And once they start complaining, well, time to fire them and bring on the next batch of newbies!
This works, as long as you constantly have new prospective employees lining up to be hired. But when there are multiple employment opportunities in the area, and Amazon scores as one of the worst places to work in comparison with other warehouse jobs, the company may soon find that they don’t have enough people to maintain their prodigious turnover.
So that’s a problem.
I’m sure that Amazon executives are working on a solution, and almost certainly have multiple proposed paths that they are considering and debating.
Here are my guesses about the three possible avenues they may explore:
Option 1: Improve the working conditions
Hahahaha, putting the least likely option at the beginning. What, the giant, evil overlord corporation is suddenly going to start caring about its bottom-level workers? The place where the CEO earns more than 6,000x the median salary (which is much higher than the average Fortune 500 company, where the CEO-to-worker ratio is more around 200x)?
Hey, there’s always a possibility. Amazon has been increasing worker pay, and many workers would rather get a higher salary than be sated with meaningless perks. You know what’s better than a pizza party? Getting paid a decent wage, so that we can buy pizza whenever we want.
But Amazon could continue to improve working conditions:
- Build a better buffer into the regimented schedules and timing that they require of all employees. Yes, it lowers overall productivity if workers get 25 minutes for a bathroom break instead of 15, but isn’t that better than losing a worker?
- Reduce the enforcement of many strict policies. Even during the pandemic, many Amazon managers would ignore infractions, since HR was exempting many workers from being held to a 3-strikes rule.
- Offer better incentives to stay. Offer clear paths to promotion, as a reason for people to not jump ship at the next offer.
- Better work-life balance. Many workers are fired through an automated process if they exceed the amount of unpaid time off that they use, even if they have a legitimate reason (such as a medical procedure).
- Better reviews of workers who are up for termination before they are fired by automated process, as mentioned above.
- More pay. After all, some workers still do leave because they find better opportunities at other employers, not just because they are fired.
But Amazon may not be likely to suddenly start relaxing its strict, automated quota-based approach to become warm and fuzzy with its employees. What’s another possibility?
Option 2: Better automation
Amazon warehouses are already some of the most automated in the industry; robots handle transport of bins throughout the warehouses and much of the packing and shipping process. Only a subset of tasks (unpacking items, checking stocks, inspecting for damages, picking items from bins) are still handled by humans.
I’m sure that Amazon executives dream of the day when they no longer need warehouse employees at all. Build a warehouse anywhere, ensure that it’s accessible, and let the robots handle the rest. From taking in new inventory to organizing to packing and shipping out orders, robots could perform every step, meaning that there only need to be a couple technicians on staff to handle the maintenance.
This is obviously a longer-term option — but not that long. Automation is a booming area, perhaps most visible with Flippy, the burger-flipping robot that is being rolled out to more than 100 White Castle locations.
As we improve on machine learning, robots will get better at filling more and more roles currently held by humans. Even if robots aren’t perfect, there could be a human who supervises the robot through a screen, stepping in when the robot is unable to proceed — but one human could supervise twenty different robot workers.
But there’s still another option open to Amazon, one that doesn’t involve shelling out more money to workers or to expensive robotics companies. Often, the cheapest approach is the least ethical.
Option 3: Fight competition through legislation
Hello, depressing realism that’s been seen over the last decade! Why should Amazon need to improve its practices, when it can just shut out the competition and make sure that workers don’t have any better options?
Amazon is no stranger to using these sorts of tactics. Along with being well known for its anti-union stance, to prevent workers from collectively banding together to demand more rights with teeth behind their requests, Amazon makes sure that, when it considers new locations, it extracts the most concessions from its final choice.
Remember when Amazon was preparing to build its second headquarters, in 2017? It allowed any city to put in a submission, and received more than 230 of them. Many cities offered massive subsidies promised to the commercial giant if they were selected; New York, for example, offered up to $1.5 billion in subsidies. Others, including Virginia (where HQ2 was built) offered big subsidies as well.
What if Amazon promises to build a warehouse in a city — but only if that city agrees that they won’t grant any warehouse licenses to Amazon’s competitors, like Walmart or FedEx, for some period of time?
Amazon already requires exclusivity from many sellers of goods on their platform. They often want exclusivity from partners, like the third party groups that help deliver packages for last-mile delivery.
Why not exclusivity at their warehouses?
There could be a requirement that anyone who accepts an Amazon warehouse position is ineligible to be hired at a competitor for some period of time. Amazon might argue that this is due to trade secrets, but it’s more useful as a method to prevent their staff from having anywhere else to go.
Could it be challenged in court? Almost certainly. But there’s a big difference between “could be challenged” versus “has the resources to challenge”.
Most workers won’t be able to wait around while a legal challenge plays out, or pay a lawyer’s fees. And even after this is settled, Amazon may change the terms slightly but keep the language in the contract to some extent, requiring multiple rounds of challenges.
In summary: Amazon can combat a future shortage of workers… but some approaches are probably kinder than others
For at least a year, now, Amazon has known that its low-retention, worker-churning policies are quickly going through associates in its warehouses. They’ve known that there is a risk that, at some point, they will have no one left who is willing to work for them in that area.
This isn’t guaranteed; Amazon has a number of potential solutions to pursue. They could:
- Improve working conditions and retention for their existing workers
- Move to new locations to keep chasing an ever-shifting worker pool
- Embrace more automation to reduce the number of workers needed
- Enact draconian policies and legal/legislative challenges to help secure their monopoly on workers
Or, perhaps, they’ll end up choosing some combination of the above routes.
What do you think? How do you anticipate that Amazon may try and solve an upcoming labor shortage in their warehouses?
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