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Amazon: The human cost of business

A call for reform in the online retailer’s labour practices

by   |  29 Oct 2018

The human cost of business

Silicon Valley’s technology behemoths have been among the best performing companies in the US equity market over the past few years. They have commercialised transformative electronic products and provided an ever-expanding range of cheap and convenient services to consumers.

Yet their ascendancy is increasingly accompanied by calls for reform. Exploitative labour practices are among a nexus of concerns we have about the negative corollaries of some of these business models, despite their undeniable commercial success. Perhaps unexpectedly, the power of workers could be critical in finding solutions to these problems.

Amazon are not the only one

Concerns around technology companies’ labour practices are not new. Apple has faced scrutiny over conditions in its supply chain, from the vast factory sites where its products are assembled in China to the Congolese mines containing minerals which are crucial to its electronic components. Meanwhile, newer platform companies, which structure the so-called ‘gig economy’, have run into legal challenges and public concern surrounding the rights and status of those delivering their services.

These tensions have been particularly evident at Amazon, whose founder and CEO, Jeff Bezos, was named the world’s richest person earlier this year. The company has been dogged by reports of highly pressurised working conditions at its fulfilment warehouses as well as institutional antipathy towards collective organising by employees.

This September saw passionate interventions by commentators on both sides of the Atlantic. Launching his ‘Stop BEZOS’ bill (Stop Bad Employers by Zeroing Out Subsides), U.S. Senator Bernie Sanders suggested that companies such as Amazon are externalising costs to society through the payment of low wages, while also withholding the tax contributions which enable society to meet those needs. In the UK, the Archbishop of Canterbury claimed that “companies like Amazon […] don’t pay a real living wage, so the tax payer must support their workers with benefits. And having leached off the tax payer once they don’t pay for our defence, for security, for stability, for justice, for health, for equality, for education.”

A small victory?

It is perhaps no coincidence, then, that Amazon has just announced a minimum wage increase for its U.S. employees to $15 an hour, with Bezos noting “we listen to our critics”. This was indeed a key demand made by employees seeking to unionise in its recently acquired Whole Foods subsidiary, building on the ‘Fight for $15’ movement which has been driven by restaurant workers. That said, it is potentially concerning that the increase may to some extent only replace existing stock option grants and bonus awards. At the time of writing, more clarity seems necessary.

While undoubtedly also influenced by a tightening labour market in the US, this model of responsiveness to employees and other stakeholders can perhaps help Amazon navigate some of the challenges it faces on other fronts. European regulators are investigating its use of data on third party merchants with whom it also competes, while several countries have challenged its tax avoidance strategies. The almost monopsonistic power it wields over book publishers and other suppliers to its platform could also be under threat if the US Federal Trade Commission proceeds with a mooted review of the prevailing anti-trust framework.

Approach workers as human capital

In this context, Amazon should again look to those with a long-term interest in shared success to help it reach outcomes that benefit a wider range of stakeholders. Amazon workers are reported to have recently challenged the application of its facial recognition software, as well as data-mining tools, for socially repressive purposes, stating, “we refuse to contribute to tools that violate human rights”.

The tech giants have had such a profound impact on our consumption and social habits that the problems they have created can at times feel intractable. In seeking to resolve these and ultimately preserve their license to operate (and thus in turn shareholder capital), companies and their investors would do well to approach workers as human capital which is fundamental to sustainable value creation.