Amazon's Minimum Wage Increase: Big Business Still Puts Money Before People

Business Insider

Amazon recently made headlines by raising its minimum wage for workers to $15 an hour.

The company had previously come under fire for "exploitative employment practices," so many people felt the raise was long overdue. But despite making $178 billion in 2017, Amazon appears to be unwilling to take the fiscal hit to ensure fair wages for their employees. Many Amazon workers have now said that the raise will actually decrease their total compensation because Amazon will no longer give employees new stock grants and monthly bonuses.

Unfortunately, Amazon is not an isolated example of the negative effects a higher minimum wage can have on employees due to employers unwillingness to lose money. Professor Jon Meer, one of the authors of a new paper that explores the effects of higher minimum wages, said, "[Higher minimum wages] impact other forms of compensation like benefits and possibly other things that aren't picked up in the data, like flexibility and free-parking."

A study done by researchers at the National Bureau of Economic Research seems to confirm Meer's findings. The study looked at employee pay data from 2011 to 2016, and found "robust evidence" that companies who raised minimum hourly wages also reduced the amount they paid for their employees' health-care benefits in order to make up for the added expense. The study found that workers whose minimum wage was increased by $1 found that 9% to 57% of their wage gains were offset by a decline in their employer's health insurance coverage. So, while workers were technically making more money, they had to spend a larger portion of that raise on health insurance previously provided by their employer.

Recode

In some cases of government-mandated minimum wage increase, workers actually end up with smaller paychecks because of employers unwillingness to cut profit in order to pay employees better wages. In Seattle, a 2016 increase to $13 an hour for minimum wage workers ended up meaning that many workers were scheduled for fewer hours in response to the change. A study by the University of Washington found that after the increase, Seattle workers clocked 9% fewer hours on average, and earned $125 less each month.

Considering Jeff Bezos once made $6 billion in 20 minutes, large companies like Amazon have little excuse not to pay workers enough to live without cutting their benefits. But for smaller businesses — often already fighting a losing battle against companies like Amazon — an increase in state mandated minimum wage can have dire consequences. According to the Employment Policies Institute, many small businesses are forced to close their doors when faced with minimum wage increases.

But then, it's important to consider, how viable is a small business that can't afford to pay workers enough to live? Does America need or want more companies that can't or won't meet minimum wage standards? Perhaps the ability to pay workers a fair minimum wage should be a standard by which we measure the quality of an American company. Unfortunately, the only way we are likely to see widespread progress in the minimum wage conversation is if the culture of American business changes, and companies like Amazon stop valuing money more than people.

Brooke Ivey Johnson is a Brooklyn based writer, playwright, and human woman. To read more of her work visit her blog or follow her twitter @BrookeIJohnson.

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The Federal Funds Rate and How It Affects You

The Federal Reserve sets the guardrails for the federal funds rate, and through that helps control the money supply for the nation.

"Federal Reserve Building in Washington D.C. - Illustration" by DonkeyHotey is licensed under CC BY 2.0

When you take out a loan for a car, charge something to your credit card, or get a personal line of credit, there is going to be an interest rate that applies to your loan.

A lot of different factors go into what you will be charged, including your own personal credit score. But even those with flawless credit still see a minimum charge that they can't get around. That all goes back to the Federal Funds Rate.

One thing consumers rarely realize is that all of our banks are lending money to each other every night. Banks are legally required to maintain a certain percentage of their deposits in non-interest-bearing accounts at the Federal Reserve to ensure they have enough money to cover any withdrawals that may unexpectedly come up. However, deposits can fluctuate and it's very common for some banks to exceed the requirement on certain days while some fall short. In cases like this, banks actually lend each other money to ensure they meet the minimum balance. It's a bit hard to imagine these multibillion-dollar financial institutions needing to borrow money to tide them over for a bit, but it happens every single night at the Federal Reserve. It's also a nice deal for those with balances above the reserve balance requirement to earn a bit of money with cash that would normally just be sitting there.

The Federal Reserve The Federal Reserve


The exact interest rate the banks will charge each other is a matter of negotiation between them, but the Federal Open Market Committee (FOMC) (the arm of the Federal Reserve that sets monetary policy) meets eight times a year to set a target rate. They evaluate a multitude of economic indicators including unemployment, inflation, and consumer confidence to decide the best rate to keep the country in business. The weighted average of all interest rates across these interbank loans is the effective federal funds rate.

This rate has a huge impact on the economy overall as well as your personal finances. The federal funds rate is essentially the cheapest money available to a bank and that feeds into all of the other loans they make. Banks will add a slight upcharge to the rate set by the Fed to determine what is the lowest interest that they will announce for their most creditworthy customers, also known as the prime rate. If you have a variable interest rate loan (very common with credit cards and some student loans), it's likely that the interest rate you pay is a set percentage on top of that prime rate that your lender is paying. That's why in times of low interest rates (it was set at 0% during the Great Recession), a lot of borrowers should go for fixed interest rate loans that won't increase. However, if the federal funds rate was relatively high (it went up to 20% in the early 1980's), a variable interest rate loan may be a better decision as you would be charged less interest should the rate drop without the need to refinance.

The federal funds rate also has a major impact on your investment portfolio. The stock market reacts very strongly to any changes in interest rates from the Federal Reserve, as a lower rate makes it cheaper for companies to borrow and reinvest while a higher rate may restrict capital and slow short-term growth. If you have a significant portion of your investments in equities, a small change in the federal funds rate can have a large impact on your net worth.

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Frugal gifting often gets a bad reputation. However, this shopping method does not make you cheap — it makes you practical. Frugal gifts often avoid waste and overspending and can be just as meaningful (if not more so) as any other present.

With the National Retail Federation predicting each consumer this holiday season to spend upwards of $1,000 on holiday gifts amidst an economic recession —this year might be the perfect time to reconsider your spending budget. We've formulated the ultimate list of frugal gift-giving ideas to get you started.

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