Can Amazon afford to keep churning through its frontline workers?

Discussion
Photo: Getty Images/MattGush
Oct 19, 2022

Amazon.com knows it has an employee turnover problem, and internal documents acquired by Engadget put a price on what that costs the company — $8 billion a year.

The retailer and technology giant, which posted a net profit of $33.36 billion last year, has attrition rates higher than its industry peers, according to the report. Amazon tracks both regretted and unregretted attrition. Regretted accounts for workers who choose to leave the company and unregretted covers those who are fired.

The numbers of those choosing to leave occurs at twice the rate of those who are let go and “only one out of three new hires in 2021″ stayed with Amazon for at least 90 days. The highest attrition rates come from within Amazon’s Tier 1 designation, which covers lower paid frontline workers, including those in the company’s warehouses.

The internal documents reviewed and reported on by Engadget support a similar Recode report from June on a leaked 2021 Amazon memo speculating that turnover rates at its warehouses would far outstrip its abilities to hire and train new workers by 2024 unless the company responded quickly with higher wages and increased automation. These changes were positioned as triage actions designed to give the company more time.

Amazon last month said it would invest $1 billion over the next year to raise the pay of frontline workers in customer fulfillment and transportation. Those on the frontline will now earn between $16 and $26 per hour, depending on their position and where they are working in the U.S. The average pay, according to Amazon, will be more than $19 an hour.

Critics have argued that workers pay the freight for Amazon’s obsessive focus on meeting the needs of customers with many suffering from burnout. This has led to increased labor organizing activity at Amazon’s warehouses, although only one of the five elections held to date has gone in favor of a union.

In a vote held this week at a warehouse in Albany, NY, workers voted 406 to 206 to reject becoming part of the Amazon Labor Union (ALU). The totals are preliminary until the National Labor Relations Board (NLRB) certifies the election.

Lawyers for the ALU, CNBC reports, have filed 27 unfair labor practice charges against Amazon and may challenge the results of the election.

DISCUSSION QUESTIONS: Is corporate culture the source of Amazon’s employee relations problems with frontline workers? What will it take to lower Amazon’s high employee turnover rate?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"With all of the resources available to the company, its inaction indicates a lack of concern which will lead to a real crisis before long."
"The fish stinks from the head, however Amazon is not alone in the struggles of employee retention."
"In no way are the labor challenges minimal for Amazon. However when one-third of new hires leave in less than 90 days, maybe they find the job too hard."

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15 Comments on "Can Amazon afford to keep churning through its frontline workers?"


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Jeff Weidauer
BrainTrust

The high attrition rate and ongoing union activities point to a brewing crisis for Amazon. With all of the resources available to the company, its inaction indicates a lack of concern which will lead to a real crisis before long.

Gene Detroyer
BrainTrust

Can it be so bad when Amazon rates as one of the top employers in the country? Per the Washington Post, “In the latest vote, the movement to unionize Amazon suffered a defeat Tuesday as workers at a warehouse in Castleton-on-Hudson, N.Y., overwhelmingly voted against joining Amazon Labor Union.”

Lee Peterson
BrainTrust

When I was with a very large retailer, we used to say, “if you eat like an elephant, you **** like an elephant.” And so it is with $500 billion Amazon: all issues are big issues. But given their track record for innovation, I’m waiting for them to get better at HR. I don’t believe they’ll let people problems continue to the point of hurting their business, but they’d better get busy on that front. If for nothing else than better PR. These stories are killing their reputation more than anything else.

DeAnn Campbell
BrainTrust

No amount of technology can bridge every gap that humans fill in their fulfillment chain. Raising employee pay is a good first step, especially going into an economic slowdown. But the next step should be ways to improve the quality of life for employees while on the job. No one wants to feel treated like a robot. Humans need to feel appreciated, see relevance in their work and have opportunities for advancement or learning and the ability to have leeway for critical thinking and self regulation.

David Spear
BrainTrust

Amazon’s employment practices have been in the news for several years, and I’m surprised they haven’t solved this already. But with 33 percent of employees leaving before the first 90 days, they have a big issue on their hands. Pay increases might be able to reduce some of these numbers, but these percentages suggest a more acute problem in frontline culture, work environment and overly aggressive performance metrics. Amazon would be wise to put their best and brightest people on solving these HR issues. They have innovated in so many ways. There’s no reason they can’t disrupt their own employment practices and turn this around.

Steve Montgomery
BrainTrust

Amazon has the capability to gather information on the issues that are generating the turnover. They are not limited solely to the hourly rate. Raising the hourly rate is an easy, albeit expensive fix. I expect a great amount of employee dissatisfaction has to do with working conditions. These issues are not as easily addressed as pay. Amazon knows what the issues are, and will continue to have high turnover until it addresses them.

Jeff Sward
BrainTrust

Unsustainable. Clearly unsustainable. And way more complicated than throwing a couple of bucks an hour into the pot. Amazon has taught everybody that many of their wants and needs can be solved with next-day delivery. It was probably the best customer acquisition tool in the history of retail, but look at the monster they have created. Is it now even possible to try to slow down parts of the process? Offer two- or three-day delivery and give the process some breathing room? I know that’s already available, but how do they incentivize broader use of slower delivery? Or is it just a matter of time before it’s all robotic so let’s just grind through it?

Gene Detroyer
BrainTrust

The ALU has filed 27 unfair labor practice charges against Amazon, the second-largest employer in the country.

Walmart gets sued 20 times a day, with the majority of those suits relating to unfair labor practices. Starbucks has over 200 cases annually, and Coca-Cola has over 100.

In no way are the labor challenges minimal for Amazon. However when one-third of new hires leave in less than 90 days, maybe they find the job too hard.

Being big attracts attention.

Ryan Mathews
BrainTrust

Ultimately, corporate culture is the root of all commercial problems. But this isn’t entirely a problem of Amazon’s making. As consumers we want what we want before we want it and that puts pressure on all retailers to find ways of streamlining supply chains and reducing delivery times. And the result of that is ever-increasing pressure on workers, especially frontline workers. Since Amazon is not likely to cut back on services or increase delivery times, that means that pressure will only continue to build in direct proportion to volume. That said, those same stressed workers have failed to embrace large scale unionization and continue to give Amazon relatively high marks on employer ratings surveys. A paradox? Yup! Resolvable? Not so easily.

Brian Delp
BrainTrust
3 months 8 days ago

The fish stinks from the head, however Amazon is not alone in the struggles of employee retention. Things may shift from recession woes, but ensuring staff is supported and benefits are competitive should always be a priority.

Doug Garnett
BrainTrust

Amazon has always been based on doing things on the cheap. I don’t expect that to change so I expect this problem to continue. Unfortunately, it can only change if Amazon were to admit its biggest challenge: there is no way for them to make profit on the vast majority of their sales. Someday investors will realize this and stop the groupthink which has enabled an impossible business model.

James Tenser
BrainTrust

Increasing pay scales will help Amazon for a time. (How about a “staircase” wage that increases in small increments every couple months to encourage experienced workers to stay on board?)

As counterintuitive as it may seem, the company could eventually run out of fresh individuals to hire for its expanding operations. More automation is certainly one response (although it comes with a need for more trained technicians to maintain the robot fleet).

Improving the job experience may be even more important than wages. Workers who feel cared for by their employers tend to be more loyal, so a hard look at sick leave policies seems essential. (Think about how critical this issue was in the recent railroad workers contract deal.)

Mel Kleiman
BrainTrust

Simple answer: no, Amazon can not afford to keep churning workers. One, you will run out of workers. Two, the cost of turnover is outrageous. Simple solution: create a more stress-free work environment. Easy to say, hard to do.

Patricia Vekich Waldron
Staff

Raising wages will give Amazon some breathing room as they (hopefully) seriously reconsider the business model and practices that have driven great growth along with employee turnover.

Allison McGuire
BrainTrust

It’s hard to get past 1 in 3 stay after 90 days. Would any other business be ok with those stats? This just shows the negative effects of massive growth without the right training/structure/resources in place to handle it. If $8B isn’t an incentive to make improvements, I don’t know what is!

wpDiscuz
Braintrust
"With all of the resources available to the company, its inaction indicates a lack of concern which will lead to a real crisis before long."
"The fish stinks from the head, however Amazon is not alone in the struggles of employee retention."
"In no way are the labor challenges minimal for Amazon. However when one-third of new hires leave in less than 90 days, maybe they find the job too hard."

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