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Amazon Just Announced a (Voluntary) Pay Raise for 500,000 Employees. Here’s Why

No, Amazon isn't doing this out of the goodness of Jeff Bezos' heart.

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This article is excerpted from the FEE Daily, a daily email newsletter where FEE Policy Correspondent Brad Polumbo brings you news and analysis on the top free-market economics and policy stories. Click here to sign up.

If you listen to folks like Senator Bernie Sanders too much, you’d think that the only time businesses raise wages for their hourly employees is when they’re forced to by increases in the minimum wage. But that’s not actually how labor markets work. And Amazon just provided us with yet another glaring example that competition can lead to wage increases without government meddling.

Amazon said Wednesday that it plans to give more than 500,000 of its workers a raise as it seeks to attract new workers,” ABC News reports. “The online shopping giant, which already pays new hires at least $15 an hour, said it will start increasing pay between 50 cents an hour to $3 an hour starting next month.”

Why is Amazon doing this? No, it’s not out of Jeff Bezos’ generosity or the goodness of their hearts. Market forces are pushing them to raise wages.

As lockdowns are finally being unwound across the country, demand for goods and services is surging. To keep up with increased demand, businesses are scrambling to hire new workers. But, in part because of counterproductive welfare programs and in part due to underlying market realities, there’s a shortage of available workers. This means that in order to get people to come aboard, Amazon has to open its checkbook and increase wages.

Its competitors are leaving it no choice.

“Other retailers have been boosting pay, too,” the ABC report notes. “Costco, for example, recently raised its minimum wage to $16 an hour. And Target recently raised its starting pay to $15 an hour.”

Of course, Amazon is far from a patron saint for free-market capitalism. The company engages in crony capitalist rent-seeking by lobbying for anti-market policies like a $15 minimum wage and corporate tax hikes because it knows these will hurt its start-up competitors.

But nonetheless, the news that Amazon is raising wages for half a million Americans is a good reminder that market competition is alive and well.

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