Wages during the Covid-19 Pandemic
The coronavirus pandemic hugely impacted the market. This is because, a huge percentage of businesses were forced to close and buyers were mandated to stay at home as a measure to curb the spread. Consequently, many major companies have either fired or as set to lay of their employees because of the lack of enough revenue. On the contrary, Amazon came up with policies that would increase the employees’ salaries and pay more during overtime. However, they directed that the increase would be undone come May 30 2020. This paper is going to analyze salary stagnation in the USA and determine whether higher salaries are good for the employees.
Wilmer (2018) provides that many companies base their employees’ salaries on the profits that they make. These are always greatly affected by external factors. The article majors on the impact of the large customers in dictating the price they would buy the products as a major external factor. Further, retailers and their employees have realized that pandemics have a larger effect on the market. Many shops have been closed, and a great percentage of the workforce has been rendered unemployed. For example, HSBC has laid off 35,000, Macy’s 3,900, and AT&T 3,400 employees (Borden, 2020). Some employers then opted to retain some employees but reduce their salaries. These actions lead to wage stagnation or even a reduction of wages as compared to the other years.
Amazon’s decision to increase the wages of its employees by $2 an hour and double overtime, was a good move to help improve the employee’s livelihoods. However, it was a temporary initiative to help curb the negative effects of the coronavirus. It ended on May 30 2020, and there were complaints that it was too soon for the company to revert to their earlier payment policies. Some of their employees provide that the wages do not match their productivity levels (Hamilton, 2020). Considering the amount of work that they do, they earned the increment. From Amazon’s perspective, this increment would be unsustainable and a burden to the company. Their profits have been highly affected by the reduction in the sales and the buying power of their market (Emerson, 2020).
By understanding the role of purchasing power of certain buyers, then one can understand why some buyers have higher control of their buyer-supplier relations with some manufacturers. Suppliers are in a disadvantaged position as they strive to maintain their profits. They may reduce their profit margins and sell to the dominant purchaser, to maintain the relationship. However, it comes at the expense of the employees who have to settle for less.
To many individuals, the pandemic has been beneficial to Amazon. Many people have opted for online purchases, and Amazon is one of those stores. Therefore, they are set to increase their profits. Consequently, they should be able to maintain the increase in their employee’s salaries. On the contrary, the purchasing power of a huge percentage of their market has been negatively affected by the pandemic. A majority of the buyers only purchase necessities. So, Amazon does not realize the huge profits that many people think that they do.
With e-commerce being the new normal, then Amazon is set to further its dominance in the market. Some sellers have decided that they would not sell using Amazon. This is mainly because of the little or no control over the quality and pricing of their products. These include huge companies such as Nike, PopSockets, and Ikea. Consequently, the company ends up being at the mercies of Amazon. However, Amazon is seen to be unmoved since it controls 38% of the market with little competition.
By losing control of vital areas such as pricing, quality, and profits means that the sellers have to center their plans around Amazon’s policies. Therefore, negatively affecting their goals and strategies. For instance, it negatively affects their output since Amazon has a say on the pricing, which then affects the seller’s profits. The lack of adequate planning would mean that the revenue would be negatively affected, resulting in the wage stagnation experienced in the market. This leads to lower employee standards of living and motivation.
Kahnerman et al. ‘s (2006) study found out that happiness and riches are not connected. It is a fallacy that by increasing one’s income, then they would automatically become happier. Their study provides that this idea is based on the illusion created by the society that rich people are living the life. The study found out that an individual’s happiness is relative. It is affected by factors such as their goals and expectations. In addition, the definition of happiness varies from employee to employee.
Rosewarne’s (2020) study challenged the findings of the research. Her study found out that salary was a major motivation for many employees in various fields. The survey realized that 92% of the retail and repair employees correlate their level of happiness to their weekly earnings (Rosewarne, 2020). Furthermore, they concluded that the level of happiness would always be dependent on the nature of the work that one engages in. When they interacted with people in a more manual-based form of employment, then they realized that they were more concerned with issues such as improved working conditions. To them, happiness was not directly connected with their earnings. However, their study still realized that it is among their major motivators.
Increasing one’s revenue will in most cases lead to happiness since it allows them to access or purchase items that would then make them happier. By motivating employees, then companies are more likely to increase their output from their employees. An increase in revenue means that they can improve their standards of living and have a good attitude towards their employment.
In conclusion, wages are greatly affected by external factors. Buyer dominance and unfavorable environments are among the factors that have been shown to lead to wage stagnation. The negative effects may include low employee motivation, which negatively influences their output in the company. Consequently, employers are supposed to come up with policies that would increase their revenue and allow for salary increment as a motivation for their employees.
References
Borden, T. (2020, July 1). The coronavirus outbreak has triggered unprecedented mass layoffs and furloughs. Here are the major companies that have announced they are downsizing their workforces. Retrieved from Business Insider: https://www.businessinsider.com/coronavirus-layoffs-furloughs-hospitality-service-travel-unemployment-2020?r=US&IR=T#on-june-16-a-union-representing-att-employees-said-the-wireless-carrier-will-lay-off-3400-and-shut-down-more-than-250-stores-3
Emerson, C. (2020, January 13). The reason you aren’t getting a pay rise. Retrieved from Financial Review: https://www.afr.com/policy/economy/the-reason-you-aren-t-getting-a-pay-rise-20200113-p53r12
Hamilton, I. (2020, March 14). Amazon will drop its $2 pay raise for warehouse staff after May, and workers say it’s too soon. Retrieved from Bussiness Insider: https://www.businessinsider.com/amazon-dropping-covid-19-hazard-pay-warehouse-workers-may-2020-5?r=US&IR=T
Kahneman, D., Krueger, A. B., Schkade, D., Schwarz, N., & Stone, A. A. (2006). Would you be happier if you were richer? A focusing illusion. science, 312(5782), 1908-1910.
Rosewarne, A. (2020, Februaru 26). How Much Does the Salary Affect Employees’ Motivation. Retrieved from Employee Management: talentlyft.com/en/blog/article/362/how-much-does-the-salary-affect-employees-happiness
Wilmers, N. (2018). Wage stagnation and buyer power: How buyer-supplier relations affect US workers’ wages, 1978 to 2014. American Sociological Review, 83(2), 213-242.