Amazon Increases Wages, Adds Free Prime Perk Amid Stock Surge

Sep 18

Amazon (NASDAQ: AMZN) recently announced a series of moves aimed at benefiting its U.S. warehouse and transportation workers, while also preparing for the crucial holiday season. The e-commerce giant is boosting its average hourly wage for warehouse employees to over $22 per hour, up from around $20.50, in response to labor demands and to improve worker retention. In addition to wage increases, Amazon will introduce a free Prime membership as part of employee benefits starting early next year. Prime, which costs $140 annually, offers services such as expedited shipping and access to a vast library of video content, among other perks.

This pay raise comes on the heels of Amazon’s announcement last week that it would also increase wages for contracted delivery drivers, lifting pay to around $22 per hour. Amazon has committed to investing $2.1 billion into its third-party logistics program this year, underscoring the company’s efforts to remain competitive in a tight labor market.

Overview
The timing of Amazon’s wage hikes is strategic. With the company’s annual Prime Day-like sales event set for October 8-9, and the peak holiday shopping season approaching, Amazon is positioning itself to attract and retain workers who are crucial for managing the influx of online orders. By enhancing its employee package, Amazon not only addresses internal pressures for better working conditions but also boosts employee morale, potentially improving productivity during its busiest period.

Amazon's decision to offer free Prime memberships to employees is a notable move as it seeks to enhance its benefits package. Prime has long been one of Amazon’s key revenue drivers, with over 200 million paying subscribers worldwide. The inclusion of Prime for employees further aligns Amazon’s workforce with its services, fostering loyalty and reducing employee turnover.

However, this decision comes amid growing pressure from labor unions. In June, the Amazon Labor Union—the first organized labor group at a U.S. Amazon warehouse—voted to affiliate with the International Brotherhood of Teamsters, signaling a strong push for improved contracts and conditions. While Amazon has resisted widespread unionization, the wage hikes and enhanced perks appear to be part of its strategy to appease workers without succumbing fully to union demands.

Technical Outlook
On the technical front, Amazon’s stock is currently trading up 1% and showing promising signs of bullish momentum. The stock's relative strength index (RSI) stands at 59, which suggests the stock is nearing a cooling-off period, yet remains in a solid position for further upward movement. Over the past few weeks, AMZN has broken free from what appeared to be a declining trend pattern, potentially signaling a reversal into bullish territory.

The recent wage hike news, coupled with the interest rate cuts announced by Jerome Powell, has likely fueled investor optimism. The rate cut eases borrowing costs, making it more favorable for businesses like Amazon to maintain operational liquidity, especially when expanding their workforce or investing in logistics infrastructure. This dovetails with the company’s preparation for the upcoming Prime event and holiday shopping season.

If Amazon (NASDAQ: AMZN) continues its upward trajectory, the stock could breach higher resistance levels in the short term. The current RSI suggests that the stock isn’t overbought, and with positive sentiment around the company’s proactive approach to labor issues, AMZN is well-positioned for continued gains. However, investors should keep an eye on broader market trends and any developments around labor union activities, which could impact Amazon’s cost structure moving forward.

Conclusion
Amazon's wage hikes and the introduction of free Prime memberships come at a pivotal moment for the company, as it ramps up for its busiest period of the year. These moves strengthen the company’s labor force and provide a buffer against union pressures. Technically, the stock appears poised for further growth, with the RSI indicating room for more upward movement, especially in light of favorable macroeconomic factors like the Fed’s recent interest rate cuts.

Amazon is making bold moves to maintain its leadership in e-commerce while addressing internal and external pressures, setting the stage for a potentially strong performance in both the labor market and on the stock charts as we move closer to the holiday season.