Amazon is one of the biggest employers in the U.S., and has more than 1.58 million employees worldwide.
The company’s enormous workforce is central to its ability to move millions of packages and keep its sprawling retail operation running.
But Amazon’s reputation as an employer has also faced scrutiny.
The company has dealt with criticism over warehouse working conditions, including concerns about repetitive physical work, injury rates, and the pace at which employees are expected to perform their jobs.
In 2024, the U.S. Department of Labor announced a settlement with Amazon requiring the company to implement an ergonomics program across its fulfillment, sortation, and delivery facilities.
The agreement followed multiple OSHA investigations into ergonomic hazards and included a $145,000 penalty.
Now for a company like Amazon, $145,000 is pocket change. But Amazon also needs to be mindful of its reputation as an employer. And that’s why the company’s latest compensation decision is a smart choice.
Amazon raises its starting wage
Amazon announced that it will increase pay by $1 an hour for eligible employees, bringing the minimum starting wage for full-time employees in its core operations to $20 an hour. The company said the increase brings its average starting wage to about $24 an hour.
The company is also rolling out additional benefits, including grocery discounts for U.S. employees and a new banking benefit through First Tech Federal Credit Union.
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The wage increase makes sense for Amazon, despite the obvious cost.
Amazon operates an extraordinarily large logistics network. And retaining experienced workers could help reduce the costs and disruption associated with constantly hiring and training replacements.
Research published in the Journal of Labor Economics found that employee turnover creates costs through short-staffing, onboarding, and effects on existing workers. Enticing workers to stay on board with higher pay makes sense for a company like Amazon whose reputation hinges on being able to deliver fast, reliable service.
“I’m excited about how these investments work together to help our employees and their families continue to thrive for the long run,” said Udit Madan, Senior Vice President, Amazon.
“And while there’s always more work to do, I’m proud that we’re continuing to find new ways to support our team, both at work and beyond.”
Amazon
Amazon’s decision is a page out of the Costco playbook
Amazon’s decision also brings to mind one of the retail industry’s best-known examples of paying frontline employees relatively well: Costco.
Costco has built a reputation for competitive wages and benefits. In 2025, the warehouse club raised its minimum starting wage to at least $20 an hour for entry-level positions in the U.S. and Canada.
The company also raised the top of its wage scales, and its average hourly rate for U.S. hourly employees reached approximately $32 by the end of fiscal 2025.
Costco said that approximately 94% of its U.S. and Canadian employees who had been with the company for at least one year remained with the company in 2025. Competitive compensation and benefits help minimize turnover and increase employee productivity and loyalty.
But higher wages don’t just benefit workers. There’s a potential benefit for shoppers, too.
Experienced retail employees can develop greater familiarity with their stores, products, and customers, while lower turnover can reduce the disruption and training costs associated with constantly replacing workers.
Costco has long tied its employee strategy to the customer experience. Management says taking care of employees is fundamental to its business model, so it pays to invest in higher wages.
Amazon has a very different business from Costco. Its vast fulfillment network, delivery operation, and technology infrastructure create a different set of workforce demands.
Still, the basic idea is similar: Pay employees enough to make jobs more attractive, give workers a reason to stay, and potentially create a more experienced workforce.
For Amazon, that could prove especially valuable as it heads into the crucial holiday shopping season.
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The Costco comparison doesn’t mean Amazon has adopted Costco’s entire employee strategy. But by pushing its starting wage to $20 an hour, Amazon is increasingly competing on one of the same factors that has helped make Costco a notable and desirable employer in the retail industry.
Maurie Backman owns shares of Amazon and Costco.
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