The world’s most powerful retailer will pay more, but its impact on the economy may mean more struggles for low-wage workers

In 1967, just a year before his assassination, Dr Martin Luther King launched the Poor People’s Campaign to “to demand that the government address itself to the problem of poverty”. Five decades on little has changed for low-wage workers.

Minimum wage increases in the US have failed to even keep pace with inflation. A full-time minimum wage worker in 1968 would have earned $20,600 a year (in 2017 dollars), according to the Economics Policy Institute (EPI). A worker paid the federal minimum wage would have only earned $15,080 working full time in 2017. Even the record-breaking run in employment growth has so far failed to raise the wages of low-paid workers.

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Last week there seemed to be a sign of change. Amazon became the latest company to promise a $15 minimum wage for its workers in the US (and an increase to £10.50 an hour in London and £9.50 across the rest of the UK).

Despite the irony that the move was being made by a company run by Jeff Bezos, the world’s richest man, the decision was hailed as a major victory by advocates of a higher minimum wage. Even senator Bernie Sanders, a probable 2020 presidential candidate, congratulated Amazon. Sanders recently introduced the aptly acronymed Stop Bad Employers by Zeroing Out Subsidies (Bezos) act that would tax companies whose workers are paid so poorly that they rely heavily on government benefits.

Bernie Sanders (@SenSanders) What Mr. Bezos has done today is not only enormously important for Amazon’s hundreds of thousands of employees, it could well be a shot heard around the world. I urge corporate leaders around the country to follow Mr. Bezos' lead. https://t.co/06wIAHunPq

Amazon was the latest US company to agree to a wage hike after a series of high-profile protests over wages in the US. Disney and retailers Target and Costco have made similar moves. Now the pressure is on for other big employers, notably Walmart and McDonald’s, to follow suit. But without a federally mandated increase in the minimum wage, many workers will still struggle to make ends meet and Amazon critics worry that the move will distract from other issues associated with the world’s most powerful retailer.

“This is good for low-wage workers,” said Stacy Mitchell, co-director at the Institute for Local Self-Reliance (ILSR). “But we should not let it distract us from Amazon’s impact on the wider economy.”

In 2016, ILSR released a report that calculated Amazon needed roughly half as many employees as traditional bricks and mortar stores to sell the same amount of goods. “And that was a 2016 report using 2015 data,” she said. Every generation of Amazon warehouse is more automated than the last and in China, where the trend is ahead of the US, giant warehouses can use as few as four employees, maintaining robots, to process orders.

While it’s popular to worry about the rise of the robots – King himself warned of the “impact of automation and cybernation” back in 1967 – Mitchell believes it is probably not worth getting too hung up on automation. Similar threats have come and gone in the past without dramatically reducing the workforce.

The problem this time is different. “I am far more worried about Amazon’s impact from its increasingly monopolization of the market,” she said. “In history when we have had new technology, there has traditionally been a flood of companies and competition. But what we have seen recently is the collapse of small and mid-sized businesses. Amazon is not the only factor in that, but it’s the largest.”

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The wage rise comes as Amazon is buffeted by ever stronger regulatory headwinds. Senator Elizabeth Warren, another likely Democratic presidential candidate, and European commissioner Margrethe Vestager are increasingly concerned about Amazon’s power. The company has also faced multiple reports of poor pay and work conditions at Amazon and criticism of its demands forlarge tax breaks, said EPI economist Ben Zipperer.

The old argument that Amazon is a net good because it allows people to buy stuff cheap online “is not really cutting it any more”, he said.

But while it is a clear positive that low-wage Amazon workers will get more money, the impact of lax policies on anti-trust issues and soft labor laws mean low-wage workers will still continue to struggle to get meaningful wage increases with or without Amazon’s backing, he said.

While we watch to see whether other big companies will follow Amazon’s move, Mitchell said: “It’s good that this has happened. But it is also important that we don’t take our eye off the ball.”