: Amazon, perpetually bashed by politicians, is taking on big social initiatives, and investors should reward it

Jassy’s remarks following Amazon’s
AMZN,
+1.52%
earnings report at the end of October deserve consideration. Two things, in particular, stood out to me as attention-worthy.

First, Amazon is continuing to make the investments that it thinks are necessary to grow despite what that may mean for short-term results.

Second, Amazon is boldly taking on a litany of what the market and media has long considered priority social issues in the U.S. and globally.

However, while there seems to be a longing to see many of these issues addressed through a long list of tax-and-spend activities and greater regulation over tech companies, the market seems to be underwhelmed by Amazon’s substantial efforts.

I believe those efforts, while not entirely altruistic, deserve greater recognition and reward from investors and Wall Street. 

Minimum wage

A hotly debated topic is a higher federal minimum wage. Despite talk of doubling the amount to $15 an hour as a mandate, lawmakers have been unable to tackle this initiative for a plethora of reasons, even as inflation soars over 5%.

Amazon took the initiative on its own to raise wages nearly three years ago to $15 an hour. With a tightening labor market and surging prices due to supply-chain shortages, the company is now pushing its wages for entry-level workers closer to $18.

With well over half a million entry-level workers at Amazon, the math of the company’s decision has a significant impact on costs and the bottom line. Based on a half-million employee number at that wage level, for every dollar above the federal minimum wage that Amazon pays, it adds about $4 million a day in wage expenses plus benefits and other direct employment costs.

Depending on the location of its centers and varying local employment laws, that can be nearly $8 an hour more than minimum wage, which can easily add $40 million per day in base wage costs for Amazon.

Some may view higher wages as a way for Amazon to deter unionization efforts, but I believe it is also worth considering that the company is using its autonomy and resources to act swiftly to implement a wage policy that will attract high-caliber workers, both front-line and white collar.

Skills upgrades

Furthermore, backing its financial outlay for higher wages, the company is raising the skills of hundreds of thousands of workers through its Upskill 2025 efforts. It recently announced another $1.2 billion outlay to offer more than 750,000 front-line workers access to free community college. That’s another social initiative that has largely fallen flat with Wall Street. 

Social impact, sustainability

Also top of mind among investors are climate change and sustainability efforts. The rise of ETFs and other investment vehicles designed around sustainability and ESG (environmental, social and governance) issues have created a lot of hype, but few outcomes.

And while we wait for more federal regulation to push enterprise investments toward carbon neutrality and other social-good initiatives, there’s not much that could be considered tangible.

Amazon has used its resources and reach to accelerate those efforts. In 2019, the company co-founded what it calls “The Climate Pledge” to reach carbon neutrality by 2040, 10 years ahead of the Paris Agreement. The company isn’t merely doing this itself, including investing billions, but as co-founder it is actively applying its influence to bring more than 200 signatories from companies generating over $1.8 trillion in annual revenue. Those companies include Microsoft
MSFT,
+1.29%,
Pepsi
PEP,
-0.02%,
Salesforce
CRM,
+1.21%
and Visa
V,
+0.79%.
The pledge sets out for greater accountability through regular reporting, carbon elimination and offsets. 

Small-business support

Amazon is often cast as a bad actor that uses its massive platform to punish and eliminate small businesses. However, data provided by Amazon suggest the opposite. While the government has a variety of programs aimed at helping small businesses, Amazon serves as a turnkey storefront with end-to-end backend logistics. And the company doesn’t just offer its platform, but it puts its money where its mouth is and acts as a catalyst for small businesses in a way that federal efforts have long struggled to replicate.

In 2020, Amazon invested $18 billion, offering 135 tools for its small and medium-sized businesses (SMBs), while committing to educate 500,000 SMBs and entrepreneurs, and onboard more than 100,000 more smaller businesses. The tools, tech and support of Amazon are well-documented in the company’s 2021 SMB Impact Report. Amazon’s investments helped SMBs lower their shipping costs by 30%, increase revenue by 20%-25%, decrease fraud, offer advertising support services and access to capital including $800 million in lending. It earmarked $150 million to help Black business owners.

Getting things done

In short, Amazon is tackling social-impact issues that have eluded lawmakers. The company isn’t the only one taking these actions, but on a grand scale it is spending billions to raise minimum wage, upskill its workforce, send its front-line workers to community college, initiate meaningful and measurable climate change and social initiatives, and help hundreds of thousands of small-business owners.

Even still, I’m not willing to call it all altruism, but as I’ve long said, when it comes to making meaningful progress, sometimes getting things done is most important.

Amazon is doing what capitalism is supposed to do. The company is making significant profits and reinvesting them in growing the business while also investing in communities, people, the environment and social causes.

Of course, at its size, the company should undergo ample scrutiny, be it regulatory or for its mission. However, the bottom line is Amazon is getting things done and, in recent quarters, you could argue these social-impact investments may even be harming its bottom line and ability to return profits to shareholders.

But the company hires, builds and expands into communities and the tax base follows through the businesses that are built around it, and through the people the company employs.

Andy Jassy is following what Jeff Bezos did for years: Invest first, grow later. And with it a large side of social impact that deserves a whole lot more recognition than it has received so far.

Daniel Newman is the principal analyst at Futurum Research, which provides or has provided research, analysis, advising, and/or consulting to Microsoft, Zoom, Salesforce, AWS and dozens of other companies in the tech and digital industries. Neither he nor his firm holds any equity positions with any companies cited. Follow him on Twitter @danielnewmanUV.