The
Amazon Conundrum
Amazon
is desperate for human labor. An article in the Wall Street Journal noted how the company is short-circuiting and reinventing
its training process as it works feverishly to place hosts of seasonal workers
in its fulfillment centers.
Being a rapidly growing beast in online
commerce presents two challenges. First, Amazon is growing rapidly on a secular
basis — the company’s sales are rising at an annual rate of more than 25
percent. So it constantly needs to add new warehouses, and new people to staff
them. And while those facilities are highly automated, there is a limit to what
robots and machines can do. Amazon already has about 300,000 people staffing
its 149 warehouses around the world.
Second, Amazon’s business is highly seasonal.
A disproportionate share of the nation’s retail activity — purchases, shipping,
returns, exchanges — takes place in the action-packed weeks between
Thanksgiving and mid-January. And so, like every other major retailer and
logistics company, Amazon has to hire tens of thousands of temporary workers
each year. This year, it will add 120,000. And it has to train them and put
them to work quickly, lest they lose interest or seek other positions.
As we’ve noted, filling any position is getting increasingly harder for
companies. The United States has now had a record 74 straight months of job
growth, with 15.4 million payroll jobs added since February 2010. As of
October, there were 5.5 million open
jobs in the U.S. This is a state of affairs that is good
for workers and not so great for companies. Which is why we’re finally
seeing some
upward pressure on wages.
Amazon
is responding with a mix of savvy reinvention and old-fashioned carrots. As
the Wall Street Journal described, instead of spending six
weeks training new hires in classrooms on the ins and outs of warehouse
operations, Amazon is slashing the time to as little as two days, and sends new
hires to the floor immediately. It can do so because the company is using
technology — algorithms, touch screens, order management systems — to take some
of the complexity out of the work.
As for
carrots, the company is making the seasonal work more attractive by offering
more people the potential to transition to full-time positions. Last year,
the Journal reports, about 14 percent of those who signed on
for several-week stints became full-time employees, attracted by “perks such as
prepaid tuition for warehouse workers who remain on the job for at least a
year.”
Paying more, making work more attractive, and
offering perks is one tried and tested way of meeting the need for labor when
labor markets are tight. Another tack is to design machines, systems, and
consumer experiences that reduce or eliminate the need for human labor.
Amazon
is doing that, too. The New York Times reported
in December that Amazon is now experimenting with a
retail concept dubbed Amazon Go. It has built an 1,800-square-foot store in one
of its office buildings in Seattle that should start operations next year. Open
at first only to Amazon employees, it will be stocked with drinks, snacks, and
prepared meals. One thing it won’t be filled with is many retail employees. The
store will be outfitted with technology — a smartphone app, scanners, sensors —
that will enable people essentially to load goods into their bag, then walk out
and pay without stopping at a check-out lane.
Amazon
thus encapsulates one of the dichotomies of the U.S. economy at this stage of
the economic cycle. The demand for labor, which is somewhat expensive and
growing more so, is high because economic activity continues to rise. And while
technology can in some instances obliterate classes of human jobs (e.g.,
stenographers), it doesn’t do so across the board. Not by a long shot. Machines
are expensive to build, program, and maintain, they can’t come close to
performing the full range of human activity, and many customers
explicitly prefer to deal with humans rather
than machines. All of which is pushing companies to think imaginatively about
how to make jobs more appealing, pleasant, and satisfying. And at the same
time, companies — sometimes even the same companies — are deploying capital expertise
to figure out how to get more work done with fewer humans.
Daniel Gross
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