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‘Let’s thank Amazon, for pushing us to do better when it comes to compensating our employees.’ Photograph: Bebeto Matthews/AP

Is Amazon’s $15 minimum wage raise ‘bad’ for small business?

Amazon has been the primary reason why companies – large and small – have gone out of business. But it has also helped a new group become entrepreneurs

WT24 Desk

This week, Amazon announced that it was raising its minimum wage for all workers to $15 an hour. The move will affect more than 250,000 of their employees, as well as more than 100,000 seasonal workers, The Guardian reports.

“We listened to our critics, thought hard about what we wanted to do, and decided we want to lead,” said Jeff Bezos, the company’s founder and CEO. “We’re excited about this change and encourage our competitors and other large employers to join us.” (Bezos this week topped the richest people in the world according to Forbes magazine, beating out Bill Gates spot by a staggering $63bn).

Raising its own minimum wage isn’t the only thing the company is doing on the issue. Bezos also committed that Amazon would be advocating for a raise in the federal minimum wage from its current $7.25 an hour, because doing so would “have a profound impact on the lives of tens of millions of people and families across this country”.

With this highly publicized move the company is not only attempting to soften its image among critics that have accused it of paying its workers too little and working them too hard, but it’s also taking a shot across the bow at its competitors. So should merchants be worried? Is this yet another example of how Amazon is “bad” for small businesses?

Sure, Amazon has been the primary reason why many businesses – large and small – have gone out of business. Visit your mall or take a walk down Seventh Avenue in New York City and you’ll see retail locations that were once the site of clothing, books, gifts and office supplies stores now either vacant, occupied by “experience” retailers like restaurants, nail salons and smoothie shops or rented out by non-retail businesses and government organizations. Amazon has helped to put giant retailers like Borders, Circuit City and Linens ‘n Things out of business and has driven out many smaller mom and pop shops that just couldn’t compete with its pricing and convenience.

But wait. Something else has been happening.

A whole new group of people have become entrepreneurs. These are full-time business owners, part-time hobbyists and even corporate employees with side-gigs that are making money as Amazon merchants. In fact, according to a Small Business Impact Report released by the company earlier this year, there are millions of small merchants selling their wares on Amazon (one million of those in the US), accounting for more than half of the products sold on the site. Just this past month the company launched a new site – Amazon Storefronts – that is devoted entirely to highlighting the products and stories of its merchants. (Disclosure: I am not being compensated by Amazon to write this piece, but my company has done work for Amazon in the past.)

Amazon offers fulfillment, billing, marketing and customer service tools that help its small merchants reach customers that were previously unreachable. Sure, their requirements for customer service, product quality and transparency can sometimes be draconian, and Amazon certainly takes a healthy cut of the profits. But for those that play by their rules, the opportunities can be significant. Amazon has given rise to countless startups and small companies looking to take advantage of its investment in warehouse logistics and delivery. And not all businesses have been shuttered by the online giant. Independent bookstores are thriving, as are smaller retailers that have figured out how to provide an extra level of service that customers will never be able to get online.

Now, Amazon is raising its minimum wage, which is another challenge to small firms who may not be able to afford to pay $15 an hour. For starters, let’s be grateful that the private sector is taking the lead on this issue and not the government. Let’s also thank Amazon, for pushing us to do better when it comes to compensating our employees. As I’ve written before, you get what you pay for. With Amazon’s decision to up its wages, many small companies are going to be forced to respond.

So how will your firm meet this challenge? Maybe you’ll pay more and absorb the costs – or raise prices. Perhaps you’ll find other ways to compensate your people through better time off, additional fringes and more flexibility. Or, how about being better at selling the benefits of working for a small firm where an employee can really contribute, interface with owners and not be tied down by corporate rules, policies and gobbledegook? It’s also possible that a $15 an hour wage will be what finally makes you invest in better technology to make your business more efficient and help keep your payroll under control.

There are ways for a small business to respond to Amazon’s wage increase – and most will do so successfully because it’s the right thing to do to pay people a fair wage. Those firms – as well as their employees – will be better off in the long run for it.

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