Amazon is facing a looming crisis: It could run out of people to hire in its US warehouses by 2024, according to leaked Amazon internal research from mid-2021 that Recode reviewed. If that happens, the online retailer’s service quality and growth plans could be at risk, and its e-commerce dominance along with it.
Raising wages and increasing warehouse automation are two of the six “levers” Amazon could pull to delay this labor crisis by a few years, but only a series of sweeping changes to how the company does business and manages its employees will significantly alter the timeline, Amazon staff predicted.
“If we continue business as usual, Amazon will deplete the available labor supply in the US network by 2024,” the research, which hasn’t previously been reported, says.
The report warned that Amazon’s labor crisis was especially imminent in a few locales, with internal models showing that the company was expected to exhaust its entire available labor pool in the Phoenix, Arizona, metro area by the end of 2021, and in the Inland Empire region of California, roughly 60 miles east of Los Angeles, by the end of 2022. Amazon’s internal report calculated the available pool of workers based on characteristics like income levels and a household’s proximity to current or planned Amazon facilities; the pool does not include the entire US adult population.
Amazon spokesperson Rena Lunak didn’t refute the contents of the internal report Recode obtained but declined to comment on it.
The research provides a rare glimpse into the staffing challenges that Amazon is now facing behind its slick veil of one-click online shopping and same-day Prime delivery. And it pointedly reveals how much of Amazon’s business success and its longtime position as a darling of Wall Street investors is dependent on its workforce of more than 1 million people who pick, pack, and ship its customers’ orders nearly 24/7.
The leaked internal findings also serve as a cautionary tale for other employers who seek to emulate the Amazon Way of management, which emphasizes worker productivity over just about everything else and churns through the equivalent of its entire front-line workforce year after year.
In the past, that churn wasn’t a problem for Amazon — it was even desirable at some points. Amazon founder and former CEO Jeff Bezos saw his warehouse workforce as necessary but replaceable, and feared that workers who remained at the company too long would turn complacent or, worse, disgruntled,according to reporting by the New York Times. But now, as the internal report Recode reviewed shows, some inside Amazon are realizing that strategy won’t work much longer, especially if leaders truly want to transform it into “Earth’s best employer,” as Bezos proclaimed in 2021.
To be sure, part of Amazon’s turnover issue relates to how some employees view working in a warehouse as a brief pit stop on the way to better things. But some workers have long complained of stresses unique to Amazon’s workplace, from the pace and repetition of the labor to the unrelenting computerized surveillance of workers’ every move to comparatively high injury rates. In a company survey of 31,000 workers who left Amazon that was referenced in the report, some former Amazon workers say it’s worse to work at Amazon than some big-name competitors like Walmart or FedEx. In that survey, those who joined another employer soon after leaving the tech giant “rated Amazon significantly worse on work fitting skills or interests, demands of the work, shift length and shift schedule.”
With traditional competitors ramping up their investments in e-commerce warehouses, Amazon is no longer a slam-dunk top choice for those seeking work in these types of facilities and the starting minimum wage that comes along with it. And that dynamic is already playing out in some parts of the country.
Danger zones
In the Inland Empire region of California, for example, Amazon may cycle through every worker who’d be interested in applying for a warehouse job by the end of 2022, the internal report warned. One of the reasons is that Amazon is increasingly finding itself in a bidding war for workers with rivals in the area, which is a key logistics region because it is within a two-hour drive of 20 million potential customers and two of the largest container ports in the US.
“We are hearing a lot of [Amazon] workers say, ‘I can just go across the street to Target or Walmart,’” said Sheheryar Kaoosji, co-executive director of an Inland Empire nonprofit called the Warehouse Worker Resource Center. Kaoosji added that Walmart is offering some workers with past warehouse experience as much as $25 an hour. An Amazon executive told Reuters in late 2021 that the company was bumping the average starting wage for new hires in the US to more than $18 an hour, attributing the decision to intense competition among employers. He also said Amazon had increased hiring bonuses to as much as $3,000 in some geographies.
And internal forecasts showed the situation was dire in Phoenix, Arizona, with Amazon projected to exhaust its entire potential workforce by the end of 2021. The Phoenix metro area has been a key market for Amazon since it opened its first warehouse there in 2007. The company currently operates more than 20 facilities in the region. But attrition at Amazon’s facilities in the area grew from 128 percent in 2019 to 205 percent in 2020, as the pandemic upended labor markets and online shopping boomed, putting pressure on fulfillment center employees.
As a result, Amazon seemed to have reversed, or stopped enforcing, some workplace policies at Phoenix warehouses amid the labor shortage, according to a former manager.
“They were so concerned about attrition and losing people that they rolled back all the policies that us as managers had to enforce,” Michael Garrigan, a former entry-level manager at Amazon warehouses in Phoenix from 2020 to early 2022, told Recode. “There was a joke among the … managers that it didn’t matter what [workers] got written up for because we knew HR was gonna exempt it. It was almost impossible to get fired as a worker.”
Lunak, the Amazon spokesperson, declined to comment on Garrigan’s claims.
The internal research also identified the regions surrounding Memphis, Tennessee, and Wilmington, Delaware, as areas where Amazon was on the cusp of exhausting local warehouse labor availability. Amazon’s models used for this internal research were 94 percent accurate in predicting the US geographies where Amazon was significantly understaffed in the lead-up to the Amazon Prime Day shopping event in June 2021, the report noted, which contributed to delivery delays for customers in those markets. The warnings about Amazon’s labor supply shortages indicate that in at least some markets, Amazon shipments could face more severe delays in the future.
Despite its looming labor crisis, Amazon temporarily overcorrected in some markets, going from understaffed to overstaffed. Amazon’s chief financial officer had previously said that the company was understaffed by 10,000 employees during the end of 2021, before the omicron Covid-19 variant had wreaked havoc on much of the US. But in April, the company revealed that it was actually overstaffed in some areas in early 2022 as the first wave of omicron subsided and employees returning from sick leave worked alongside new hires who had been recruited to backfill their roles.
Amazon spokespeople have said that the company will count on natural attrition rates to solve much of the current overstaffing problem, and the Wall Street Journal reported on Thursday that a top company official pitched a plan internally to “[thin] out its worker base through attrition.” It’s unclear where exactly Amazon is overstaffed and how long it will take to rightsize its workforce, but it seems unlikely that it is thinning staff in competitive locales like Phoenix and the Inland Empire where it had already exhausted much of the labor pool. It’s also unclear how the current economic climate will impact consumer spending and, relatedly, Amazon’s hiring needs.
For better or worse, the approach of reducing the temporary overstaffing issue through attrition should work for Amazon because it has long churned through its workers at a rapid clip. Amazon’s attrition rates were 123 percent in 2019 before jumping to 159 percent in 2020, according to internal data in the report Recode obtained, while turnover rates across the US transportation and warehouse sectors were much lower: 46 percent and 59 percent respectively in 2019 and 2020, according to Bureau of Labor Statistics estimates.
Turnover in the US retail industry was slightly higher than that — 58 percent and nearly 70 percent respectively in 2019 and 2020 — but still only about half as bad as Amazon’s. The high rates of attrition “made some [Amazon] executives worry about running out of workers across America,” the New York Times reported in 2021, though the article did not include specific timelines.
The leaked report viewed by Recode reads like an attempted wake-up call — along with potential solutions to avert the crisis — for some company leaders who long exhibited a nonchalant attitude toward employee attrition.
Amazon has a variety of potential solutions for its people problem, but they will require the company to shift its mindset and overcome practical or logistical challenges.
On the surface, simply employing its current workers for longer would be a big help. The turnover rate disparity between Amazon and industry averages shows there is ample opportunity for the company to keep employees longer and delay the arrival of the day when it won’t have workers left to recruit. This is not some unsolvable, mysterious problem; the BLS stats show that plenty of companies retain workers much better than Amazon does. In fact, Amazon’s own data shows that nearly 90 percent of new workers say they want to stay at their jobs for at least six months. If Amazon could bring attrition rates down to its 2019 levels, which were still above 100 percent, the company would gain three more years of hiring runway, according to the internal projections
