Amazon's no-frill, low- wage, high-turnover labor model is showing signs of stress.
According to a leaked internal research memo seen by Recode, Amazon could run out of workers to hire for its warehouses by 2024, putting its service quality, growth plans and quick labor model in jeopardy.
According to a leaked report, if we continue business as usual, Amazon will deplete the available labor supply in the U.S.
Changing the way it manages its employees is the only way to delay the labor crisis by a few years, according to the memo.
There are worse shortages in some regions. The report indicated that the labor pool in the Phoenix, Arizona metro area will be exhausted by the year 2021.
The available pool of workers was calculated by Amazon on the basis of income level and household proximity. The report said that the calculations were accurate in predicting which U.S. regions would be understaffed in the lead up to Amazon Prime day.
Some of the areas are close to places where Amazon is planning to sublet warehouse space. In warehouses in New York, New Jersey, Southern California, and Atlanta, the company is looking to lease 10 million square feet of space and end lease agreements with landlords.
A request for comment was not returned by the time of publication.
Amazon has a talent model designed for turnover at its warehouses which employs tens of thousands of people to pack and ship the company's seemingly endless stream of orders.
The method used by Amazon to keep workers motivated and flexible worked for a long time, but it seems that the rate of Churn has gotten out of control. According to the leaked memo, Amazon had an attrition rate of 15% in 2020. According to the Bureau of Labor Statistics, the turnover rate in the transportation and warehouse sectors in the U.S. is well above average.
The report said that Amazon needs to bring down its attrition rates in order to get more years of runway.
Workers at Amazon have complained about the stresses unique to their warehouses, from repetitive labor to the computerized face-recognition surveillance. The company was criticized for offering water or soda and a candy bar or bag of chips as an incentive to speed up work on Easter Sunday.
According to payscale.com, Walmart and FedEx are more attractive places to work due to the issues they face.
Amazon has raised its starting wage for new hires in the U.S. to $18 an hour, but it could be considering increasing them more, according to a report. The memo predicted that Amazon would hire more workers if it increased its minimum wage by a certain amount.
More of Amazon's work could be automated. Even with the "conservative" goal of improving warehouse productivity by 25% through automation, this would only push back the labor crisis.
The need for workers has led to the end of some policies at Amazon.
Michael Garrigan, a former entry-level manager at Amazon warehouses in Phoenix, told Recode that they rolled back all the policies that managers had to enforce. Managers used to make a joke that it didn't matter what workers got written up for. It was difficult to be fired as a worker.
Unions may have more bargaining power because of the worker shortages. On April 1st, Amazon workers at a New York warehouse voted to join the independent Amazon Labour Union, ending the company's opposition to unionization.
According to a leaked memo, Amazon is trying to avoid a growing tide of unionization by blocking posts on an internal messaging app. Those who contained words like "union" and "restrooms" would be flagged by the chat room.
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