[nickff]

Most companies’ largest expense is labor/wages (usually somewhere on the order of 25-50%), and profit margins are usually on the order of 0-5%. Increasing pay or benefits substantially would increase costs by a lot more than 0.5%.

[vel0city]

Sure, 0.5% is hyperbole on my part. Sorry. It's not like a 20% bump in costs for these workers would result in a 20% bump in prices or anything like that.

Their margin on that retail item is probably 30-40% of the cost of that product though. Let's assume the workers' benefits and wages in question here are 35% of Amazon's costs. If there was a 20% increase of that labor cost, that's going from 35% to 42% of the total share of costs, or an increase of 7% of the total costs. But that's 7% of the 30-40% of their markup. For a product with a 40% markup and they were to just pass that entire cost along to the consumer, it's a 1.6% increase in price.

So like in this hypothetical, which is not anywhere near real numbers for Amazon, we could give these workers a 20% benefit bump for increasing prices 1.6%.

[nickff]

I don't understand how you got down from 7% down to 1.6%. I think you are not counting COGS as an expense, and that's where the error comes from. If your assumptions are otherwise correct, I think you'd get roughly a 7% increase in prices to sustain the 20% bump in wage expense.

[vel0city]

I am including COGS in this; that's the retail price minus the markup. The markup is all the rest of Amazon's costs, of which I agree wages for workers are probably somewhere around 30%ish.

Are you suggesting the warehouse worker's benefits and pay is really 25-50%+ of the final purchase price of the good?? That'd be an extraordinarily high amount of cost.

[nickff]

Yes, though I am including delivery and support staff with warehouse workers (basically everyone who is working 'on the floor'). More than half of their employees are categorized as "laborers and helpers", and there are a number of other categories that seem similar. https://assets.aboutamazon.com/64/79/d3746ef14fd99cc6be94532... (I only found this after your latest comment).

The largest categories of employees tend to dominate most companies' cost structures. I would like to run some numbers to see what the likely distribution is here, but the annual filings are quite sparse (in terms of income statement details), and I don't have the time to do an extensive analysis.

[vel0city]

> Online retail North America booked $65.55bn in sales

> Amazon estimates the price of labour, labour-related productivity costs and cost inflation was $2bn in Q3

https://www.theregister.com/2021/10/29/amazon_q3_2021/

It cost $2b-4b in labor to do ~$65.55b in sales. Their labor cost of revenue was 3-6%. Pretty far from 50%, wouldn't you say?