Drew Drazy
Amazon has recently laid off more than a hundred employees in an Ohio third party delivery service. This is reportedly only the beginning of a 925 employee “mass layoff” by the company. When it comes to a massive company such as Amazon, you may wonder why they would want to downsize their employee numbers with the Christmas season right around the corner. From a consumer standpoint, more employees is often associated with increased productivity and higher quality customer service. When observing this situation from a economic stand point, there may be a major problem on their hands.
One explanation could be decreasing marginal benefit with every new employee hired. The company may have over estimated their needed amount of employees and are now experiencing negative side effects. Imagine that you are trying to assemble lego pieces from a normal sized desk. Easy, right? Now add 10 more people to the desk with all of them trying to assemble pieces. Your arms would begin to run into one another and you may even grab the same piece as somebody else. A similar situation could be happening within Amazon. To apply it to the context of the article, there may be too many drivers and not enough vans to drive due to a surplus of employees and a shortage of vans.
Another explanation could be the introduction of automation in both production and delivery. When Amazon’s first warehouse opened in 1995, workers walked an average of 30 miles a day, sometimes more. Today, the average is more in the range of 10-20 miles a day. This is partially due to complaints by the employees which resulted in automation to reduce human labor. Because robots and machine are exponentially more efficient than humans, we may see the company makes changes in the direction of completely removing human labor from their warehouses all together. Machines and robots have always been seen as the way of the future for decades. Is it possible that we are at the point where we will more commonly see more robots than humans in the workplace? This would also eliminate another cost by removing the salaries of their workers and covering their healthcare.
Works Cited
“More than 100 Ohio Workers Laid off after Amazon Ends Contract with Third-Party Delivery Company.” WKYC, 14 Oct. 2019, www.wkyc.com/article/news/local/cuyahoga-county/more-than-100-ohio-workers-laid-off-after-amazon-cancels-contract-with-delivery-company/95-5f8cfa60-48dd-4587-93f9-42b99e1b5c89.
Spitznagel, Eric. “Inside the Hellish Workday of an Amazon Warehouse Employee.” New York Post, New York Post, 15 July 2019, www.nypost.com/2019/07/13/inside-the-hellish-workday-of-an-amazon-warehouse-employee/.
Dastin, Jeffrey. “Exclusive: Amazon Rolls out Machines That Pack Orders and Replace Jobs.” Reuters, Thomson Reuters, 13 May 2019, www.reuters.com/article/us-amazon-com-automation-exclusive/exclusive-amazon-rolls-out-machines-that-pack-orders-and-replace-jobs-idUSKCN1SJ0X1.
This blog is very interesting considering it has many different points brought up. One of the biggest points you brought up is how they changed from manual workers to mechanical robots which is a big argument right now. Also, I would think that Amazon workers would be happy with their working because of how well the business is doing.
ReplyDeleteYou make a good comparison with legos- it embodies the metaphor we used in class with "too many chefs in the kitchen" in specialization. You were right as my initial thoughts were questioning why Amazon of all places would need to lay off workers, but it does make sense. At some point, you're losing more money on paying people than you are gaining with the product they're making. Marginal benefit must equal marginal cost!
ReplyDeleteLike Manal said, that comparison with Legos really brought your comparison to a familiar face. To the naked eye, and with our knowledge of Amazon, we continuously think that they are a nonstop growing company. Why would they fire workers? But you also related it to one of the most basic economic concepts, which is kind of hard with our basic level knowledge and the complexity of the real world economics. I really liked this piece of how you took such a complex issue-at least to the naked eye-and related it to our everyday class.
ReplyDeleteAgastya Asthana,
ReplyDeleteIt is good to see diminishing marginal product in the real world because it really proves that economic concepts work in real life. It seems inevitable that a company like Amazon which is known to hire employees at a higher minimum wage to have a problem of employing way too many people and therefore the Marginal Cost has become so high that it is better for Amazon to lay people off in order to increase marginal product created. I like you touch based on automation because that brings up the trade-offs Amazon has to face between labor and capital. It seems likely that since Amazon processes billions of orders from across the world that it would be a viable option to automate those processes to make them not only more efficient but also cheaper in the long run.
It's nice to point out the increases to automated labor and recognizing that it is more efficient to pay for a robot once instead of paying for a human resource over and over again, however what other jobs does amazon open up by replacing human workers, there can still be the jobs of technicians to work on, repair and service the robots and that would be a high paying job that someone could reasonably live on. Also what percentage if any of these jobs are coming over seas to markets that have reduced wages and workers who won't demand the same level of workers rights?
ReplyDeleteThis article was super easy to follow and the comparison to the Legos really made it easy to understand. It really helped you make your case as most of the people reading this doesn't have in depth background knowledge on amazon so explaining why they may be cutting a huge mass of employees was much more clear to understand. I also like the comments on the ever changing artificial intelligence taking many of the human jobs away and making such a big company like amazon reduce its costs and increase profit margins.
ReplyDeleteOriginally I began reading confused with the topic because Amazon is such a huge popular organization but after reading I see how this could be an issue especially within the employment aspect. Your use of the LEGO analogy was also extremely helpful to better my understanding of the topic. It's quite scary to think about the fact that pretty soon, no one is going to be working in customer service because of the increase of technology.
ReplyDeleteI really thought you hit it on the head with decreasing marginal benefit for each worker hired. With such a mass layoff, Amazon must have greatly overestimated the amount needed, or simply did not have the capital to allow for that many workers. This also shows structural unemployment, as workers in customer service are replaced by new technology, they must learn new skills to become valuable to Amazon once again.
ReplyDeleteWhile I am aware of the fact that large businesses are beginning to replace human labor with technology and the effects this will ultimately have on the nation, I was unaware of the mass layoff by Amazon. It is scary to think about what will happen if all businesses follow this trend, as this would leave a growing number of people unemployed, and the economy would begin to function differently. Additionally, I thought your analogy of the table and legos was really beneficial for an attempt to demonstrate why Amazon could have made the decision to lay off so many employees.
ReplyDelete