Reference no: EM133026064

On October 2018, Amazon announced to raise its hourly minimum wage to $15 and to give raises of at least $1.25 per hour to workers whose hourly wage already exceeded $15. "We listened to our critics, thought hard about what we wanted to do, and decided we want to lead," Bezos said in a statement. "We're excited about this change and encourage our competitors and other large employers to join us." At the same time of increasing the minimum wage, Amazon stopped the monthly bonuses (up to 8 percent of monthly income) and stock awards (one share at the end of every year, worth $1,750 based on October 2018 stock price) for its hourly workers. According to Amazon's spokesperson, "The significant increase in hourly cash wages more than compensates for the phase out of incentive pay and restrictive stock units. In addition, because it's no longer incentive-based, the compensation will be more immediate and predictable."

Question:

-Please analyze these compensation changes with the strategic messaging model.

-Describe any sorting and incentive effects on the part of workers, and the resulting implications for Amazon's benefits and costs.

-What could Amazon do to keep and improve employee performance under the new compensation system?