Tech

Morgan Stanley explains how unions could affect Amazon's bottom line

Key Points
  • Morgan Stanley analysts say Amazon's costs could rise as a result of the successful union vote on New York's Staten Island.
  • With the potential of additional union elections, "Every 1% of Amazon's front-line workforce that unionize would lead to an incremental $150 million of annual [operating expenses]," the analysts wrote.
  • The e-commerce giant employs about 750,000 workers across its U.S. fulfillment and transportation operations.

In this article

Workers and supporters hold signs after filing a petition requesting an election to form a union outside the National Labor Relations Board (NLRB) regional office in the Brooklyn Borough of New York, on Monday, Oct. 25, 2021.
Gabby Jones | Bloomberg | Getty Images

Amazon workers on New York's Staten Island on Friday voted to join a union, and Morgan Stanley analysts say the landmark decision could drive up costs for the e-commerce giant depending on how the situation evolves.

The Amazon Labor Union, which is representing workers at JFK8, has called for the company to increase hourly wages for all workers to a minimum of $30 an hour. The average hourly starting pay at U.S. fulfillment centers is $18 an hour, according to Amazon. The union also is seeking vacation improvements and more paid breaks, among other demands.

In a note to clients on Monday, Morgan Stanley analysts estimated that 2023 operating expenses could increase by $203 million if Amazon boosts JFK8 employees' hourly wages to $29.

That's a tiny fraction of the company's annual operating expenses, however, which topped almost $445 billion last year.

The election at the Staten Island warehouse, known as JFK8, has broad implications. It is the first union in Amazon's sprawling U.S. operations — and could be the beginning of additional attempts to organize the company's vast number of warehouse and delivery workers. A second union election is set to kick off at another Staten Island site later this month.

Morgan Stanley analysts said they "don't expect a rapid trend towards unionization." But if more warehouses opt to unionize, Amazon's costs are expected to increase.

"Every 1% of Amazon's front-line workforce that unionize would lead to an incremental $150 million of annual [operating expenses]," the analysts wrote.

Amazon employs roughly 750,000 workers across its U.S. fulfillment and transportation operations, Morgan Stanley analysts said.

The new union will now have to negotiate a contract with Amazon, which could be a protracted fight. Amazon has said it is exploring whether to file objections against the National Labor Relations Board, which could delay the process.

In a statement Friday, Amazon accused the NLRB of improperly influencing the vote. It didn't specify instances of any meddling, but said the company and some business-advocacy groups witnessed the same behavior.

CNBC's Michael Bloom contributed reporting to this story.

WATCH: Workers vote for union at Amazon NYC warehouse

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Workers vote for union at Amazon NYC warehouse