Ryan Bourne explains for the Cato Institute why Amazon’s recent decision to raise its minimum hourly pay to $15 should have no influence on government regulations.

If one of the world’s biggest companies can raise their internal “minimum wage,” then why can’t others?

This kind of argument is logically flawed. It’s important to remember that Amazon has made this decision considering its own perceived interest. It might be because it figures the bad publicity surrounding the firm had the potential to dent sales. It might be because they figured out that they could absorb any increased costs much more easily than other proposed policies in both countries (such as Senator Sanders ‘Corporate Welfare Tax’ or the UK government’s proposed digital services tax).

It might be because they expect future minimum wage hikes, and so are getting ahead of the curve. It might be because they can adjust compensation in other ways such that the move doesn’t bring a dramatic cost increase. It’s also possible that the company plans on making labour-saving technological investments anyway, so can couple it with efficiency improvements in the long-term with the added bonus of good PR today.

Whatever the thinking, Amazon thinks its business model can cope. But this tells us nothing about the feasibility of pay hikes for the low paid across the whole economy through raising minimum wage rates. Remember, the most robust evidence from Seattle still suggests that statutory pay hikes reduce job opportunities and maybe even lower overall incomes for the low paid as a cohort.