Amazon.com (AMZN) is lifting the average minimum pay for its package delivery drivers to avert union threats. The global e-commerce giant is investing $2.1 billion in its Delivery Service Partner (DSP) program this year. Plus, it will invest another $660 million over the next year in DSP rate card increases and bonuses. This will raise the average national pay for drivers delivering Amazon parcels to $22 per hour, reflecting a 7% jump over last year’s pay of $20.50 per hour.
About Amazon’s DSP Program
Amazon started the DSP program in 2018 and has invested $12.3 billion in it to date. Through this program, Amazon partners with small local driver-hiring companies. Amazon’s investments go towards the maintenance of safety programs, training, and additional pay for the contracting firms.
Amazon can only dictate the minimum pay to the DSP each year, while the latter decides the range depending on the region serviced by the drivers. For this year, Amazon drivers have a minimum pay range between $19.50 and $25.25 an hour. Part of the investment will go to update the technology to simplify driver’s ease of navigation. Also, Amazon is launching an app for drivers to easily monitor their accrued wages.
Amazon Seeks to Avert Driver Unionization
This is the biggest annual investment Amazon has made in the DSP program so far, as unionization threats continue to escalate. Labor groups have been arguing that by treating their parcel delivery drivers as third-party contractors, companies such as Amazon and FedEx (FDX) are dodging their responsibilities towards them.
The National Labor Relations Board (NLRB) is pushing for Amazon to be called a joint employer of the DSP since it controls drivers’ wages, determines driver routes, and also sets delivery targets. However, Amazon says they are merely third-party workers and not its own employees.
Additionally, the International Brotherhood of Teamsters is pushing for strikes at Amazon with a focus on the DSP driver community. The Amazon Labor Union in New York also recently voted to join the Teamsters, adding more pressure on the company.
Is Amazon a Buy, Hold, or Sell?
Wall Street is highly optimistic about Amazon stock’s trajectory, considering its well-established business lines, including e-commerce, Amazon Web Services, advertising services, and logistics operations.
On TipRanks, AMZN stock commands a Strong Buy consensus rating based on 42 Buys and one Hold rating. The average Amazon.com price target of $222.88 implies 19.2% upside potential from current levels. Meanwhile, AMZN shares have already gained 23.1% so far this year.
