Join our community of smart investors

Can Big Tech fend off unionisation?

David and Goliath battle in Silicon Valley
April 7, 2021
  • Amazon workers in Alabama have voted in a union election
  • Google workers formed the first union in the big tech group earlier this year

With reports of employees urinating in bottles, fainting in warehouses and big-brother systems that monitor every minute that is “time off task”, it is a wonder that Amazon (US:AMZN) has been able to fend off unionisation for so long. Or perhaps not, given the internal anti-union campaigns it has mounted over the years. 

“We are not anti-union, but we are not neutral either,” says a smiling cartoon Amazon manager in a leaked training video shared with WholeFoods in 2017, after the grocer was absorbed into the e-commerce giant. “Our business model is built upon speed, innovation, and customer obsession—things that are generally not associated with union. When we lose sight...we jeopardize everyone’s job security.” 

This language might shock readers in the UK - but internal campaigning such as this is commonplace in the US, where private sector union membership stands at just 6.3 per cent, compared with 13.3 per cent in the UK. 

This makes the growing movement to unionise in Big Tech, the powerhouse of the American market, all the more unusual. Earlier this year, around 200 workers at Google parent Alphabet (US:GOOGL) formed the first union in the so-called 'FANMAG' group of companies, including temporary workers, vendors and other contractors. This shadow workforce reportedly outnumbers Google’s full-time employees, although is not afforded the same benefits. 

Its formation may have started a domino effect. This week in Alabama, Amazon warehouse workers cast their votes to decide on forming their own union. These employees are small in number - but if the outcome is positive, it could trigger a chain reaction for other warehouses and driver networks up and down the US. Worker action will likely add to the tech titan’s legal headaches, while it is already being scrutinitsed by international lawmakers over competition issues. That is not to mention that from a shareholder perspective, a union may well affect Amazon’s bottom line. 

 

Encouraged to vote 

There is a growing wave of unionisation coming from the west coast. But Amazon and Google workers’ incentives are not the same. At Amazon, the desire to unionise is coming from the ground-up. 

Warehouse workers and delivery drivers are calling for change, after years of demands for better welfare often being ignored - or even seemingly flat out denied, as per Amazon’s Twitter (US:TWTR) account. The company has since admitted that the post was an “own goal”. 

But at Google, unrest is coming from all levels of the business, with the union taking issue with not only the treatment of workers, but also top-level business decisions. 

In 2018, workers staged a major walkout in global offices over the alleged mishandling of sexual harassment allegations. There have been objections to its military contracts, its presence in China and, most recently in December last year, workers demanded an apology from Google after it fired Timnit Gebru, who had been in charge of ethics in its artificial intelligence (‘AI’) technology. 

 

It’s not Day 1 anymore

Amazon’s ‘Day 1’ mentality, which pedals an entrepreneurial start-up dogma, has driven the company’s aggressive growth, with both revenues and margins simultaneously expanding since 2011. But the latter is largely a product of its less expensive cloud computing business, Amazon Web Services - whose current head Andy Jassy will take over from Jeff Bezos as CEO this summer. 

But the ‘Day 1’ mission to lower costs and hike up productivity is arguably not compatible with what Amazon looks like today. Its e-commerce business is far too labour intensive - and relentlessly pushing for the maximum efficiency of a human workforce does not look like a sustainable strategy. 

The outcome of the Alabama vote should become clear in the coming weeks, and will follow a ruling by the National Labor Relations board that Amazon illegally retaliated against two internal critics when it fired them last year. Even if the poll does not reveal a positive outcome for organisers, it seems unlikely that this unrest will dissipate any time soon. 

 

Momentum in the Valley

The company regularly touts its starting pay per hour, which is more than double the federal minimum wage. In a statement, a spokesperson for Amazon pointed to the group’s “starting wages of $15 or more, health care from day one, and a safe and inclusive workplace.” The statement added: “We encouraged all of our employees to vote, and their voices will be heard in the days ahead.”

But Amazon’s ever-growing margins are supported by the grueling demands it allegedly places on its employees on the ground. If it wants to stay in the same ballpark for productivity, it will need to invest in the relationship with disgruntled workers. 

At Google, the union’s issues permeate throughout all of the company, to the very highest level of decision making. But the problems are not singular to Alphabet - Facebook (US:FB) too has similarly drawn criticism for its AI technology, especially in its role in the spread of misinformation. Last year, hundreds of Facebook employees protested the company’s initial refusal to retract posts by President Trump, staging a virtual walk out. It is a slippery slope towards more formal action - and with a precedent already in place, big tech unions may enter the new normal in 2021.