5/5/2019 Amazon's "Offer": Why the Company Pays Workers to Quit - The Atlantic

BUSINESS

Why Amazon Pays Some of Its Workers to Quit

The company’s unusual offer—to give employees up to $5,000 for leaving—may
actually be a way to get them to stay longer.
ALANA SEMUELS FEB 14, 2018

Warehouse workers at an Amazon facility in New Jersey  (JULIO CORTEZ / AP)

On Monday, Amazon reportedly began a series of rare layoffs at its headquarters in

Seattle, cutting several hundred corporate employees. But this week, something
quite different is happening at the company’s warehouses and customer-service
centers across the country: Amazon will politely ask its “associates”—full-time and
part-time hourly employees—if they’d prefer to quit. And if they do, Amazon will
pay them as much as $5,000 for walking out the door.

Officially called “The Offer,” this proposition is, according to Amazon, a way to
encourage unhappy employees to move on. “We believe staying somewhere you
don’t want to be isn’t healthy for our employees or for the company,” Ashley
Robinson, an Amazon spokesperson, wrote to me in an email. The amount full-
time employees get offered ranges from $2,000 to $5,000, and depends on how
long they have been at the company; if they take the money, they agree to never

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work for Amazon again. (The idea for all this originated at Zappos, the online shoe
retailer that Amazon bought in 2009.)

Considering that Amazon reportedly already has high turnover—it is a famously

efficient company that asks a lot of its workers—it may seem surprising that it
would incentivize workers to walk away. Many employees at Amazon’s
warehouses, as I’ve written before, say that they are constantly pressured to work
harder and faster (and get fired if they don’t), and that the jobs are physically and
psychologically grueling.

When I asked Amazon about these workers’ complaints, the company said that the
top priority of its fulfillment centers is the success and well-being of its employees.
No worker is ever dismissed without good reason, Robinson told me. And as the
company grows, she added, it is “strongly in our interests” to retain existing
employees. But that just makes The Offer seem more puzzling. If Amazon wants to
retain employees, why would it pay them to leave?

With The Offer, Amazon seems to be making the calculation that weeding out a
single unengaged worker is worth as much as multiple thousands of dollars. But
there might be other, less obvious effects of providing The Offer that serve to
benefit Amazon, according to some behavioral economists. The Offer might in fact
be a way to make employees stay longer than they otherwise might.

The reasoning goes like this: Employees resist an initial temptation—to quit
Amazon and walk out with cash—and by resisting it, they may actually feel more
committed to their jobs, said Ian Ayres, a professor at Yale Law School who wrote
about the concept of The Offer in his book Carrots and Sticks: Unlock the Power of
Incentives to Get Things Done. Amazon employees who evaluate The Offer and then
turn it down have decided they like the company enough to stay a little longer.
They then want their future behavior to match that feeling, Ayres said.

When I talked to Katherine Milkman, a professor at the Wharton School at the

University of Pennsylvania, she brought up a similar idea, from the realm of social
psychology. She talked about the mental pressure humans feel to resolve cognitive
dissonance—if people have two conflicting beliefs, they’ll try to rationalize one to
make it fit with the other. In this case, workers may dislike their jobs at Amazon,
but if they turn down The Offer, it means they passed on a chance to quit. It’s likely
that they’ll then try to convince themselves that they actually like working at
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Amazon, Milkman said. To pick a more extreme example of this phenomenon,

when people join a cult that says the world is going to end on a certain date and
then it doesn't end, they tend to end up believing more strongly in the cult, because
they can’t put up with the cognitive dissonance between what they believe and
what actually happened.

Milkman also brought up “escalation of commitment,” another concept studied by

behavioral economists. The idea is that when people put a lot of money or effort
into something and it appears to be going badly—perhaps they bought a stock and
the share price is tanking—they often double down on their commitment. “They
say, ‘I want to see this turn around—I don’t want it to turn out badly,’” Milkman
said. When employees see that they’ve lost $5,000 by not taking The Offer, they
might mentally recommit to the company, trying to do better at their jobs and
enjoy them more.

Amazon is just one of dozens of companies (many of them tech firms) that are
looking for ways to use behavioral-economics findings to try to make their
companies run more efficiently, and, in some cases, make their employees happier
and healthier. Google, for instance, has conducted a number of experiments in its
cafeterias to nudge employees toward eating vegetables or cutting down on the
number of M&M’s they consume. (Maya Shankar, who had founded the Social and
Behavioral Sciences Team in the Obama White House, now runs a behavioral-
science division at Google.) Uber uses digital nudges in its app to try and motivate
its drivers to pick up more fares and work longer hours. “I think companies are
recognizing that there’s a lot to be learned from research about how to build smart
incentive systems and use behavioral science to design tools that aren’t just cash,”
said Milkman.

An important caveat about The Offer is that—regardless of how it may register in

an employee’s mind—the people who do take it don’t actually walk away with
$5,000. A big chunk of the payment is taxed, and employees who might have
received benefits (in the form of 401(k) contributions or shares of stock) if they
stayed to a certain date might not be around long enough for those benefits to vest.
John Burgett, a current Amazon employee who has worked various positions in a
warehouse in Indiana since 2014 and blogs about his experiences at Amazon
Emancipatory, estimated that if he took The Offer in early 2017, he would have
received a $3,000 payout. But he says he also would have lost a portion of his

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401(k), which would not vest until he had been with the company for three
continuous years, and also would have lost four shares of Amazon stock that would
not vest until the summer of 2017. He also figured the company can pay a new
employee less than it pays him, since he has received a few raises over the years.
(At the time of his calculations, he made $13 an hour.) “I’ve considered it, but I’ve
always said it’s a bad deal,” he told me.

Behavioral economics aside, part of Amazon’s reasoning for issuing The Offer is
probably straightforward: It wants to prod unhappy employees to leave. And each
year, some people—“a small percentage,” according to Amazon—do take the
company up on it. They include Jim Perota, who is now 60, and worked for
Amazon’s distribution center in Chattanooga for three years. He says he hated the
job. He says he lost 30 pounds working at Amazon because he was on his feet so
much, picking items off shelves and putting them in bins, and also packing goods
into boxes. His breaks were only 15 minutes, but it would take 10 minutes to get to
the break room, so he’d sit on stairs, waiting for the work to begin again, he told
me. Perota had worked for the postal service, as a disc jockey, and for the U.S.
Census, but working for Amazon “was the most brutal, and it took the biggest toll
on my body,” he said. But he couldn’t quit, because he needed the health
insurance, he said.

But then Obamacare came to Tennessee. In 2014, Amazon presented The Offer to
employees at Perota’s warehouse on a Tuesday in March. On Thursday of that
week, Perota signed up for Obamacare. On Friday, he took The Offer and quit his
job. It was one of the best decisions he ever made, he said. “I felt pretty liberated
when I walked out those doors for the last time,” he said. He now works as a
nighttime security guard.

In the end, The Offer wasn’t a financial boon for Perota. He received $3,000 from
the company, but says he more or less broke even because the money was taxed
heavily, and he lost the employer contributions in his 401(k), because he had not
been with the company long enough to walk away with it. But that didn’t matter, he
told me. What mattered was that he got out.

We want to hear what you think about this article. Submit a letter to the editor or write
to letters@theatlantic.com.
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