Will Amazon’s Plan to ‘Upskill’ Its Employees Pay Off?

amazon retraining employees

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Wharton’s Matthew Bidwell and NYU’s Ari Ginsberg discuss Amazon’s $700 million plan to retrain its workforce.

Prime Day was a big success for Amazon this year: The two-day online shopping event held in mid-July and featuring special discounts netted higher sales than last year’s Black Friday and Cyber Monday combined, the company said on July 17.  But that wasn’t the only positive publicity Amazon received this month: On July 11, the company announced it is launching an ambitious $700 million retraining program to create “pathways to careers” for its employees in areas including health care, machine learning, manufacturing, robotics, computer science and cloud computing.

The six-year, $700 million effort covers about 100,000 employees, or about a third of Amazon’s U.S. workforce of nearly 300,000, and works out to about $1,200 a year annually for each employee. (That contrasts with a $500 spend on each employee for training by large employers with 10,000 workers or more that were surveyed by the Association for Talent Development, The Wall Street Journal reported.) The mostly free program does not require employees to stay on at Amazon; some programs pay 95% of the costs for tuition and textbooks, capped at $12,000 per employee over four years.

The move will make it easier for Amazon to hire and retain employees, gain a competitive edge over rivals, and it could help to improve its image, said experts at Wharton and New York University.

In fact, the last element is becoming increasingly important: On July 16 — in the midst of Amazon’s Prime Day success — a group of 13 Democratic members of Congress, led by Vermont senator and presidential hopeful Bernie Sanders, called for a Labor Department investigation into the company’s workplace conditions, alleging safety violations and unfair labor practices. Amazon responded by inviting Sanders and his group to visit its warehouses, repeating its invitation of last August. It has also repeatedly pointed to its pledge on worker safety.

Since 2013, seven workers have died of vehicle and equipment injuries at Amazon facilities, earning for it a listing on the so-called “Dirty Dozen” of companies prepared by the National Council for Occupational Safety and Health, a nonprofit made up of labor unions, health and technical professionals.

“While [Amazon’s training program] is an important signal to the marketplace and to workers that [it does not look at its] employees as disposable and in a callous way, there are still these safety issues that it has to address,” said Ari Ginsberg, professor of entrepreneurship and management at New York University’s Stern School of Business. “Amazon is going to have to do a little bit more to figure out how to significantly reduce these serious accidents that they’ve had.”

Safety issues aside, Amazon is taking a calculated risk in offering the training, according to Matthew Bidwell, Wharton professor of management. “There is the concern that if you give people training in transferable skills, either they leave, or the threat that they’re going to leave means that they can demand much higher wages — and that eats away any of the returns [from the] training,” he said. At the same time, employees “tend to be risk-averse when moving jobs and making a leap into the unknown,” he added.

All considered, Bidwell said economists see employers capturing net positive gains from their investments in training. The reason is “the labor market isn’t perfectly efficient,” he explained. “If the labor market is perfectly efficient, all training will be a bad idea.”

Bidwell and Ginsberg discussed what Amazon stands to gain from its retraining program on the Knowledge@Wharton radio show on SiriusXM. (Listen to the podcast at the top of this page.)

Amazon’s so-called “Upskilling 2025 pledge” aims to score on several fronts, including: equip non-technical employees with the essential skills to transition into software engineering careers; train fulfillment center staff to move into technical roles regardless of their previous IT experience; offer machine learning skills to employees with technical backgrounds, and provide employees with courses to build practical tools to operate in Amazon Web Services, its cloud platform.

Training Keeps Talent

“Generation Z is already fairly tech-savvy and is more likely to be attracted and stay in a place where they can get technology learning,” said Ginsberg. “If they feel they’re in an organization where they are not able to continue learning in the ways they would like, they will leave.”

“Amazon is going to have to do a little bit more to figure out how to significantly reduce these serious accidents that they’ve had.” –Ari Ginsberg

It also makes sense for Amazon to invest in retraining its existing employees with the skills it seeks rather than hire new talent with those skills; it will be cheaper and earn employee loyalty. As one of the biggest employers worldwide, Amazon cannot expect the marketplace to supply its needs, said Bidwell. (Amazon is the world’s second-largest employer after Walmart, according to Fortune magazine.) “You can wait for other companies and universities to train people, but that’s going to be quite slow,” he added. “Also, hiring is always a crapshoot, and a lot of the people you end up hiring are not going to work out.” It seems a much smarter idea to train “some of your people who work hard and have a good attitude, and then help move” into the jobs that call for higher levels of skills.

A Talent Imperative

Reskilling Amazon’s workforce “is necessary for survival,” said Ginsberg. “It will facilitate greater retention and make recruitment easier as the need for such talent will only grow. It will also give [Amazon] a competitive edge over companies like Walmart.”

Citing U.S. Bureau of Labor Statistics (BLS) data, Amazon said in its announcement that there are now more job openings (7.4 million) than there are unemployed Americans (6 million). The BLS anticipates some the fastest growing job areas to be those that need a high level of skills, such as medical assistants, statisticians, software developers, nurse practitioners, and wind turbine service technicians, the company noted.

An analysis of the company’s hiring data covering the past five years revealed huge growth in its talent needs in areas such as in data mapping specialists (832%), data scientists (505%), solutions architects (454%), security engineers (229%) and business analysts (160%). In the area of customer fulfillment alone, the need for people to fill highly skilled roles has increased over 400%, including jobs like those of logistics coordinators, process improvement managers and transportation specialists, Amazon added.

“It is very nice to see that even if you don’t have unions to hold people to account, employers themselves are starting to feel like they need to pay attention — that people are watching, and how they treat people matters.” — Matthew Bidwell

Help in Morale Building

The retraining could also boost employee morale, especially as fears abound of robots taking over human tasks, said Ginsberg. “[It will help] if you have employees who feel the company is actually interested not in replacing us, but in keeping us around because they will need us.” He added that while Amazon has deployed 200,000 robots globally and half of them in the U.S., in launching the retraining program, it is sending out the message that it wants to train its employees to control those robots, and not replace them, Ginsberg added.

In the current, tight labor market, employers are worried about employee turnover and retention, said Bidwell. Companies have moved away “from a model where [employment] is transactional … and are doing all they can to try and build that relationship, and hang on to people,” he added.

Amazon has the financial resources to look beyond quarterly earnings as it invests in such training programs, “and that’s turning out to be an advantage when it comes to managing people,” said Bidwell. He pointed out that the decline of worker unions over the years has contributed to the perception that “workers have become disposable” and that companies are focused more on their bottom lines. But initiatives such as that at Amazon are helping to change that narrative — and that is something to cheer, he noted. “It is very nice to see that even if you don’t have unions to hold people to account, employers themselves are starting to feel like they need to pay attention – that people are watching, and how they treat people matters.”

Ginsberg said he expected Amazon’s move to trigger similar efforts at other companies. Added Bidwell: “One of the big benefits is that it does legitimize this idea [of investing in retraining]. It’s going to be a lot easier to go to my CEO or CFO and say, ‘I think we should invest in training.’” With Amazon setting the example, those calls for training carry “a lot more weight … and it puts pressure on others who are competing with them for talent.”

However, the argument for investing in retraining will need demonstration of tangible returns before it gains momentum, according to Ginsberg. He said such training or programs like “corporate venturing,” where companies incubate new businesses, “make a lot of sense conceptually, but it will be important at some point to have some metrics to link them to bottom line results.”

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