Amazon Stock Opens Strong Despite Landmark Union Development

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Today, Amazon’s (NASDAQ:AMZN) stock opened on a bright note, providing much-needed relief for investors after a recent drop. Shares of the tech giant have been down significantly in recent days. But they opened at $3,282.50, a nice improvement from Friday’s close of $3,271.20.

Analysts and investors are still buzzing from news that workers in one of Amazon’s fulfillment centers voted to unionize. It was a close contest at JFK8, a Staten Island Amazon warehouse. However, 2,654 workers voted in favor of unionizing versus 2,131 against, leading to a landmark decision. Amazon will now have to work with the Amazon Labor Union and a collective bargaining agreement is currently in discussion.

Amazon employs many people, yet it has been successful for almost three decades without unions. However, the company will now have to discuss benefits and labor conditions with a union representative before making any decisions. In addition, we are seeing traction regarding labor union movements in other fulfillment centers as well. For example, Amazon workers in Bessemer, Alabama, recently voted a second time on unionizing. Although it appears the site will not get a union, the vote itself was closer than last time.

Jeff Bezos has argued that there is no need for a union to act as an intermediary between the company and its employees. Pay for employees at the Amazon fulfillment centers starts at $18 an hour, above minimum wage in every U.S. state. The company also provides front-line employees with many benefits, such as healthcare coverage and flexible spending accounts.

However, concerns have been raised about the mistreatment of employees at Amazon fulfillment centers. Last year, the New York Times published an article about Amazon reportedly taking advantage of its workers by not giving them their fair share of wages.

What Does This Mean for AMZN Stock?

Morgan Stanley (NYSE:MS) analysts have weighed in on the current situation, saying the decision to unionize can significantly impact costs depending on the circumstances.

The Amazon Labor Union is calling for a hike in the hourly rates to a minimum of $30 an hour. In addition, it has a host of other demands, including more paid breaks. Morgan Stanley says that if the decision is made to increase JFK8 employees’ hourly wages to $29, it will lead to an additional $203 million in 2023 operating expenses. Although it is not huge when considering the company’s total operating outlay, such a decision could have wider implications for AMZN stock if more sites unionize. A second union election is taking place in a separate Staten Island location before this month ends.

According to the note, if 1% of Amazon’s entire workforce unionizes, operating costs will increase by $150 million per year. However, Morgan Stanley analysts said that they do not expect speedy unionization. This developing story can have massive implications for Amazon and the wider retail space.

On the publication date, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.

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