In a move that signals both investment in its workforce and a response to increasing labor pressures, Amazon has announced a $2.1 billion investment aimed at raising the average pay for its delivery drivers. This move, the company’s largest investment in its Delivery Service Partner (DSP) program to date, will bring driver pay to an average of nearly $22 per hour, a 7% increase from last year. The initiative is expected to enhance recruitment, retention, and worker satisfaction at a time when Amazon faces heightened scrutiny from labor organizations and regulatory bodies.

Amazon’s DSP program, launched in 2018, partners with small, independently owned delivery companies that handle the “last mile” of package delivery from Amazon warehouses to customers’ doorsteps. As the backbone of Amazon’s delivery operations, these drivers play a crucial role in the company’s ability to fulfill its Prime delivery promises. However, unlike employees directly hired by Amazon, these drivers work for third-party contractors, leaving Amazon to walk a fine line between oversight and liability.

Beryl Tomay, Amazon’s Vice President of Transportation, highlighted the significance of this investment. “This $2.1 billion commitment is about more than just increasing wages; it’s about supporting the people who make our customer deliveries possible,” she said. “We’ve seen incredible growth in our DSP program, and this investment will help these businesses retain high-performing teams while also focusing on safety, training, and value-added services.”

Responding to Union Pressures and Regulatory Scrutiny

The timing of Amazon’s announcement comes as the company faces growing pressure from labor unions and regulatory bodies. The International Brotherhood of Teamsters, one of the largest labor unions in the United States, has been leading efforts to unionize Amazon’s delivery workers. Strikes organized by the Teamsters have taken place at several Amazon facilities across the country, signaling increased unrest among delivery drivers over wages, benefits, and working conditions.

Adding to the complexity is the National Labor Relations Board (NLRB), which has begun to scrutinize Amazon’s relationship with its contracted delivery workforce. Recent NLRB rulings have suggested that Amazon could be considered a “joint employer” of these contracted drivers, which could compel the company to engage in collective bargaining if the drivers unionize. The NLRB’s rulings have the potential to reshape Amazon’s delivery operations, as the company has historically resisted unionization efforts, maintaining that drivers are employed by independent contractors, not Amazon itself.

“Amazon has fought to avoid being designated as a joint employer of its contracted delivery drivers,” said Sebastian Herrera, a tech reporter covering Amazon for The Wall Street Journal. “But labor groups and regulators argue that these drivers, who wear Amazon-branded uniforms, drive Amazon-branded vans, and follow strict schedules set by Amazon, are more than just third-party workers.”

Tomay, however, downplayed the regulatory concerns, emphasizing that Amazon’s investments are designed to empower small businesses and their employees. “Our DSPs are independent companies that have the freedom to manage their teams while benefiting from Amazon’s resources. We provide the tools they need to grow, from financial investments to technology that improves safety and delivery efficiency,” she said.

Enhancing Driver Pay and Benefits

The $2.1 billion investment will allow DSPs to increase their driver’s wages across the board, with some regions likely to see hourly pay surpass $22. “Many DSPs are already paying above this rate,” said Tomay. “But we want to ensure that all of our partners have the resources they need to attract and retain talent.”

In addition to wage increases, Amazon is rolling out a suite of new benefits through its partnership with PayActiv, a financial wellness platform. With this service, drivers will be able to access up to 50% of their accrued wages before payday, making it easier to manage cash flow and reduce financial stress. The app will also offer drivers access to discounts on essentials such as gas, movie tickets, and prescriptions, as well as bill payment services and a savings tool—all in one platform.

“Our goal is to give DSP drivers more control over their financial well-being,” Tomay explained. “Access to earned wages before payday, coupled with discounts and financial tools, can make a significant difference in their lives.”

This focus on financial wellness reflects Amazon’s broader strategy of improving driver experience and satisfaction, especially as competition for labor continues to rise. “It’s about more than just paying drivers more; it’s about creating a package that supports their overall well-being,” said Shaun Cunningham, Executive Director of a logistics industry group. “Amazon’s commitment to this holistic approach is clear with this $2.1 billion investment.”

A Commitment to Safety and Innovation

Alongside wage increases, Amazon is also using a portion of its $2.1 billion investment to bolster driver safety. The company has announced plans to implement advanced machine learning tools to improve route planning and minimize potential hazards. The technology will predict environmental risks, such as weather conditions or traffic, and provide real-time safety alerts, including warnings for railroad crossings or unpaved roads.

“Safety is our top priority,” said Tomay. “We are using predictive models and public safety data to design safer routes for our drivers. By the end of this year, we will have implemented 18 million safety cues across 200 million roads globally.”

In addition to these safety upgrades, Amazon is expanding its training programs for DSP drivers. The company’s Last Mile Driver Academy, which trains new hires, is being enhanced to include more rigorous safety protocols and hands-on experience with the latest delivery technology. “Our training programs are designed to ensure drivers are fully equipped to handle the challenges of last-mile delivery,” added Tomay.

Challenges and Criticisms

Despite these significant investments, some industry analysts and labor advocates argue that Amazon’s efforts may not be enough to prevent further unionization or address the underlying issues facing delivery drivers. “A $22 hourly wage is certainly a step in the right direction, but it pales in comparison to what unionized drivers at companies like UPS are making,” said labor expert Esther Fung. In 2023, UPS drivers secured a contract that pays experienced drivers an average of $49 per hour, thanks to their union.

The Teamsters Union remains vocal in its criticism of Amazon’s business model, asserting that the company’s reliance on third-party contractors allows it to avoid responsibility for labor conditions. “Amazon’s subcontracting model is designed to keep drivers from unionizing,” said one Teamsters representative. “This latest wage increase is simply a way to distract from the real issue—that these drivers should be Amazon employees, not outsourced labor.”

Others, however, view Amazon’s investments as a positive step. “The $2.1 billion infusion is a clear indication that Amazon understands the importance of its delivery workforce,” said tech analyst Matt Day. “Whether it’s enough to ward off unionization remains to be seen, but it’s certainly a significant gesture.”

Investment is Critical To Its Success

As Amazon continues to expand its DSP program—now employing over 390,000 drivers globally—the company’s focus on driver satisfaction, safety, and retention will be critical to its success in an increasingly competitive and labor-challenged market. With unionization efforts growing and regulatory scrutiny intensifying, Amazon’s investments may offer a way to stabilize its delivery operations and maintain its edge in e-commerce.

“We’re proud of the impact our DSP program has had on small businesses and communities around the world,” Tomay said. “And this $2.1 billion investment is just the latest example of our commitment to supporting the people who make Amazon’s delivery network possible.”

While the future remains uncertain, Amazon’s multi-billion-dollar bet on its drivers is a clear signal that the company is prepared to invest heavily to stay ahead of the curve. Whether this will be enough to quell unionization efforts and regulatory challenges will be a crucial test in the months to come.