Guess What Starbucks Did After Raising Workers’ Minimum Wage

ZeroHedge reminds us that a year ago, owner and CEO of Seattle-based Starbucks, Howard Schultz, piously told CNN that he supported raising the minimum wage to $15/hour “across the country,” but warned that “it will be very difficult for small business in the country at a $15 level to pay those kinds of wages.” Then Schultz grandly announced that Starbucks will lead the way by raising the wages of its employees “way above the minimum wage”:

“For Starbucks come January 1 we are taking wages up across the country and we will pay above the minimum wage in every state we operate. Starbucks is way above the minimum wage. I have always looked at total compensation. I have always believed that our success as a company is best shared.“

Note that a worker’s total compensation is a function of hourly wages and total number of hours worked.

Fast forward a year . . . .

Lisa Baertlein reports for Reuters, June 30, 2016, that Starbucks, the world’s biggest coffee chain that employs 160,000 people in the United States, is accused by an online petition, signed by more than 9,000 people, of “extreme” cutbacks in work hours at its U.S. cafes, which hurt both employee morale and customer service.

In other words, Starbucks compensated for raising its employees’ wages to “way above minimum wage” by reducing its workers’ hours, so as to maintain its profitability.

According to Jaime Prater, a Southern California barista and the online petition’s creator, some 7,000 signers of the petition described themselves as Starbuck employees.

Prater said “The labor situation has gone from tight to infuriating.” The manager of a central California Starbucks who asked not to be identified for fear of reprisal, told Reuters that the store’s work force has shrunk by about 10%, even though sales are up.

Similar complaints were made by many signers of the online petition:

Signer Aaron I. wrote: “No matter what we do to save on labor at my store, the system tells us EVERY SINGLE DAY that we are at least 8 hours over in labor for the day and have to cut even more.”
Leslie S, a self-described shift manager, wrote: “We’re suffering, & so are our customers. It’s not working.”
Makenna S, a shift supervisor, wrote: “Mobile orders have increased sales and created more need for labor, yet the company is cutting labor.”

While its employees contend with reduced work hours and, therefore, pay, Starbucks’ established cafes in U.S.-dominated Americas region is enjoying increased sales of:

9% sales increase in the first quarter of this year,
7% increase in the second quarter, and
an expected 6.2% increase for the current quarter, according to Consensus Metrix.

Howard Penney, an analyst at Hedgeye Risk Management who follows Starbucks, observed, “They’ve been posting industry-leading same-store sales growth for the last five years while reducing labor costs – a trend that can’t continue.”

According to Wikipedia, Starbucks’ CEO Howard D. Schultz “was born to a Jewish family on July 19, 1953, in Brooklyn, New York.” He is pro-gun control and same-sex marriage. In 2012, Forbes magazine ranked Schultz as the 354th richest person in the United States, with a net worth of $1.5 billion.

Howard Schultz’s name should be listed in dictionaries as a synonym of hypocrisy.