Something "Unexpected" Happened After Starbucks Raised Minimum Wages

Tyler Durden's picture

One year ago, when the political push to raise the minimum wage hit a crescendo, the CEO of Starbucks had some words of caution. Howard Schultz told CNN that minimum wage "should go up across the country", however he warned that "it will be very difficult for small business in the country at a $15 level to pay those kinds of wages." What about for his own company? "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.

His conclusion: "I have always believed that our success as a company is best shared."

 

One year later, something "unexpected" has happened as a result of the Schultz' all too eager push to "share" his company's success by hiking minimum wages, namely the realization by the company's employees (if not so much the CEO, management and certainly shareholders) that total compensation is a function of two things: hourly wages and number of hours worked.

As Reuters reports, an online petition accusing Starbucks of "extreme" cutbacks in work hours at its U.S. cafes, hurting both employee morale and customer service, has been signed by more than 9,000 people. Suddenly Starbucks' eagerness to raise its wages becomes all too clear: after all, it would merely have to reduce work hours, to keep profitability humming.

The world's biggest coffee chain, trying to address cooling growth at its U.S. shops, recently introduced technology that allows customers to order and pay from mobile devices. That service aims to boost sales and reduce bottlenecks in stores; it also aims to reduce work hours. 

In short: Starbucks is finding itself in a sales and profit squeeze (its shares have gone nowhere for the past year), and having been such a fervent supporter of minimum wage hikes, is now far less willing to "share" its success as a company, especially if it means a stagnant stock price for the foreseeable future.

Starbucks CEO Howard Schultz and other top brass have spoken with Jaime Prater, a Southern California barista and the online petition's creator, the Seattle-based company said. It declined to give details but Starbucks spokeswoman Jaime Riley said it is not uncommon for Schultz to reach out to members of its 160,000-strong U.S. workforce. She said that Starbucks has a software system that determines labor needs based on business trends.

In which case, one wonders what the company's attempt to squeeze out every last penny from the bottom line by implementing "extreme" cutbacks to work hours says about business trends in the US, and the economy in general.

But back to the disgruntled employees who don't share Schultz' optimism that this is all merely orindary course of business. Comments on the petition painted a picture of broad discontent at the company known for offering better wages and benefits than other chains, including healthcare coverage, retirement account contributions and paid vacation days.

Prater and many signers say they noticed cutbacks in U.S. staffing hours after Starbucks in April reported a deceleration in quarterly cafe sales growth. Several of them said store managers were under pressure to comply with the dictates of Starbucks' software system.

Translated: boost profits by reducing overall pay.

Almost 7,000 signers of the petition described themselves as employees, according to Prater. They did not give their full names and Reuters was not immediately able to confirm that signers worked for Starbucks. 

"The labor situation has gone from tight to infuriating," Prater said.

One central California store has seen its labor allotment shrunk by about 10 percent, even though sales are up, its manager, who asked not to be identified for fear or reprisal, told Reuters. Similar complaints were heard from many signers of the online petition.

"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," wrote signer Aaron I. "We're suffering, & so are our customers. It's not working," wrote Leslie S, a self-described shift manager.

But... just one year ago an euphoric Howard Schultz said he was so eager to raise minimum wages. What he forgot to add is that he is just as eager to cut work hours if it means preserving profitability.

"Mobile orders have increased sales and created more need for labor, yet the company is cutting labor," wrote Makenna S, a shift supervisor.

And the punchline: like other restaurants and retail companies, Starbucks is wrestling with the effects of local minimum wage increases. Some petitioners said Starbucks had not boosted pay for existing workers in areas where minimum wages have increased - creating a situation where new hires are paid about the same wage as more experienced peers.

The longer we look at it, the more it appears that the CEO was not exactly genuine in his enthusiastic support for minimum wages.

As for the cherry on top: some employees said take-home pay had also taken a hit because tipping has fallen substantially amid broad customer adoption of the "Starbucks Rewards" program, which allows customers to pay with a loyalty card or mobile phones. 

* * *

And just like that, the grim picture of the "minimum wage hike effect" is starting to be appreciated by all, and explains why over the past few months even the BLS has reported that average work hours have been shrinking, incidentally something we warned about over a year ago when the topic of minimum wage increases first emerged. Because as was obvious all along, the simple math is that as mandatory wages rise, there is far less "success" to be shared.

To be sure Starbucks is neither the first nor the last corporation to show its true colors. One year ago we reported that "Economics 102: WalMart Cuts Worker Hours After Hiking Minimum Wages", and just four weeks ago we followed up that "Half Of Washington DC Employers Have Cut Jobs, Hours Due To Minimum Wage Increases - And It's Going To Get Worse."

The Starbucks news confirms just that; expect much more.

Meanwhile, we can only hope that more realize that politicians pandering to populism by conducting a phony "war on inequality" via minimum wage propaganda is merely serving their corporate overlords. Because as Starbucks employees are the latest to learn the hard way, as wages go up, all in comp is rapidly dropping while layoffs are rising. Maybe next time Obama mandates a minimum wage to show how much he cares about the "little worker", he should also issue an executive order requiring minimum hours too. Naturally, that would merely unleash even more central-planning hell, but in a world in which the central banks already control everything, why the hell not?

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Boris Alatovkrap's picture

Oh, no, Amerikansky is now pay more for coffee whip up like pansy girl drink! Aghast, is pay for one drink what Boris is earn two day wage of hard labor.

flaminratzazz's picture

Oh sure.. poor poor boris! .. as if

Boris Alatovkrap's picture

And now Starista is work less or lose job. Boris is always say, REAL minimum wage = $0 if you are lose job to increase in FIAT minimum wage.

… But what is Boris knowing!?

Beam Me Up Scotty's picture

The REAL minimum wage is what Uncle Sam gives the FSA to keep quiet, and to keep the votes coming.

Beam Me Up Scotty's picture

We are raising your chocolate ration from 30 grams to 20 grams!!!!  REJOICE!!!

Dormouse's picture

Some people see that work as a brilliantly prescient glimpse into the future, I think it was more of a blueprint. Regardless, it's fucking scary how close we live to that reality.

LowerSlowerDelaware_LSD's picture
LowerSlowerDelaware_LSD (not verified) Dormouse Jul 1, 2016 2:42 PM

I love it when a leftist company does the exact opposite of what it states that it believes in order to keep making a profit. 

Come on, Starbucks... 40 hours per week at $20/hour for ALL employees.  Living wage, dudes...  Robots NOT allowed.  Lets see how long you last.

New_Meat's picture

"unexpectedly" this pushed every store under the Obamacare mandated threshold.

Who woulda' thunk?

Kissy Ass's picture

Fuck Starbuck. Their coffee sucks.

ack's picture

And their CEO is a ZIO-scum fukwit.

Escrava Isaura's picture

Job insecurity or lack of jobs have nothing to do with minimum-wage, stupid.

 

It has to do with CREDIT EXPANSION.

 

Credit expansion from:

 

1990 ($13,568) to 2000 ($27,221) = 100.62%

 

2000 ($27,221) to 2008 ($54,492) = 100.19%

 

2008 ($54,492) to 2015 ($63,467) = 16.47%

 

https://fred.stlouisfed.org/series/TCMDO

 

Doom Porn Star's picture

Well.   An exponential(esque?) trajectory was interrupted/failed.

At very low ( suppressed? ) real rates of interest and/or inflation emission of fiat credit may masquerade as velocity of existing money supply/gdp sub-componet/etc...

Also consider that these emisions were then pyramided through/by rehypothecation chains, tranched securites, un-allocated reits, derivatives contracts, and other leveraged schemes.  

Escrava Isaura's picture

The exponential was interrupted that’s why it failed.

 

Interest rates have more to do with the gambling side of the economy, that you listed. I learned with Richard Werner, interest rate is a rear view of the economy. So is wage and unemployment.

 

Matter is credit creation.

 

Unless if you change the money system from credit to equity that’s injected on GDP growth, not on stock market and real estate speculation. Sorry Trump lovers.

 

jcaz's picture

It's stunning to see that, no matter the topic, you're ALWAYS a clueless idiot. 

That truly is an amazing feat.   Even MDB gets it right now and then, despite his satire.

Clearly,  you're one of the barristas affected here-  good luck in making it up in tips.

Escrava Isaura's picture

Money is an account gimmick. Anyway, this might help you.

 

I am told that in the Bible, there is a single word that means “slave” and “servant.”

According to this link http://www.celebritytypes.com/quotes/karl-marx.php

 

Nassim Nicholas Taleb: “Karl Marx, a visionary, figured out that you can control a slave much better by convincing him he is an employee.”

 

https://ourfiniteworld.com/2016/06/20/china-is-peak-coal-part-of-its-problem/comment-page-12/#comment-92660

 

 

Vincent.Vega's picture

Check out the reptile bitch Melusine on their logo: http://www.sureewoong.com/logo-design/starbucks-logo/

PS

However, this post on ZH is to serve one purpose: pump emotions into retail sheeple to make them sell at 56, then SBUX is 53 next week and around 60 by the end of July.

gladih8r's picture

Christ almightly, a Zio-scum fukwit?  I kind of knew it, their coffee always tasted kind of weird.  Personally I think Cafebritt coffee always tastes better even if you have to brew it yourself.

cheeseheader's picture

Unfortunately I do not know how their coffee tastes...fortunately I still have never stepped into a starbux.

My fiats stay within MY fellow believers....

All Risk No Reward's picture

That's my thought... if part-timers haven't been shafted on benefits yet, give it time... they will get screwed as this debt-money Ponzi winds down and eventually collapses into a pile of multi-trillion dollar debt destruction.

spastic_colon's picture

unfortunately the ceo is corect in trying to increase productivity; its a cup of fucking coffee for crissake; let the employees walk around and whine that they have to work harder; if the customers dont want to wait then make your own coffee at home for 25 cents a cup or just stop ordering a fucking coffee milkshake and think its not killing you just beacause it has a logo on the cup.

 

 

he is not beholden to his employees; they are to him; he is beholden to the shareholders including himself.

Katos's picture

Of course nothing is said about the million dollar paychecks and millions of dollars in bonuses that the top tier corporate people in Starbucks make. And of course, shareholders are not about to lose money jist because the people who make it for them want a little more of it for themselves. This is just more greed at the top of the food chain. The big boys demand millions of dollars in compensation for their stellar knowledge and "HARD WORK"? And they expect their slaves to work hard and kept their mouths shut! Same old shit, we owe it to these billionaires to keep their fortunes in tack by starving ourselves and our families so they can continue to reap massive profits. Fucking all these rich greedy bastards!

Billy the Poet's picture

Being an evil rich person is easy. You just do nothing and slaves surround you and beg to do your bidding. That's why you're opening a coffee shop of your own; so that you can show those evil bastards how to do it right.

I await word of your success!

All Risk No Reward's picture

Can I have his Debt-Money Monopolist Wall Street front seed money and all that comes with it?

You sound like the ignorati that hasn't figured out the Debt-Money Matrix is completely rigged.

Here's Carlin to set you straight...

The American Dream... you have to be asleep to believe it...
https://www.youtube.com/watch?v=kJ4SSvVbhLw

Balanced Integer's picture

Carlin was a fucking comedian. Anyone who looks to him as a fount of wisdom blowing the whole conspiracy wide open is a fucking imbecile.

LowerSlowerDelaware_LSD's picture
LowerSlowerDelaware_LSD (not verified) Katos Jul 1, 2016 4:29 PM

If you don't like it don't work there and don't buy from them.  Problem solved - for you anyway.

All Risk No Reward's picture

The only vote we have is with our dollars and time... spend them wisely.

Abbie Normal's picture

The CEO owns a huge mansion on a tropical island.  About a week before they arrive, the house manager gets the place ready and Mrs. $tarbucks lets them know what color theme she feels like for their stay.  Except on one trip, she changes her mind just before arriving so there's a mad scramble to replace thousands of dollars of flowers.  Maybe they could scrimp on those types of necessities and give their workers a few more hours.

techpriest's picture

I knew some kids who tried starting up a coffee shop on the premise of being all organic, not making any profit, and paying all employees $15/hr.

They were out of business in one month.

Too bad, the food was pretty good. And cheap.

Bob's picture

That's the obvious subplot.  Sad that so many in the sycophantic aspirational class are so oblivious to the obvious. 

That's their "ideals," I guess. 

Sure as fuck ain't common sense or knowledge. 

glenlloyd's picture

County govt here is considering mandating new minimum wage. I wrote a paper and sent it to them suggesting they were idiots for even wading in to this issue.

You can't tell them anything, they don't understand that when you increase compensation you create more unemployment.

Idiots will do what they want...

zhandax's picture

People apparently can't conceptualize why it is a waste of time to try to teach a pig to sing until they try.

max2205's picture

I remember the ceo starting a free college program....I am sure that's working out fine.

 

SBUX stock is definitely rigged 

Say What Again's picture

For the price of one cup of goo from your favorite fartista, I can buy 10 bottles of NoDoz.  After all, all we care about is the caffeine, right?

bonin006's picture

Or you could buy 1000 grams of pure caffeine for $59.95. That's about 10,000 cups of coffee, or 18,500 cans of Mountain Dew:

http://www.herbstoreusa.com/energy-caffeine.html

(I have not ordered anything from them yet, but I am thinking about it)

undertow1141's picture

Energy-everything!!!!!!!!!

Billy the Poet's picture

Have a cup of joe. That'll get you moving on it.

Freddie's picture

Go to Chick-fil-A - a Christian restaurant growing leaps and bounds.  Someone I know who is a non parcticing Christian loves some coffee drink they have.  some iced coffee or something.   Starbucks sucks. 

MopWater's picture

The greatest food experience has been at Chik fil a.

 

Food is always hot, service always with a smile, food is quick, and eating there with kids is fantastic as they have plastic table covers for kiddo's. Restaurants are always clean too.

techpriest's picture

I used to work at Chick-fil-A. On the backend the managers really stressed that everything is clean, that the oil is changed regularly (you can taste when oil is burned or rancid), and of course, all of the lemonade is the real thing, made by a guy with a squeezer and a couple boxes of lemons.

Most kids I knew talked about the horror stories about the kitchens of places they worked, but I was proud of the work we did.

DutchResistance's picture

Morality can't be legislated, or contrived on the behest of another that does not share the same values.

Chick fil a is virtually debt free and is not  a slave to public trading;

Lowest employee turnover rate in the fast-food world;

They actually practice what they preach;

The exact opposite of what most of corporate ( & political) America believe ....and yet they are successful...go figure 

 

kareninca's picture

Unfortunately Chick- fil-A's food is full of MSG:

The seasoning used in all of Chick-fil-A's fried chicken is the second ingredient. Of the five ingredients in the seasoning, MSG is listed second (after salt). This means there is more MSG in the seasoning than there is sugar, spices, and paprika.


"https://www.change.org/p/chick-fil-a-take-monosodium-glutamate-i-e-msg-o..."

Riga's picture

Fresh flowers on every table.

Bob's picture

They're known as a bunch of gay-haters, but who knows what JHC might be like in our present time?  He might be marching with the Westboro Baptist Church at Vet's weddings!

OTOH, who knows what he might have been like in his own queer times?  Disciples indeed.  (For all we know, it was Judas who was betrayed first.)

Just the same, much as I despise planet starbuck, I gotta give credit to the coffee. 

I didn't want to.  But i ended up with no choice.  No, on principle alone I will not go into the shop and buy a cuppa.  When compelled to go in--sorry, honey, inspired!--to pick up my beloved's dream drink, the fucking decaf latte grande (free glass of her special starbuck ice water with corporate cup and one hell of a tall stack of corporate-sponsored napkins), all the plastic people sitting around posing with their ferociously overpriced drinks, baked goods, juices and what-the-fuck-evers, make me cringe bigtime.  Though I do feel for the workers, who are busting ass on Sunday mornings.

I bought a french press after being overwhelmed by the disgust with the k-cup rip-off, and set out to find an easily available source of good cheap coffee to plunge.  Easier said than done. 

Long story short, I'm left to drink the evil star's coffee every morning because it's the best deal by far when bought in bulk on sale at kroger.  Free fuel points for my trouble.  All in all, pretty damn good bean.

I'm not proud of my capitulation to the corporate menace.  But shit happens. 

Life makes hypocrites of us all. 

Of course, I don't need to point that out to a Christian. 

Sean7k's picture

Bob, you didn't go far enough. Try Sweet Marias coffee. Get a roaster and buy green beans. You will discover the benefits of coffee which has not been burned and sold as gourmet.

I find starbucks to be undrinkable because of how badly it is burned. Hidden in milk and sweet adds the taste is disguised, but never far from the palate.

As for this minimum wage business, it is founded in "the labor theory of value" which no economist has ever been able to justify because they fail to realize that prices are set by the market and are SUBJECTIVE.

Example, if I grow a carrot and it takes me an hour of labor, I could ask 15 dollars  for it, but no one will buy it- because a carrot isn't worth 15 dollars. It is this simple, but people have decided the rich should share their wealth to compensate for the worker's poverty.

Here's a better idea: quit being a slave. Eliminate the legal system which empowers the wealthy to maintain and steal market share, which forces small entrepreneurs out of business and into labor slavery. Instead of demanding a wage, create value via production, thus giving you a powerful argument for a raise.

Anybody can spend money, but you need to learn how to make money first. It is by far the most important skill you can acquire. Further, please people, stop calling debt money. People haven't been paid in money since 1913 (if not before). The reason they can play with values is they are playing with fiat, who's value eventually is buttressed by the population's need for fiat to retain value. Then they can set values for various goods and services depending on how they want to control the slave population.

Heck, the biggest debtors are the wealthy! All their fiat is debt. If they don't defend the system, they will be broke. In reality, they have little wealth at all.

Bob's picture

Yeah, I used to oven roast my coffee long before the drink became such a spectacular lifestyle phenomenon--back in 1982 or so.  Yeah, it's better and, as with wine, I'm sure that the further you go into it the greater becomes the distance you'd have to travel to return to what has as a function of distance become nasty-tasting gut rot.  That path would not lead to financial ruin in the case of coffee, but there's the time invested.  Sometimes--hell, alot of times--it's better to not open the pandora's box of fine tastes. But thanks for the suggestion . . . I spent about an hour at Sweet Marias site.  Nice to know of a resource.  Protests notwithstanding, I'm a sucker for fine shit.

You point out that the labor theory of value held by the classical economists was never "justified."  As I understand it, the justification is a moral one, which is very much a subjective thing.  I see nothing unique about that in comparison with any "market," though, including one putatively controlled by "the invisible hand" operating upon a boatload of arbitrary constructs that define--yes, define--a proper "market."  There's nothing about this that does not originate in the minds of men.  There are no natural laws involved except force--which party has license and power to enforce one definition/system over another.  And bend dissidents to their will as necessary. Much as Radical Marijuana argues, basically, I guess.  

The classical theory of labor took the side of human beings over "capital" on the assumption that the collective good was maximized when illegitimate rake-offs taken as "rent" by parties with the power to control markets were explicitly minimized.  This was assumed to maximize both efficiency and utility . . . except for the self-regarding nobility, be they King George II or Soros or even the wondrous Galt. 

I can't see how the dystopia before us today dominated by robber barons concealed behind corporate fronts who, both directly and indirectly, make the rules for this historical moment's version of markets could be considered natural or objective, except in the sense that the rules are set down in black and white.  At the same time, I think that, if anything, the classical economists have been proven prophetic--any society that allows unfettered accumulation of wealth will inevitably return to feudalism, however elaborate its trappings and rationale.

And there's no problem with that--if you think feudalism is a fine thing.  It's entirely subjective.  Nature could not possibly care less.

Doesn't really matter, though. None of our debating will make a difference even in our own socially constructed synthetic reality.

Might is openly celebrated as right nowdays.