After a several month-long battle, Starbucks employees in Buffalo, New York, unionized one cafe. This was not a sweatshop with 20-hour workdays. It was your typical Starbucks.
However, this reflects the stress of living in a high-cost state as “life” gets expensive, and money doesn’t go far enough.
Inflation nips at small businesses with 70% saying that rising costs have significantly impacted business. According to the U.S. Chamber of Commerce, inflation has eclipsed pandemic concerns.
At the same time, “average” employees feel the pinch, in which food, housing and transportation have all significantly increased in cost while underlying compensation has lagged.
For Starbucks employees, this was the first successful attempt at unionizing since the coffee giant went public nearly thirty years ago. As such, many are keenly watching to see how this may impact other players in the service industry.
Michelle Eisen, a Starbucks barista who has worked in Buffalo for 11 years, said, “With a union, we now have the ability to negotiate a contract that holds Starbucks accountable to be the company we know it can be, and gives us a real voice in our workplace.”
Given this, one would naturally think Starbucks was taking advantage of its employees. In reality, the opposite is probably true. By summer 2022, Starbucks minimum pay will be $15 an hour, with an average wage of $17 an hour.
Furthermore, the company offers 401(k) with match, paid time off, parental leave, health insurance, and the opportunity to earn a bachelor’s degree with 100% tuition coverage through Arizona State University.
Let those benefits sink in for a second. These are some of the best benefits offered to hourly employees anywhere in the service industry, in exchange for pouring coffee.
There are many facets to consider in this situation and there will be unintended consequences.
A few thoughts run through my head.
- How many employees are forced to work at Starbucks? Obviously, none. However, this may be the extent of their skill set.
- How many employees’ lives are in jeopardy by working at Starbucks? Again, none.
- Does anyone think there is unlimited upside compensation when pouring coffee? Ms. Eisen does not work as an executive or a sales position with unique skills. There is a limit by which a barista should be compensated. Obviously, no one expects a barista to be compensated the same as a neurosurgeon. The surgeon spent considerable time developing very valuable skills while going to school to refine their craft. Conversely, the skillset needed to pour coffee, while potentially tiring, is not rocket-science.
- Whether executive management at Starbucks or a barista, what is your duty to other stakeholders? When decisions like this union vote happen, there are consequences to vendors, co-workers and shareholders. Management is obligated, by law, to consider all stakeholders, not just the union members.
- Does this put Starbucks in a competitive advantage or disadvantage relative to McDonald’s, Tim Horton’s, Dunkin Donuts or other coffee shops? None of those competitors pay as much as Starbucks nor do they offer the outstanding benefits to average employees.
Admittedly, there is a shortage of workers across the country currently and the cost of life continues to increase. In time, these things moderate and the pendulum will swing again.
To cope, Starbucks could easily follow the path of McDonalds in locations around the world. Several years ago, McDonalds embraced robotics and technology in many locations. As such, the entire process of ordering, payment and delivery of food was highly automated, and the number of people employed plummeted.
As you think about this, recognize that robots don’t unionize. Robots don’t require health insurance, 401(k) matching, tuition reimbursement or any of the other benefits that Starbucks generously offers.
What can be learned from this?
Inflation is real. Prioritize living a low-cost lifestyle.
There is a delicate balance with pay and benefits. Not enough and you’ll lose key employees. Too much and jobs evaporate.
Employment is a two-way street. Show up early, stay late and provide solutions; employers should appreciate great employees.
There is a limit to the fair-market-value of any skill set. Invest in your future by getting valuable skills. Doing so makes you less exposed to technological outsourcing.
Capital flows where it is most efficiently used. If investors cannot get an acceptable return on their capital, they’ll move to another location—with or without you.
Dave Sather is the CEO of the Sather Financial Group, a fee-only investment management and strategic planning firm.