Starbucks Bumps Up US Workers’ Pay—and Drink Prices


Starbucks Cold Brew Coffee

What Starbucks CEO Howard Schultz giveth, his customers also giveth.

With American companies on the hot seat over worker pay, the Seattle-based company has announced that it’s raising pay by as much as 15 percent for its US employees—in addition to confirming that it’s raising prices on some beverages by up to 30 cents.

It’s Economics 101: The labor market is getting tighter, so Starbucks announced a series of enhanced employee incentives this week, including increased pay and a more relaxed dress code. In a letter, Schultz told employees that Starbucks is increasing the base pay for all “partners” and store managers at its company-owned US locations by more than 5 percent and doubling the annual company stock award for employees who reach two years of continuous service, resulting in total compensation increases of between 5 and 15 percent.

Starbucks is also giving employees more control over their benefits packages and adjusting its scheduling practices and dress code as part of a holistic approach to make the company a more attractive place to work for millennials and Generation Z members who increasingly are finding they have more employment options. Walmart is among many other companies that are doing similar things, while JPMorgan this week also announced it’s raising pay.

“Over the years, we have viewed our total compensation approach as the best way to create long-term opportunity for partners,” Schultz stated in a press release. “We believe strongly in this philosophy but also recognize we must do more to help partners take advantage of all the company has to offer.”

But you can’t squeeze coffee out of a turnip, so Starbucks turned right around and confirmed that it has made a “small price adjustment” in those same company-owned US stores where workers are getting a compensation boost. Price increases run 10 to 20 cents on certain sizes of coffee and up to 30 cents on espresso beverages and tea lattes.

These hikes will increase the “average consumer ticket” by about one percent, Starbucks calculated, also noting that “65 percent of beverage prices have not changed.” Meanwhile, Starbucks continues to do one of the things it does best: changing up the product mix, including introducing its first coconut milk-based drink, an iced espresso beverage.

Starbucks also is applying another lesson from Economics 101: Play the float. While Starbucks’ compensation increases won’t go into effect until October, its price hike is now in effect.


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