Workers with five years or more could see a 10% increase by the end of January 2022.
Starbucks announced Wednesday that it would raise its minimum wage to $15 an hour across the nation. This news comes amid a national labor shortage caused by the COVID-19 pandemic and President Biden’s April executive order raising the minimum wage for federal contractors to $15 an hour. Starbucks stated that the increase in pay, which will be implemented by summer 2022 is one of its most important investments in its “partners” or employees (as the company refers to them) in its history.
The announcement states that the pay increase will “recognize, reward” tenured employees. Hourly employees will earn an average of $17 per hour, while baristas will be earning $15 to $23 per hour by the summer.
Starbucks raised its hourly wage for baristas in November 2020 as more voters supported a higher minimum wages. Business Insider reports that many Starbucks employees have been pushing for an all-encompassing pay increase, asking for a $15 minimum wage. Analysts believe a pay increase would reduce the company’s bottom lines, especially since they don’t have a franchise to help cover the additional costs.
“As Starbucks celebrates its 50th anniversary, we are reminded of the simple idea that our green apron partner are the heartbeat and that success is best when shared,” stated Kevin Johnson (Standards president and chief executive Officer). We are proud to announce another significant investment in our partner’s, knowing that when our partners take care of their customers, all stakeholders will benefit. This is how we build a lasting company. A company that believes in doing good for others and the greater society is a good business model.
During the labor shortage in the country, many companies tried to recruit more workers with higher pay. Many stores have closed early because they are short of staff. It is not easy to find new talent because of the hardships faced by food workers during the pandemic.
Rossann Williams, Starbucks’ executive Vice President and President of North America, wrote to all U.S. Starbucks employees to say that the “partner experience” is essential to Starbucks.
Williams wrote that “When other companies were closing down stores or laying off employees, we doubled our COVID-19 benefits and made record investments in partner wages and experiences.” “And today we’re announcing another one of our largest partner investments in history!”
Employees with at least two years’ service can receive a 5% increase, while staff with five years or more could get a 10% rise.
Starbucks announced that they will double their efforts to recruit new talent in today’s labor market. They will offer $200 referral bonuses.
Williams stated in the letter, “These raises represent an investment by Starbucks of more than $1B in less than 24 month” and that the company’s investments will go beyond increased wages.
Starbucks will also invest more in in-store training to new hires. They have redesigned their “Barista Basics” program and increased training time for all positions.
Other innovations include the testing of a shift app that makes it easier for partners and improves store design, and the testing of a Cold Beverage Station at select stores across the country.
This all comes as Democrats attempt to raise the federal minimum wage which currently ranges from $7.25 to $15 per hour. While some economists believe that increasing the minimum wage is a good idea because service jobs are highly skilled and necessary, others feel that it would be difficult for restaurants to remain in business. Research has shown that companies paying higher wages have lower turnover. This can increase productivity through lower search costs, training absentees, vacancy costs, and higher morale,” Erica Groshen of Cornell University School of Industrial and Labor Relations told TODAY Food. Companies that can reduce the perceived higher wages will reap the benefits.
Groshen believes that it is possible to increase business profits by paying higher wages.
She said that this could lead to companies changing their business models in order to provide better-developed career paths and emphasize worker training rather than hoping that robots will make it easier for workers to interchangeably work.
She continued, “Median worker compensation has stagnated in inflation-adjusted terms for 40 years.” It is possible that the pandemic may have triggered a combination o corporate, policy, and organizational actions to finally move the needle.