Friday, July 31, 2015

Starbucks Faces Minimum Wage Hike

Any time the subject of raising the minimum wage comes up, the narratives seem to split between workers and management. The narratives are so set that you can nearly predict the conversations before they happen. But now one national chain is breaking the mold. Starbucks just reported a massive jump in profits, even while wage hikes are hitting it hard in multiple major cities including Los Angeles, San Francisco, and Starbuck’s home city of Seattle. New York may soon follow.

That’s not to say operating expenses are minor. According to reports, Starbuck’s operating costs have jumped 18% in the past year. Why? Well, according to Starbucks executives the biggest reason for the increase was, quote, “Investments in our store partners.” Translation – wage increases for employees. They had to pony up the cash and increased their expenses 18%.

While Starbucks CEO Howard Schultz has been adamantly against a wage hike to $15 per hour, the company seems to be doing okay. Some are saying this example should put to bed the notion that doubling the minimum wage wouldn’t “really” hurt companies. Leaders such as Schultz and Dunkin’ Brands CEO Nigel Travis, continue to argue that the problems will come.

But there’s no doubt that the PR narrative has shifted. While CEOs and business owners are still saying doubling the minimum wage will mean huge cuts for their businesses, proponents are already beginning to point to Starbucks’ recent quarters as proof that businesses can take the increase.

To successfully counter this narrative, the companies must prove to people these conclusions are preliminary. It may also work to do something the larger companies have been reluctant to do – reach out to small businesses. If the idea of a $15 minimum wage catches on it will be the smaller mom and pop shops that face the biggest hurdle. They could close their doors, providing a wider customer base for the big brands that can more easily absorb the loss. But if they don’t want the sky to continue falling, the big brands will have to take control of the national narrative before they can reap those rewards.

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