Starbucks is to Raise Base Pay in October

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Howard Schultz, CEO of Starbucks Corp. (NASDAQ: SBUX), the world’s biggest coffee chain, claimed in a letter to employees on Monday that Starbucks will increase base pay for all U.S. baristas and managers at company-operated stores by at least 5 percent starting Oct. 3.

Such move will benefit more than 12,800 people, including many self-identified Starbucks workers, who have signed an online petition laying out the employee complaints, and is widely considered as a compromise to its employees who accused the coffee chain of “extreme” cutbacks in work hours that they say are hurting morale and service.

Beyond worries about customer service and morale, petition commenters said they were not getting enough hours to make ends meet or to afford Starbucks benefits, including healthcare and college tuition reimbursement.

In addition, Starbucks already has announced $275 million in incremental employee and digital investments for 2015 and 2016. A significant portion of that is earmarked for wages.

Starbucks recently announced price increases for some drinks and  it will double the annual stock reward to hourly employees who have worked at company-operated stores for at least two years, steps that will, according to Starbucks, result in a wage hike of 5 percent to 15 percent for roughly 150,000 workers in 7,600 U.S. cafes.

On the other hand, the chain recently introduced potentially labor-saving technology that allows customers to order and pay for drinks and other products via mobile phones and other devices.

The company, which has been grappling with cooling sales growth at its popular cafes, has repeatedly said there is no nationwide reduction in labor hours at the chain. Schultz did not directly reference the petition or employee concerns about labor hour cuts in his letter on Monday.

“Howard Schultz did not acknowledge or validate the labor crisis in the stores,” said petition author Jaime Prater, a Los Angeles-area Starbucks barista. “Until that is addressed, or simply acknowledged, my job isn’t finished.”

As a result, it has been largely unaffected by a union-supported multiyear restaurant worker wage campaign that has helped spur minimum wage increases in major cities and states, as well as pay raises at companies like McDonald’s Corp.

Still, Starbucks is not immune from the pressure that rising wages is putting on restaurant operators, who now must compete to hire and keep the best workers.

“Restaurants have to step up and pay people more,” said Peter Saleh, BTIG restaurant analyst.

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