Starbucks Losing to the Unions

Starbucks has had an ugly battle with unions that represent its in-store workers. Workers object to pay packages that can be as little as $15 an hour. Former CEO Howard Schultz was hauled before a Senate committee to explain his aggressive tactics to keep unions out. It brought the practices to the attention of the public. (These are the states with the most union membership.)

The Guardian recently published an article with evidence of manipulation by Starbucks management. A reporter wrote: “NLRB regional offices have issued 93 complaints covering 328 unfair labor practice charges against Starbucks since late 2021. This included actions by federal judges and rulings about 23 Starbucks workers who have been dismissed for union activity.

Starbucks has reached a critical point of decision. It can fight workers store by store and continue to be punished for its practices. Alternatively, Starbucks could recognize the unions and start collective bargaining. This will likely cost Starbucks’ margins as hourly wages rise but would end countless hours spent trying to end union participation in its store operations. The eventual growth in legal judgments and expenses against Starbucks could harm margins even more.

Starbucks’ front-line employees tend to be popular with customers. At many locations, they know the customers by name. This creates a particular bond of sympathy. Over time, this will tend to cause customers to lend the workers a measure of support. Eventually, customers will go elsewhere. It is not out of the question that they could begin a boycott, which would harm Starbucks’ margins and hurt its brand.

Starbucks can easily afford improved pay for its most poorly paid workers. It brought in revenue of $8.7 billion last quarter. Its net income was $908 million. Both numbers are rising quickly.

Starbucks has a new CEO — Laxman Narasimhan. He could move away from Starbucks’ past labor practices. Alternatively, he could face a set of severe consequences. (These are the largest worker strikes in American history.)