Business 101: When paying an employee, you have to pay in line with their productivity.
- If you underpay, you lose the employee.
- If you overpay, you run up losses and lose your business.
- If you raise the hourly wage, you must get more from each employee hour – and you must cut the hours/employees that won’t or can’t rise to the new, higher bar.
You may have seen the following last week, but I didn’t want to let it pass without comment. After raising wages over the last 18 months, Starbucks and its employees have been learning some lessons the hard way:
An online petition accus[es] Starbucks Corp of “extreme” cutbacks in work hours at its U.S. cafes…
[Starbucks] recently introduced technology that allows customers to order and pay from mobile devices. That service aims to…reduce bottlenecks in stores. [ed: reducing the number of employees needed per shift]
Starbucks has a software system that determines labor needs based on business trends…
Comments on the petition painted a picture of broad discontent at the company…
…many signers say they noticed cutbacks in U.S. staffing hours…
One central California store has seen its labor allotment shrunk by about 10 percent, even though sales are up…
“No matter what we do to save on labor at my store, the system tells us EVERY SINGLE DAY that we are at least 8 hours over in labor for the day and have to cut even more,” wrote [a petition] signer…Like other restaurants and retail companies, Starbucks is wrestling with the effects of local minimum wage increases…tipping has fallen substantially amid broad customer adoption of the “Starbucks Rewards” program, which allows customers to pay with a loyalty card or mobile phones.
Suppose Starbucks gives in and boosts employee hours (arbitrarily; without a matching, widespread sales & productivity gain). What happens then? Operating budget overruns and closing stores. And/or price increases, declining sales, and closing stores. Perhaps eventually, a closing company. Thanks, Blue State lefties!
UPDATE: This oldie from The Guardian in 2014 may help us to see the problem: