Howard Schultz, CEO of Starbucks, may be a bit unpopular at the country club for the next few weeks, after expressing support for an increased minimum wage on CNBC today. Not all of his CEO friends already pay close to what President Obama proposes.
Schultz has been dabbling in politics a lot recently, though primarily from the mostly barren space outside of partisan advocacy. In 2011, his company announced a program to encourage job creation; it involved selling bracelets and yielded some $15 million in donations. He also worked with the organization No Labels to host a town hall meeting on the issue after having previously asked politicians to reject campaign contributions.
His position in support of the minimum wage, then, is actually braver than many of his prior positions. Schultz revealed his support in a conversation with Maria Bartiromo.
First calling the minimum wage a "double-edged sword", Schultz then expressed support. Huffington Post transcribed the comments.
“On balance, I am a supporter of the minimum wage going up,” he said. “We’ve got to be very careful what we wish for because some employers -- and there could be a lot of them -- will be scared away from hiring new people or creating incremental hours for part-time people as a result of that wage going up.”
Bartiromo cites Glassdoor.com to suggest that Starbucks baristas average $8.78 an hour. Schultz calls that figure "misleading", but doesn't clarify.
Let's assume the figure is close to accurate. (Glassdoor's data, which is an average of user-submitted information, suggests a range from $6 to $14.) If Starbucks pays nearly $9 an hour, there's not much for the company to lose in supporting Obama's proposed hike to that level — and there may be something to gain.
Here's how various food service businesses pay, according to Glassdoor and AOL.com.
At the left end of the spectrum is Papa John's at $7.19 an hour. At the right is Walmart, at $8.84. The red line indicates how much an increase from those levels to minimum wage would cost each company annually for each 10,000 workers. If Papa John's were to increase wages to $9 an hour, it would cost an additional $37.6 million a year for every 10,000 employees. The same increase would cost Walmart $3.3 million.
The Huffington Post article notes two other companies that have taken a stand on an increase.
[Schultz is] not the first corporate chief to speak out on the minimum wage issue. Fred Deluca, the CEO of Subway, told CNBC in February that a minimum wage hike would push his franchisees to raise their prices. Still, some are backing Obama’s proposal. Costco CEO Craig Jelinek said in a statement earlier this month that lawmakers should raise the minimum wage to $10 an hour.
The economics back that up. Glassdoor puts Subway "sandwich artists" at $7.77 an hour — an additional $25.5 million for 10,000 employees. (These costs would often be imposed on multiple franchise owners, it's worth noting — usually not on the parent company.) Costco pays much better. Glassdoor indicates that stockers in Costco stores earn $12.63 an hour on average.
Which is exactly why Costco wants a higher minimum wage, and why Starbucks might want one too. If Costco pays four dollars more an hour than Walmart — Costco is a largely union company — a higher minimum wage would incur big costs to its competitors and almost none to it. Likewise with Starbucks. If Dunkin Donuts has to start paying more equivalent salaries, Starbucks gains a competitive advantage.
In case you weren't convinced that Schultz' move isn't entirely motivated by altruism, he went on to complain to Bartiromo about the Affordable Care Act — Obamacare — saying it some unintended economic consequences. On that, he agrees with one of Obamacare's most outspoken corporate opponents: John Schnatter, CEO of Papa John's.