Starbucks (SBUX) on Wednesday became the latest company to hike pay for its workers, announcing plans to increase all U.S. hourly wages to at least $15 per an hour — up from the current $12 rate — by the summer of 2022.
Effective in late January of 2022, all U.S. partners (the company's term for employees) with two or more years of service could receive a raise of up to 5%, while partners with five or more years of service could receive a raise up to 10%. The move comes as the service industry has been hampered by a shortage of workers, prompting many to offer higher salaries to attract and retain talent.
This will bring the average pay for all Starbucks' U.S. hourly partners to nearly $17 per an hour, with average hourly rates ranging between $15 to $23. Previously, the average wage was $14 per an hour, while more than half of its partners were already at $15 an hour, according to a Starbucks' spokesperson.
As of October 27th, the federal minimum wage for covered nonexempt employees is $7.25 per hour, according to the U.S. Department of Labor. Meanwhile, Starbucks' move puts its hourly rate closer to other food and retail companies such as Target ($15), Costco ($16), Ben & Jerry’s ($18.13), McDonald’s ($13) and Chipotle ($15).
Wednesday's news represents the third investment by the Seattle-based coffee giant in wage, benefits and support in the last 24 months. In December of 2020 Starbucks committed to raising its wage floor to $15 an hour.
And in January of 2021, Starbucks CEO Kevin Johnson told Yahoo Finance he expected all partners in the U.S. to be at or above $15 per hour within the next two to three years, bringing the company ahead of the schedule with this latest announcement.
In an internal memo that went out on Wednesday afternoon, Starbucks North America EVP Rossann Williams noted "Our wage increases from Dec. 2020 to the Summer of 2022 will mean at least a 17% increase for partners, and at least 20% for tenured partners, in two years."
She continues, "I share all this only to reaffirm our belief that investing in our partners is not a cost, it’s an opportunity – and we intend to let our shareholders and peers know the same."
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Starbucks itself has not been immune from the trend: workers in the Buffalo area launched Starbucks Workers United Organizing Committee. In a letter to Johnson, the group asked for assurances that employees who favor a union won't face reprisals.
"We are organizing a union because we believe that this is the best way to contribute meaningfully to our partnership with the company and ensure both our voices are heard...we do not see our desire to organize as a reaction to specific policies but as a commitment to making Starbucks, Buffalo, and the world a better place," the letter said. Amid the union push, the group met with U.S. Representative Alexandria Ocasio-Cortez, (D, NY).
In addition to the wage hike, Starbucks announced an extension of its $200 referral bonus to help attract new talent on top of a revamped training process including a complete redesign of its “Barista Basics” guide.
In a release, the company noted a "significant customer demand" and an "increasing pace of beverage innovation" with plans to improve store staffing and test a "shifts app" to make it easier for partners to work available shifts.
According to the memo, this initiative will be led by Starbuck's labor team, which is comprised of data analysts, former store partners and the company's Store Manager Labor Council. The company also aims to improve its bar floor design and equipment, beginning with a testing a new Cold Beverage Station redesign to "make it easier to handcraft drinks and connect with customers," as cold drinks grab a larger share of its beverage sales.
To help improve partners' work experience and "reduce complexity in stores," Starbucks is using its Tryer Lab, which is known as the coffee giant's hub of innovation, to test bar layout redesign, new store equipment, and technology and evolving operational roles with a rotation of more than 20 store partners.
"This partner-focused effort helps hold support partners accountable to the store experience with real-life challenges being designed by both support center and store partners, together, working shoulder to shoulder," the company noted in a release.
Among the other benefits Starbucks offers to part-time employees include healthcare, equity rewards, retirement plans, childcare, paid sick leave, paid vacation, paid family leave, free college tuition through the Starbucks College Achievement Plan with Arizona State University and mental health support through a partnership with Lyra.
On Thursday, Starbucks is expected to report its fourth-quarter earnings results and fiscal year end 2021 results after market-close. According to Bloomberg estimates, Wall Street expects same-store sales to increase 24 percent in the U.S. and global same-store sales to rise 4.3 percent compared to a year ago.
Year-to-date shares of Starbucks are up 6.4 percent, while shares are up 27 percent compared to a year ago.
Brooke DiPalma is a producer and reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at email@example.com.