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Starbucks versus Gen Z
Last weekend, during an interview with The New York Times, Starbucks CEO Howard Schultz, said he believes employees at Starbucks' stores are pushing for unionization and better working conditions “primarily because Gen Z has a different view of the world.” These young employees, Schultz suggested, don't realize how good they already have it.
The comment comes at a time when Starbucks workers have racked up a string of union victories, much to the frustration of the coffee giant. Over the last seven months, 152 Starbucks stores have voted to unionize across 30 states. The company has not taken to these unionization efforts well. It has repeatedly been accused of using union-busting tactics.
“I’m not anti-union, but the history of unions is based on the fact that companies in the ’40s, ’50s and ’60s abused their people,” Schultz said during the interview. “We’re not in a coal mining business; we’re not abusing our people.” Schultz thinks people should focus on the benefits Starbucks provides to employees, like a free subscription to Spotify, which costs $10 per month.
Schultz's view of the economy is ahistorical. Yes, some workers in mid-Century America faced abusive working conditions. But some workers face abusive working conditions today. And in mid-century America, corporations struck a much more equitable balance between profitability, executive compensation, and worker pay.
In 1965, for example, American CEOs made 15 times more than the average worker. Today, the CEO-to-worker pay gap at America’s largest low-wage employers like Starbucks is closer to 670 to 1, according to a report published this month by the Institute for Policy Studies.
The pay ratio at Starbucks is even more extreme. Starbucks’ former CEO, Kevin Johnson, raked in $20.4 million in 2021 –– 1,579 times more than what the typical Starbucks worker took home. The explosion in CEO pay began about 40 years ago. During that time, CEOs have not become significantly more skilled or productive. Rather, CEOs have convinced corporate boards to pay workers less and pay executives more.
Starbucks is part of a broader trend. Since the mid-80s, corporate profits as a percentage of the economy have risen dramatically. Over the same period of time, wage income as a share of the economy has decreased.
Research also shows that these trends were fueled by the decline of unionization. In the 50s, about one-third of the workforce was unionized. Today, it's only 10%. “The erosion of collective bargaining is the second largest factor that suppressed wage growth and fueled wage inequality over the last four decades,” the Economic Policy Institute reports.
For Schultz, however, it’s Gen Z’s “view of the world” — not the underlying economic reality — that makes some Starbucks workers interested in joining a union.
Is Starbucks breaking the law?
During the interview, Schultz made clear that he returned temporarily as Starbucks CEO, at least in part, to thwart union activity. Schultz told the New York Times' Andrew Ross Sorkin that he doesn't believe unions, which Schultz refers to as a "third party," should have a role at Starbucks; he argues that he is engaged in "a battle for the hearts and minds of our people." But Schultz may have taken things too far.
Schultz said that he needed to "customize new benefits" and "demonstrate to our people they can trust us." Sorkin asked Schultz if he could "ever see doing that and embracing the union as a part of it."
"No," Schultz immediately replied.
But federal labor law requires Starbucks, and every other company, to "bargain in good faith about wages, hours, and other terms and conditions of employment" with a union. Workers United has already won union votes at many stores, and votes at dozens of additional stores are scheduled.
Those pending votes create more potential problems for Schultz. Under federal law, employers must not "interfere with, restrain, or coerce employees" considering whether to exercise their right to form a union. Employers can express their opposition to unionization but cannot "convey the message that selecting a union would be futile."
Schultz also said that if Starbucks became unionized, "customer experience will be significantly challenged and less than." Asked why a union would damage the customer experience, Schultz pleaded with Sorkin to change the subject. Federal law prohibits employers from threatening "employees with adverse consequences, such as closing the workplace" if they "select a union to represent them."
Workers United filed an unfair labor practice charge against Starbucks on June 10, citing Schultz's comments. The charge alleges that Schultz "made an implied or actual threat to refuse to engage in good-faith bargaining," "made an implied or actual statement of futility," and "made an implied or actual threat that Starbucks will lose business because customers will go elsewhere if workers unionize."
The complaint will now be investigated by the National Labor Relations Board (NLRB). Some legal experts believe the NLRB may side with the union. “This is a textbook case,” Ann Lofaso, a former NLRB attorney, told Bloomberg. “It’s a core violation of the act when an employer suggests something could be futile.”
Even if Schultz's comments don't constitute an unfair labor practice in isolation, they could be used to bolster other evidence. The NLRB "has received nearly 200 charges accusing Starbucks of violating federal labor law since the union started filing petitions for elections last August." (Starbucks, in turn, has charged the union with violating federal labor law, accusing Workers United of "intimidation and other unfair labor practices.") The NLRB has "found merit in about 50 of those cases thus far, leading to eight complaints filed against the company."
The most detailed complaint against Starbucks issued by the NLRB involves stores in the Buffalo region. According to the complaint, Starbucks "promised its employees increased benefits and improved terms and conditions of employment if they refrained from union organizational activity." The complaint also alleges that Starbucks "engaged in surveillance" of employees involved in union activity, which is illegal. Further, Starbucks allegedly "has been holding mandatory or effectively mandatory captive-audience meetings for employees of its Buffalo facilities to discourage union activity."
Starbucks also closed or reduced the hours of Buffalo area stores pushing to unionize. Although there can be legitimate business reasons to close stores or adjust hours, Schultz's comments could further bolster the claim that the purpose of the changes was to interfere with union activity.