Dear Howard Schultz, Why Can't Your Poorly Paid Employees Get Tips?

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At the checkout of typical Starbucks Corps. (NASDAQ: SBUX) is a small tip box and a credit card reader. The tip box usually has a very few dollars in it. Customers cannot use their credit cards to give tips. This also holds true for people who use Starbucks gift cards.

Co-founder, long-time CEO and now Executive Chair Howard Schultz has trumpeted what Starbucks does for workers. Employees can earn a college degree through the coffee company’s relationship with Arizona State University. Starbucks also offers a host of benefit programs. Starbucks even offers discounted stock options to its workers. The company says it is “a place they look forward to working each day.”

Starbucks retail employees are among the lowest paid workers at any large company in America. Years ago, the tip box may have been a way for its employees to make more money. Many customers paid with cash. However, as more customers use credit cards, and Starbucks promotes its own card system, cash tipping almost certainly has dropped off.

Tipping is part of most restaurant experiences. And Starbucks has tried to build its stores and menus to offer customers a very wide variety of coffee and other beverages, breakfast and other food. Essentially, the company has made an effort to expand beyond its coffee store roots. The in-store benefits for employees, at least those that would allow tips, have not kept pace.

According to PayScale, the average compensation for an entry-level barista, a person who makes and serves coffee and food, is $9.27 an hour. For a full-time worker, the sum works out to less than $20,000 a year, even if the worker takes no vacation. That is around the poverty level for a family of three, according to the U.S. Department of Health & Human Services.

Schultz has the opportunity to lift the amount his employees make in most cases. All he has to do is allow patrons to tip with credit cards.


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