Starbucks raises prices, $15 minimum wage to blame?

Starbucks Corp. recently announced an increase in drink prices in its stores across the country. Customers can expect to pay 1% more for their drinks. However, in the Puget Sound region, customers can expect to pay an average of about 3.5% more.

Starbucks’ decision comes despite the “decline of about 42% in Arabica futures prices from a peak late last year.” A Starbucks spokesperson attributed the price increase to “an overall need to manage business costs, including labor and rent expenses.” As the Wall Street Journal reports, the “costs” include rising minimum wages and rent.

Starbucks is not the only company to respond to rising labor costs by increasing prices. The Wall Street Journal,

“Some other retailers have started raising prices in cities that have passed wage increases. Chipotle Mexican Grill Inc. has been raising prices in several cities across the country, with the highest increases in San Francisco, where the minimum hourly wage rose to $12.25 on May 1, up from $10.74. Chipotle’s menu prices in San Francisco rose, on average, more than 10% compared with about 4% in other cities, according to a recent note from William Blair & Co.”

Howard Schultz, the Starbucks CEO, warned an increase in the minimum wage could result in cuts to the company’s generous employee benefits. The Washington Policy Center points out,

“Starbucks “partners” receive full health coverage, free food, bus passes, 401K, stock rewards, full college tuition reimbursement, bonuses and more—even for part-time workers.  Thanks to such benefits Starbucks is noted for its incredibly high “employee satisfaction” rate, perennially earning a spot on Forbes’ and Fortune’s annual “Best Companies to Work For” rankings.  Starbucks employees say they “love that we can receive benefits and stock rewards at 20 hours/week” and rave about the “potential for anyone to move up the ladder.”

Rather than cut benefits, speculates the Washington Policy Center, Starbucks may be responding to cost increases by first increasing prices on customers.