Starbucks Union Efforts Get Frothy With Strike

Key takeaways

  • Workers at over 100 Starbucks locations went on strike Thursday in the next stage of the Starbucks union effort
  • The walkouts coincided with Starbucks’ Red Cup Day, one of the company’s busiest days of the year
  • Wall Street has long had a contentious relationship with unions – but outward appearances, at least, may be changing post-pandemic
  • Whether Starbucks unionizes or not, Q.ai can help you navigate turbulent markets to seek long-term wealth

On Thursday, Starbucks workers went on strike in their most coordinated effort yet to unionize the coffee company. CNN reported early in the day that over 2,000 employees at 112 locations nationwide were “set to go on a one-day strike.”

The Starbucks union strike walkouts landed on Starbucks’ infamous Red Cup Day. This annual event often sees customers lining up out the door to receive limited-edition reusable cups with a holiday drink purchase.

For Starbucks, it’s one of the most profitable days of the year.

For employees who allege they’re overworked, underpaid and minimally staffed, it’s a chaotic nightmare.

But this year, Red Cup Day took on new meaning for Starbucks union hopefuls.

Starbucks union strike: The quick and frothy

Starbucks Workers United representatives say that Starbucks’ practice of chronic understaffing is just one reason they launched the “Red Cup Rebellion.”

Workers note that Red Cup Day is one of Starbucks’ busiest sales days of the year. And yet, partly for this reason, it’s one of the most understaffed. Picking Red Cup Day to strike, therefore, was intended to be both symbolic and financially effective.

On the picket line, leaders handed out union-designed red cups to counter Starbucks’ red cup giveaway. Others carried signs or informed passersby of employees’ unionization efforts and goals. In some locations, workers noted that their managers made drinks while baristas marched outside.

Organizers chose this day to strike to force the company’s hand in making a good faith effort at the bargaining table. (Something that, thus far, unionized stores claim has yet to occur.) On a broader scale, striking workers are seeking higher wages, more consistent schedules and better sick leave and vacation policies.

Unionized workers have also expressed anger that Starbucks handed better pay and benefits only to non-union stores. The company says it can’t legally offer these perks during negotiations – a claim that many legal experts find dubious.

Organizers also claim that Starbucks has repeatedly engaged in anti-union activities like closing stores and firing union sympathizers. The company denies these allegations.

Michelle Eisen, who helped organize the first of over 250 successful union votes, said in a statement: “Starbucks has left behind the very values that drew many of us to the company in the first place…. This Red Cup Day, we’re organizing for a voice on the job and a true seat at the table.”

Boiling down the Starbucks union effort so far

The National Labor Relations Board reports that at least 257 Starbucks locations have voted to unionize since late 2021. So far, Starbucks has entered contract negotiations with at least 53 stores, with 13 more sessions scheduled.

The unionization sweep spread quickly after a Buffalo-area location won a union election in December. Shortly thereafter, dozens of stores nationwide filed for elections. However, the effort slowed last summer as, organizers allege, Starbucks retaliated with firings, store closings and extending extra benefits only to non-union locations.

In response, union organizers stepped up their own efforts. Individual stores began to see longer and more frequent strikes. In Boston, one area store saw employees walk out for over two months. The New York City Roastery is facing week three of an employee strike.

But Thursday’s Starbucks union strike appears to take efforts to the next level, with employees expressing grievances more coordinatedly (and financially painfully) than before.

Strained relations between the two sides

Starbucks has made no secret of its opposition to unionization efforts, though it disputes allegations that it has unlawfully interfered.

Thursday, a company statement acknowledged awareness that “union demonstrations are scheduled at a small number of our more than 9,000 U.S. company-owned stores.” However, while it respects the rights of employees to lawfully protest, its focus remains on “uplifting the Starbucks experience for our partners and customers.”

Said the company, “We remain committed to all partners and will continue to work together, side-by-side, to make Starbucks a company that works for everyone.”

But it’s unlikely that one statement will paper over months of contentious unionization efforts.

According to Starbucks Workers United leaders, the company has retaliated against leaders and denied good-faith bargaining efforts. Recently, organizers have complained that Starbucks lawyers keep walking out of or rescheduling bargaining sessions.

The company claims that it’s merely refusing to participate in recorded bargaining sessions, which violate the National Labor Relations Act. Organizers claim the company is trying to shut down offsite employee participation via video call-in, which it claims is permissible. (Many companies have adopted Zoom, Skype or similar video-conferencing software to hold meetings during and after the pandemic.)

A cuppa legal interventions

Starbucks Workers United isn’t the only organization complaining about the company’s alleged anti-union activities.

This week, a regional director with the National Labor Relations Board filed for a federal injunction against Starbucks, claiming that the company violated labor laws when it fired another union organizer. This marks the fourth time the NLRB has requested legal intervention against Starbucks for tampering with union organizers.

Starbucks has denied all allegations of unlawful retaliation, stating it’s only fired union supporters who violated company policies. It maintains that it’s prohibited by law from offering wage increases and new benefits to unionized employees without prior bargaining agreements.

In return, Starbucks has asked the NLRB to temporarily suspend all U.S. union elections on allegations that regional officials have improperly coordinated with union organizers. The case remains pending.

Bitter dregs: Wall Street’s contentious relationship with unions

Historically, Starbucks isn’t the only one with a grudge against unions – many major businesses and the bulk of Wall Street are too.

Ileen Devault, a labor historian at Cornell University, notes that U.S. businesses and unions have “literally always had a very contentious relationship…much more contentious than the relationships between companies and unions in other countries.”

Harry Katz, a professor of collective bargaining at Cornell, believes that the reasons for this stem back to an “adversarial ideology” between management and workers. “Since the 1980s, management’s perspective was that unions are the devil,” he wrote. “There is a belief that management has private property rights to control what occurs in the workplace, and that unions are an outside third party.”

The extent of this deep-rooted animosity has encouraged businesses to funnel millions annually into preventing employees from organizing. And these efforts have paid off: between 1983 and 2021, union membership plunged from 20% to just over 10%. And yet, a Gallup poll suggests that 68% of Americans approve of labor unions – the highest level since 1965.

Cornell’s experts contend that anti-union corporate sentiment extends beyond the usual worries about increased costs and investor perception. Says Devault, “Unions aren’t just about higher wages. They are very much about workers having a say about what happens in the workplace.”

In other words, when unions have a say in setting benefits and firing practices, the employer gains more responsibility for not only itself, but its workers, too.

A changing tide – for some

However, outside Starbucks, ripples of change have echoed throughout public-facing corporate sentiments.

BlackRock CEO Larry Fink wrote in a letter to investors that “workers demanding more from their employers is an essential features of effective capitalism. It drives [prosperity, competition and innovation that] will help them achieve greater profits for their shareholders.”

And Trillium Asset Management, which currently leads a coalition of 75 investors with at least $1.2 billion sunk in Starbucks stock, has pushed for the company to adopt a policy of global neutrality toward unionization efforts. Trillium’s coalition has also pushed for “fair and timely” contract negotiations, saying that “workers need to have a voice.”

To be clear, that doesn’t mean that all companies (or investors) agree, or that Wall Street’s position has necessarily changed all that much.

Rather, according to Trillium’s chief advocacy officer Jonas Kron, they’re preparing to protect their reputations. Kron holds that reputation is often among a corporation’s greatest assets – and an anti-union reputation poses financial risks to investors.

Cornell’s Harry Katz believes that unionization – when done well – can help companies face some of their biggest problems: namely, high turnover. With decreased turnover and increased organizational performance, he says, union bargaining can lead to “higher benefits, costs and wage costs – but could well provide compensating advantages to the organization.”

Still, not everyone is bought in on this new wave of ideology. Reggie Borges, director of corporate communication at Starbucks, recently stated that, “We don’t believe a union is necessary at Starbucks. Having a third party gets in the way and slows the process of investing in our people.”

How steep is the price of unionization for investors?

The prospect of a changing tide, as well as a continually tight labor market and high attrition rates, raise a critical question. Just how does unionization impact stock prices?

The answer: It depends – and it’s not always clear.

Most studies find that unionization efforts may lower stock prices for the first 1-2 years as wages and other costs rise. However, these same studies hold that unionization can decrease crucial business and investing risks that drag down long-term gains.

Essentially, unionization forces companies to spend more time and money on their employees, and less on riskier ventures. Additionally, unionized firms may be more transparent about certain financial activities, further decreasing investment risks.

Cornell’s Katz believes that collectively setting pay, work rules and neutral administrative grounds, rather than one side or the other dictating demands, is more productive for employees and even investors long-term. Unions may also reduce turnover, increasing long-term experience, safety and productivity metrics.

However, union benefits don’t always pan out for every company’s stock. One 2009 NBER paper suggested that the average union win “decreases the market value of the affected business by at least $40,500 per worker eligible to vote.”

That said, these impacts don’t differentiate between the effects of internal costs versus investor opinions, which may contribute to short-term decreased market caps. The study also found that, despite stock market decreases, a company’s long-term financial success is often unchanged at worst, or improved for the best.

In a nutshell, the complicated version is that the cost of unionization is steep for a time. In some cases, a company’s stock price can recover quickly; in others, it may remain suppressed for longer.

And for some companies, particularly those that were heavily unorganized to begin with, unionization efforts can exacerbate existing problems. But long-term, certain unionization efforts improve workers’ wages and quality of living, which bleeds positively into the broader economy, stimulating growth in other areas.

Filter through the noise with Q.ai

In other words: whether – and how – unions impact your portfolio is complex and not always clear.

When unions lead to better wages without impacting the company’s long-term bottom line, those impacts can boost the economy (and your portfolio) elsewhere. However, unionization comes with its drawbacks for investors, particularly those seeking short-term profits in the stock market.

Events like this are exactly why we here at Q.ai believe that investors should take a long-term, well-diversified approach to building wealth. Because, ultimately, financial success is rarely gained from investing in (or avoiding) a single company, but by cultivating a high-performance portfolio that meets your goals.

And that’s just what Q.ai offers.

With a variety of AI-backed portfolios, from our diversified Foundations Kits to our riskier Clean Tech and Bitcoin Breakout Kits, we can help you build a well-diversified strategy that still lets you specialize with your values and preferences.

Better yet, with Portfolio Protection and a long-term approach on your side, you can minimize the impacts of those pesky downturns. And all the while, you can ride the upside of volatility to long-term success.

Source: https://www.forbes.com/sites/qai/2022/11/21/starbucks-union-efforts-get-frothy-with-strike/