Coffee Corporations Should Nix Tip Jars

Tipping used to be a way to show appreciation for a service performed well. Now the ubiquitous tip jar can be found throughout the fast-food industry, from coffee shops to Chinese takeout. Over time, the tipping expectation spread from a few well-defined industries — restaurant, pizza delivery and bartending — to include any number of mom-and-pop shops and, unbelievably, the coffee industry, dominated by multinational corporation Starbucks.

Tipping inadvertently takes the pressure off corporations to provide a living wage for workers and places it on the consumer. By encouraging tipping, Starbucks and Northwest competitor Tully’s Coffee Corp. are shirking responsibility to their workers by paying wages that are low by any standard. Starbucks should stop relying on customer tips to supplement worker income and pay its hourly employees more.

Corporations such as Starbucks hire hourly employees at low wages but make sure to point out that tips also are a factor. But the starting wage in midtown Manhattan was so low in relation to the cost of living, $7.75 per hour plus tips, that workers in one New York store have begun the first steps toward unionization, joining with the Retail Workers Union IWW IU/660. Starbucks does not offer raises until after six months, typically 11 cents, and the company’s medical coverage is difficult, if not impossible, to afford for workers just scraping by, according to the Starbucks Workers Union Web site.

The reliance on tipping as a source of income makes it difficult for a coffee-shop employee to determine if he or she is making a fair wage, particularly since most locations do not guarantee 40 hours a week and hours vary considerably.

Advocates who promote a “living wage” believe that employees who work 40 hours a week should be able to afford some type of housing with 30 percent of their income — an impossibility given the minimum wage many service jobs offer, according to Universal Living Wage. A living wage is similarly out of reach for Starbucks employees, and tipping does little to bridge the gap from minimum wage to living wage.

For example, consider the midtown Manhattan Starbucks that is attempting to unionize. If a worker at that location did not work 40 hours and instead worked only 35 hours, at a wage of $7.75 an hour, his or her net income would be $13,904.45 a year. A similar salary might be expected in Seattle, considering Washington state’s current minimum wage is $7.16.

Therefore, if a worker earning $7.75 an hour, working 35 hours a week, transferred from a Seattle Starbucks to one in New York City, he or she would have to earn 50.9 percent more money than in Seattle to afford the same lifestyle, which amounts to $20,975 a year, according to the Cost of Living Calculator at Salary.com. A universal living wage would help bridge the difference between cities and assure that all workers can afford a minimal lifestyle, regardless of the local or state minimum wage.

Lost income needs to come from somewhere, and right now the expectation is that the consumer should make up for what Starbucks refuses to pay. Tipping for coffee has already become something of an expectation, placing an inappropriate burden on the customer and essentially raising the price of coffee for those who feel a moral obligation to tip.

An obvious solution would be for Starbucks to get rid of its tip jars and pay an extra $1 or $2 more an hour — what the employee would make in lost tip wages. Starbucks, however, is unlikely to pay more for wages because its success is contingent upon hiring workers at low wages, encouraging tipping with the placement of tip jars and relying on workers to spread the word that their livelihood is dependent on tips.

Given the low wages of the food and beverage industry as a whole, Starbucks is not necessarily a bad corporation to work for. Part-time employees working 20 hours or more are eligible to receive health-care benefits, and Starbucks is listed in Fortune 500’s “100 Best Places to Work” list for 2004.

Health-care benefits are meaningless, however, if employees cannot afford to make use of them and if workers are forced to rely on tips as a source of income.

If Starbucks does want to make a difference, to its workers and to the community, it can start by paying its employees higher wages and stop asking its customers for a handout on behalf of its employees. By raising wages and nixing the tip jars, Starbucks can make a difference in the coffee industry, and perhaps in the fast-food industry as well. Hopefully the outcome will be a future with a living wage for all workers.

(An earlier version of this article was published in the Oct. 19, 2004 issue of The Western Front, the campus paper at Western Washington University. Tully’s Coffee Corp. closed all retail locations in March of 2018; for more information about Tully’s long decline see here).

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