Starbucks announced yesterday that it will roll out credit card and debit card tipping by late 2022. Previously, tipping was only allowed via Starbucks cards, which customers can use to redeem points and rewards.
Credit card tipping has been one of the demands of organizing workers, said Starbucks Workers United, the union representing unionized Starbucks workers and an affiliate of the Services Employees International Union. To date, more than 50 Starbucks stores have voted to unionize.
Tips though, are not guaranteed and pushes the responsibility for fair payment onto customers. Overall, tipping remains ingrained in the US, and arguably has spread to more services, in part due to the rise of cashless apps.
Starbucks said it will invest $1 billion in further wage increases, improved training and other areas (including “the celebration of coffee”) this year. Last October, the coffee chain said average hourly pay will be raised to $17 an hour, up from $14, by mid-2022. But the new pay increases, not including the ones announced in October, and benefits do not automatically apply to unionized stores or ones that are organizing. Starbucks said it must bargain with the union over any wage or benefit changes.
Is tipping a worker benefit in a tight US labor market?
When there’s pressure to raise wages, businesses can use the promise of tips to reduce labor costs or keep menu prices lower, said Tashlin Lakhani, an assistant professor at Cornell SC Johnson College of Business. Food prices remain high, and Starbucks has said it expects more price increases this year.
Tipping is controversial, and studies show that it amplifies racism and sexism. Though some restaurants have tried to abolish tipping, results have been mixed. In 2015, Danny Meyer, CEO of Union Square Hospitality Group, announced that the company would end tipping at 13 restaurants including Union Square Cafe and Gramercy Tavern, and factor the costs into menu prices. But he reversed that decision in 2020 when the pandemic hit the US.
Overall, tips increase compensation for many service industry workers, whose pay is often dismal. The median wage for food and beverage workers is $12.49 an hour, according to the US Bureau of Labor Statistics. “Although tipping has its downsides, food service workers often expect tips and depend on them,” she wrote in an email. She adds, if competitors allow workers to receive tips, companies may also need to roll out tipping to attract and retain workers.