Three months ago, Starbucks drew up a plan to pay its employees more while giving them more health care choices. The benefit changes went into effect this month, and Starbucks employees are now seeing the raises reflected in their paychecks.
I talked to several Starbucks workers, and not one is taking home more money. Everyone is getting less. Those who opt for traditional health coverage, now called “gold,” are paying around $5,000 a year, or about $200 out of each paycheck, to cover their share of the insurance premiums. It is a high price when you consider the size of a retail paycheck. Most employees, to save money, selected high-deductible plans. The premiums are similar to last year’s, but a plan year deductible around $2,000 means that, in a good year, insurance won’t cover anything. Employees are paying for all health care out of pocket. That’s hard to do, of course, so many have signed up for health savings accounts to cover the gap. That’s the main reason the paychecks are smaller. Setting aside just $1,000 per year of before-tax income means your take-home pay is $28 less. Recognizing the impact, Starbucks provided across-the-board raises — its first in seven years, apparently. The raises are large enough to take much of the sting out of the situation, but with actual paychecks smaller than before, workers did not come out feeling like they’d gotten a raise.
Starbucks said its youngest, healthiest workers — those whose annual medical costs are zero — might do better with the change, but no one I talked to knew of a worker who fit that pattern. Many Starbucks workers are relatively healthy and in their 20s, but nearly all, it seems, have a continuing medical condition that requires monitoring and a prescription drug. The picture of the young worker who never sees a doctor has become a myth, it seems.
Baristas may not have quit Starbucks all at once this month, but they’re not happy. These are the gist of the reactions I heard: “I just have to take better care of my health because I can’t afford to see a doctor anymore.” “I’ll have to get another job.” “I don’t see why we can’t form a union.”
This is unfamiliar territory for Starbucks, which a decade ago had possibly the most loyal work force in the retail space. A seven-year wage freeze followed by a drastic cut in benefits has changed that, and now Starbucks is lagging a sector where many employers are making plans for a $15 minimum wage. The company knows it has more adjustments ahead and is looking at more ways to automate its store operations so it can get by with fewer workers. It is also considering a plan to close many of its locations. One thing is clear: as the labor market tightens, Starbucks can’t continue to operate the way it has.
The problems Starbucks faces are an inevitable result of the public policy decisions to tie health coverage to employment. The unfortunate result is that health care has become the largest wage tax ever, while many of the supposedly covered employees are shut out of the system again. Starbucks and its workers might be the ones affected this month, but in time, every employer will face some version of the problem. I don’t believe there will be a solution without real health care reform, and that won’t be coming soon in the current political climate. Eventually, though, health coverage for medical conditions not resulting from workplace injuries will have to be separated from employment. The chronic troubles of the labor market and health coverage are hard enough to address separately. Keeping these two vexing problems chained together just makes matters worse. Every solution you can think of creates a new problem somewhere else.