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How Starbucks Achieved 100% Equal Pay In The United States

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 That quick cup of coffee from Starbucks just got a little sweeter. Starbucks Coffee announced yesterday that after a decade of work, the iconic coffee corporation has achieved equal pay for all their employees — across race and gender in the United States. “Roughly 10 years ago we began serious work to ensure women and men – of all ethnicities and races – are compensated fairly at Starbucks,” said Lucy Helm, chief partner officer at Starbucks, via press release. Starbucks joins a growing trend among major consumer goods and tech corporations who are choosing to innovate on the human capital curve by equalizing compensation packages before being required by law, as is the case in Iceland, Germany and the United Kingdom

Starbucks

Starbucks's announcement also showcases a broader set of corporate values and culture that can all go towards supporting a more equal workplace and extend beyond just adjusting salary and compensation. Unlike most retail and low-wage employers, Starbucks began offering retirement and investment opportunities to their workers in 2010. Starbucks then began offering tuition reimbursement in 2014 for workers to finish college at Arizona State University. They project that the company will help as many as 25,000 workers graduate with a bachelor's degree by 2025. The corporation further supported employees by enhancing health care benefits in 2016, including an unprecedented parental leave program for full and part-time Starbucks workers in 2017. These steady adjustments beyond pay are part of a larger culture and system Starbucks built to help their employees succeed and truly close the wage gap. “It’s a huge muscle to build," said Sara Bowen, an attorney who leads Starbucks Inclusion, Diversity, Equity and Accessibility (IDEA) team. " Even when you reach a pay equity milestone, you have to keep working at it.  That’s why we said our goal is to achieve and maintain pay equity. Our real focus, though, is not on the number, but on the behaviors and systems that drive equity.” Each of these employee policies all help solve systemic problems that, when added up, cause women to make on average 20 cents less on the dollar, compared to the average male worker in the United States.

Of all the new policies Starbucks is adopting, one of the most groundbreaking is a commitment to radical transparency when it comes to discussing wages. Starbucks set as policy that the corporation will not retaliate or discriminate towards employees who talk about salary, and will also be open to talking about any unexplained differences in pay. This affirming policy signals the sort of openness on discussing income that is a part of the Millennial outlook on compensation, and flouts the typical approach of pay secrecy that many companies have historically followed.

Starbucks's decision to include transparent pay discussions signals a larger shift in how major corporations in the United States can approach equal pay. "Pay equity is no longer a defensive conversation, but a badge of honor that companies see as critical to attracting and retaining top talent," said Natasha Lamb, managing partner of Arjuna Capital, an investment firm focused on sustainable and impact investing. Lamb has worked with the shareholders of dozens of corporations to close the wage gap, including most recently JP Morgan Chase and American Express. In fact, seven of the biggest financial companies in the world have announced proactive steps to wipe out gender pay inequity in response to shareholder proposals from Arjuna Capital that include detailed wage data reports. Arjuna Capital has also worked with Starbucks shareholders, and Lamb mentioned that Starbucks publicly reported a wage gap of 99.7% in 2017. "Starbucks has achieved pay equity in the course of only one year. And they’ve been transparent with their employees and investors. That’s huge," Lamb said. In addition to being public about both the gap and their ability to close it, Starbucks continues a surprising momentum around establishing equal pay as a new hallmark of developing human capital.

Starbucks also isn't on this transformational path by themselves. The American Association of University Women (AAUW) worked with Starbucks to help align their existing corporate values with equal pay best practices. As Kim Churches, CEO of the AAUW, pointed out that "pay equity can have an enormous and positive ripple effect in strengthening families, communities, the tax base and the economy as a whole. Achieving parity for gender, race and ethnicity is an opportunity for us as a nation to become stronger,” Churches said.  While there might be many implementation details, Churches notes that "it’s immensely solvable.” If solved, that boost to the economy isn't just an abstract concept. A 2017 report by the Institute for Women's Research found that if men's wages stayed the same, achieving equal pay for women would add a whopping $512.6 billion to the U.S. economy.

While Starbucks has yet to verify pay equity across the globe, their leadership is committed to continuing to make the effort. “We believe it is important to encourage others to join us in recognizing the importance of this issue, not just for our partners, but for women all around the world,” Helm said. This movement towards pay equity across the globe could result in billions of added revenue to the world economy.  

Key takeaways of creating equal pay culture at Starbucks: 

  • Permanently stop asking about previous pay histories
  • Remove any caps on promotional increases
  • Be radically transparent about wages, including offering pay ranges if a candidate asks for it
  • Have an accessible pay calculator with transparent standards and calculation methods
  • Annually report out progress across the organization
  • Maintain a policy of no retaliation or discrimination towards employees who talk about wages
  • Proactively discuss unexplained differences in pay between women and men performing similar work when discrepancies are found 
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