A while ago (pre-COVID), a colleague was looking for new coffee shops to support and came across Blue Sparrow Coffee (BSC, https://www.bluesparrowcoffee.com/) here in Denver. He was impressed by their approach to operations (highly transparent) and, in particular, their stated policy on setting employee wages. Here is what the firm posts on its website (https://www.bluesparrowcoffee.com/transparency):
"The people of Denver have spoken, and as of January 1st 2022 the new tipped minimum wage will be $15.87 for hourly employees, and $12.85 for tipped employees. Before this was voted into law we asked our customers what they thought and 80% said they support $15 / hr. minimum wage. We then asked a follow up question asking what they would be willing to pay, 76% said they would pay .50 or more per drink in order to pay our baristas accordingly. We currently pay $10.55 / hr. or $2.47 more per hour than the tipped minimum wage along with tips that average much higher than the industry average. This is what our customers, our neighbors, and our baristas want, and we don't see any reason to wait until 2022 to give them what they want. Effective January 1st 2020 we will be paying a minimum of $12.85 per hour plus tips for all of our hourly employees. In order to fund this while still maintaining a sustainable business we have increased our prices 11%. Some items have gone up as high as .75 with the majority being around .50 and a few select items not changing."
In spite of my colleague's aversion to artificial wage minimums, he really likes the firm's approach, first consulting with their customers to see what they value and, in particular, what they say they want to see (and are willing to pay for) for the people who serve them their coffee. As he noted, "What if Amazon asked its customers this same question? Would people be willing to pay more for Prime to give warehouse employees a better work environment and pay....I doubt it."
There is much to like about what BSC is doing here. Their website is a paragon of good intentions around what a progressive employer should look like and, as an added benefit, a commitment to transparency that ensures they share much of their deliberations with all stakeholders.
The only potential issue that I can see is that they appear to put great faith in what their customers say they will do, rather than measuring what they are actually prepared to do. Asking their customers what they are willing to pay is a dangerous way to set wage policy. Mainly because the customers will not tell the company when they leave for the competition. Maybe this case is different, but I have seen a fair amount of academic research that reveals, for example, that customers are unwilling to pay an extra 50 cents for sweatshop-free socks. So why should coffee be any different? The response of customers when asked by BSC was that they are willing to pay an extra 50 cents per cup of coffee to ensure the firm's employees are paid a higher minimum per hour. Again, these customers may be different, and perhaps the local/face-to-face interaction when purchasing the coffee makes the impact more tangible, when the customer never meets the sweatshop worker (even if their photo is attached to the product). Either way, I think it would be in Blue Sparrow's best interest to pay close attention to sales the moment they instigate the price rise.
Incidentally, it would also pay their employees to reward the company for its progressive approach to wage-setting. An increase in productivity would be the best way to offset the likely dip in sales due to the price increase.
The firm is very good at reporting wage levels on its website. What I would like to see, however, is data around revenues and customer purchase patterns before and after the wage/price increases. Communicating the direct effect of the price increase would also be a good way to ensure broader buy-in. This is important because, as the article in the url below reports, the coffee sector as a whole is expected to contract over the next five years, with most of the store failures occurring among independent coffee shops (to the beneficiary of large chains, such as Starbucks).
Take care
David
David Chandler
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Say Goodbye to Your Local Coffee Shop in America's Café Shakeup
By Marvin G. Perez
October 8, 2020
Bloomberg Businessweek
