Will consumer competition prevent a unionized Starbucks from succeeding Note that General Motors, Ford and Chrysler are still in business despite bargaining with a union in an industry not exclusively unionized. Starbucks is likely to survive, even if all of their shops become unionized. However, if wages and benefits rise significantly above what independent coffee stores and small chains pay, then consumers will see price differences. Some consumers may continue at Starbucks, either from brand loyalty or union sympathy, but most consumers will prefer paying lower prices.
A partial offset to these costs will be Starbucks being able to hire higher quality employees. Low wage employers have to hire less able, less diligent employees, whereas high wage employers can pick the cream of the job applicants. This idea, called the efficiency wage theory, has been taken so far as to suggest that employers would make more profits paying higher wages. That view, however, is equivalent to saying that company owners are insufficiently greedy, or less knowledgeable about running a business than the economic theorizers. It is clear, though, that greater employee productivity will partially offset the simple arithmetic of added costs from higher wages. In fact, Starbucks may have been exploiting this theory when they offered health insurance.
If the unions are successful at winning high wages and benefits, the unionized stores will see either lower sales due to higher prices, or lower earnings per store due to higher costs. Passing the employee costs on to customers will reduce unit volume, thus reducing need for employees. The unionized portion of the company will decline.
If, on the other hand, the company eats the higher costs, then some of its marginal stores will turn unprofitable and be closed. Locations under consideration for new stores will be shunned if union representation makes them unprofitable. The result is the same: fewer employees in the areas that are unionized. To the extent that the union wins above-market wages, unionized employment will decline.
Looking beyond coffee, the recent unionization rates are likely triggered by the extremely tight labor market, in which more job openings exist than unemployed workers. When more normal conditions return to job markets, union organizing efforts will be successful primarily where little competition exists for the customers. That applies to a few non-competitive sectors, such as utilities and government. In sectors with competition for customers, unions will not win higher wages.
