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Starbucks Raises Prices To Give Workers A Raise

SAN FRANCISCO (KCBS) -- Expect to pay more for your Venti Caramel Waffle Cone Frappuchino on your next trip to Starbucks.

That's because Starbucks is doing more than raising the price of its beverages. The company is also raising wages. It's a move that could have a widespread effect.

The Seattle-based company says its prices went up 10 to 30 cents. Exactly how much varies depending on the market and the drink. A big part of the reason behind the increase was so they can give workers a raise.

Beginning October 3rd, Starbucks will give workers a pay increase of 5% or more depending on the region and the market.

There's a reason for the move.

"The labor market is getting tighter," says Gus Faucher of PNC Financial Services Group. "It's becoming more difficult for businesses to hire so Starbucks is raising pay in order to attract workers."

Faucher says the company will also double its stock award for employees who've been with the company for at least 2 years.

"It costs businesses a lot to hire and train new workers, so if they can keep their workers for longer, that reduces the turnover costs," says Faucher. "That's one way of keeping labor costs low."

Moves like this are not limited to Starbucks, or even the fast food sector of the economy. It's much more widespread than that.

"You have wage increases at Wal-mart and Target. JP Morgan just announced that it's going to be raising starting pay for its workers, so this is a broad based phenomenon."

FAUCHER says raising wages is a struggle for businesses with small margins. But if they don't increase pay, they run the risk of falling behind in the battle for workers.

One argument against raising wages has been that ultimately the increase is passed on to the consumer. Last year prices at Starbucks went up between 5 and 20 cents. Did people notice?

"Well, its good coffee," said one patron we talked to. "Sometimes it becomes a little expensive, like this morning, but I think it's worth it."

"I tend to get more frou-frou drinks so I already think I'm spending too much money on it," says another. "It's fine. I don't really look at the prices or whatever – I just buy things."

Most people wish they could 'just buy things.' If you're in Starbucks spending $5 bucks on a Venti Caramel Waffle Cone Frappuchino, it's all disposable income anyway -- not to mention the 510 calories that come with it.

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