Kerby Anderson

The Starbucks CEO announced that he was going to close 150 stores. The argument given by the company was that these stores were hit with declining sales. While that may certainly be true, economists have noticed another reason why these stores may be closing.

According to an article by Brandon Morse “The first stores on the chopping block are those located in cities where the ‘fight for 15’ crowd has had their victories.” If you are not familiar with the movement, they are activists who have been fighting to increase the starting wage to $15 per hour. The fight for $15 began in 2012 when 200 fast-food workers walked off their jobs in New York City.

In his statement, Starbucks CEO Kevin Johnson doesn’t mention the $15 per hour issue directly but you can read between the lines. He said that he was closing stores in the “major metro areas where increases in wages and occupancy and other regulatory requirements” make Starbucks stores unprofitable. Yes, that would be those places with high minimum wage hikes and additional regulatory burdens. You usually find them in blue cities and in blue states.

It is worth noting that while he is planning on closing many of these urban stores, he is also planning on opening Starbucks stores in less regulated suburban cities. So far, the “fight for $15” activists haven’t been as successful in those venues.

This isn’t the first time I have talked about the impact of raising the minimum wage on businesses. We have seen the negative impact on all businesses in the Seattle area. We have seen the impact nationwide on some businesses like Chipotle and Red Robin.

If you raise the cost of labor in a business with small margins, it can become unprofitable and eventually go out of business. Starbucks is finding it hard to make a profit when activists force you to pay more than your business model would allow.