CNBC: Learning From Starbucks On Job Creation

From CNBC, posted July 22, 2015

Never accuse Starbucks CEO Howard Schultz of being afraid to take on tough issues.

His latest effort is aimed at the issue of youth unemployment, which is stuck at 12 percent for people 16 to 24 years of age. This age category includes many young people who dropped out of school and have never been regularly employed. In many cases, they do not have the skills or training required for today’s jobs, even with four million current jobs going unfilled. None of this fazed Schultz, as he organized Opportunity 100,000 to create 100,000 jobs for unemployed youth.

This time, however, he isn’t taking on such a complex issue alone. In his recent announcement, Schultz said he had commitments from 16 companies that include some of America’s largest employers: Wal-MartTargetMicrosoftMacy’sCVS Health and Hilton.

Schultz is hearkening back to the days of his youth growing up in Brooklyn’s Bayview housing projects. There he witnessed many people, including his father, who were left out of the American dream. Determined to change this, Schultz put together funds to acquire the original Starbucks from its founders in 1987.

He created Starbucks “to build a company my father would be proud to work at,” adding, “My inspiration comes from seeing my father broken from the 30 terrible blue-collar jobs he had over his life, where an uneducated person just did not have a shot.” Later Schultz provided health-care coverage for all Starbuck’s employees, including part-timers. “I wanted to build the kind of company my father never had a chance to work for, where you would be valued and respected, no matter where you came from, the color of your skin, or your level of education, and a company that linked shareholder value to the cultural values we create with our people.” Today, Schultz has built a thriving enterprise that employs 191,000 people in 22,000 stores, as Starbucks has created $83 billion in value for its investors, including employees who get “bean stock.”

Schultz’s vision goes far beyond providing first-level jobs to youth. He is equally committed to helping them develop the skills needed to take on higher level, better paying positions. To this end, he has teamed with Arizona State University to establish online training programs for his employees. He and his wife are contributing $30 million toward local job training and mentorship programs. Next month Schultz is kicking off Opportunity 100,000 with a jobs fair in Chicago.

While Schultz’s initiative will impact only a fraction of the 5.6 million young people who are neither working nor studying, it is a worthy effort to attack one of America’s most persistent problems. The larger issue is the capacity of the American economy to generate sufficient jobs that pay Americans a living wage, not just the current minimum wage.

America needs to embark on a massive revamping of our training and education systems to prepare our young people for the jobs of the future. Such a program should start in high school and offer students a choice of a college track or a vocational track, much like the German system. This includes apprenticeship programs, such as those created by North Carolina’s Central Piedmont Community College, which has over 20,000 students, with the support of the Germany’s Siemens. If we can train people for skilled jobs in computer graphics and programming, skilled trades like electricians and carpenters, or running complex machines, companies can and should pay them much more for their efforts. In doing so, they can fill many of the four million vacant jobs companies report having.

That’s the only viable way to attack the pervasive income inequality challenges we face. The goal must be to make the pie larger, rather than legislating what share everyone gets of a fixed pie. In turn, America will become more competitive in global markets, and all our citizens will be able to realize the American dream, just as Howard Schultz has done.

Commentary by Bill George, a senior fellow at Harvard Business School and the former chair and CEO of Medtronic. He is the author of the book “True North.” Follow him on Twitter @Bill_George.

Disclosure: Bill George does not own any of shares of Starbucks or Siemens, nor does he have any other business relationships with the company.