Creating jobs with a caffeine fix

Tess Vigeland Nov 3, 2011
Starbucks CEO Howard Schultz. Spencer Platt/Getty Images

Creating jobs with a caffeine fix

Tess Vigeland Nov 3, 2011
Starbucks CEO Howard Schultz. Spencer Platt/Getty Images

Tess Vigeland: Now we return to the question of job creation. It is the number one economic issue in this country — yet no one seems to have figured out how to get companies to hire more people.

Howard Schultz has brewed up an idea that he hopes could make a grande dent in the problem. The Starbucks founder and CEO launched an effort this week called “Create Jobs for USA.” It’s a microlending program aimed at helping small businesses hire more employees. The money will come, in part, from Starbucks customers, who this week started to see $5 donation cards sitting near the coffee giant’s cash registers.

Howard Schultz, welcome to the program.

Howard Schultz: Thank you very much for having me.

Vigeland: So you brought gourmet coffee to the masses. Now you want to be a banker. Square that circle for me.

Schultz: Well, I don’t want to be a banker. What I’m trying to do, more than anything else, is use Starbucks’ scale for good. When I look at the landscape of 9.1 percent unemployment — almost double that in the Hispanic and African-American community — I believe that we can at Starbucks leverage the equity of our brand in a way that’s quite unique. We will collect millions of dollars and we will get it in the hands of the Opportunity Finance Network, which has a national organization of community-based loan organizations that will provide access to credit to small businesses, start-up businesses that will be a catalyst for job creation at a time in American when, unfortunately, banks are not lending.

Vigeland: Explain for us how that dollar donated by one of your customers will end up helping create a job in a small business?

Schultz: Well, I think there is evidence amongst small businesses that they’re having problems getting access to credit that they’ve gotten before. And so when we examine what we could do, we uncover the Opportunity Finance Network, which among their network is these organizations that are community-based, many in underserved communities across the country. We will provide millions of dollars to these organizations and they — through their organizations — will vet the companies that are trying to get access to credit, provide them with a low-interest loan (anywhere from $10,000 to $500,000) and 100 percent of all the donations will go to the cause. Starbucks will provide $5 million as a starter from our own foundation and we’ll absorb the cost of anything to do on the administration level.

Vigeland: It’s not a grant, it’s an actual loan. So when the business pays back that loan, where does that money go? It goes back into the fund?

Schultz: Exactly. And you know, Starbucks has been involved for almost 20 years in microloans and microfinancing in emerging countries, where we have coffee businesses. And what we’ve found over those years is that 98 percent of those loans are paid back. And in fact, the Opportunity Finance Network has given us their own statistics. Almost the exact same scenario, 97-98 percent of those loans that they’ve been lending has actually been paid back.

Vigeland: According to the information that you’ve released, for every $3,000 donated through the program, a job will be created or maintained. Can you help us understand the math there? Because $3,000 doesn’t sound like a lot to keep someone in a job.

Schultz: Yes, I think as we learn more about this, we learn that there is a multiplier effect. For every dollar that we raise, the Opportunity Finance Network or the OFN is able to raise more equity and borrow against it. So there’s a multiplier of seven times. We also learned that the number that equates to a job is $20,000. So the $3,000 that you quoted times seven gives us the job that will be created and is sustainable.

Vigeland: What’s your ultimate hope for this effort? You know, microlending has a bit of a mixed track record.

Schultz: True.

Vigeland: Certainly a lot of success, but also some questions raised about it. What are you hoping to see at the very end?

Schultz: Well, first off, we’re setting up within Starbucks a small group of people that will be engaged in this process from the very beginning to ensure the fact that the concerns that you raised do not come to fruition. But in addition to that, we hope that we can create a message and a signal to other businesses and other corporations that we can’t wait for Washington to do our part. And also, I think after the first year, we’ll be announcing partnerships, whose companies have assets and complementary skills that will bring more reach, more awareness and more money to this cause.

Vigeland: If this effort is a success and perhaps even becomes a role model for similar efforts, what do you think that says about the role of the government in job creation? Does it say, perhaps, it’s not as necessary as some people might think it was?

Schultz: I think it is, without question, necessary and it is the responsibility of government. But I do feel, as I look at the next 13 months in terms of re-election cycle, that my level of confidence that things are gonna get done that are not through the lens of ideology and re-election is pretty much zero. And that’s why I and Starbucks are stepping up, because we’re losing confidence in Washington’s ability to deliver on what I think is their primary responsibility — and that is the sustainability, the health and the hope that Americans have about our country and the American Dream.

Vigeland: How confident are you that your public, your customers are going to step up to the plate here? I mean, there isn’t a great track record for efforts like this, where you put out a jar, basically, and say, “Can you help out your fellow man?”

Schultz: I have optimism that this is a different moment in time, where Americans are gonna help Americans. There’s millions of people who come through Starbucks every day, and I believe we’ve created the kind of proposition that they will trust and support.

Vigeland: And in closing, any chance I could convince you to make the pumpkin spice latte a year-round treat?

Schultz laughs

Vigeland: Please?

Schultz: Oh, that’s funny. I’ll consider that.

Vigeland: Howard Schultz, thank you.

Schultz: Thank you.

Vigeland: To that question of whether people will actually donate? We stopped by a Starbucks here in LA and asked a few customers.

Woman 1: If it was pretty inexpensive, given what you pay for a coffee… So, not sure how effective it’ll be, but I’m hoping that it will be effective.

Man 1: And I would wanna know more about how the progrma worked.

Woman 2: It’s not a significant amount of money for most people, and it’s for a good cause.

Woman 3: I think anything we can do to stimulate the economy is a good idea. If they ask me I might consider it.

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