The Cost of Convenience

It should come as no surprise that the United States is the center of a world-spanning empire of finance and production — that it is currently the heart of the economic engine that turns the world. There is a reason that almost everyone in the U.S. owns at least one computer, whether it’s in the form of a laptop, a car-board computer, or a smartphone, even though the coltan required to make tantalum capacitors (a component of almost every single electronic device) requires huge amounts of murderous and back-breaking labor to pull out of the earth. There’s a reason we can get relatively cheap food transported from all over the world. That convenience seems cheap, but there’s a cost that we don’t see.

We can illustrate that convenience by examining the hypothetical production and preparation of a cup of coffee in a Starbucks. Unlike McDonald’s and other large-scale franchises, Starbucks is a single corporation; we won’t have to worry about franchising fees or the way that McDonald’s makes money by owning the ground the restaurants are built on and renting it back to the franchisee.

For ease of illustration, we’re going to remove their entire menu and say they serve only a single item: a grande drip coffee. This will cost you $3 at the register. How much does it cost Starbucks to make that cup of coffee? To know that, we have to tally every cost they have, figure out how many cups of coffee they sell every hour, and then divide the costs into the cups of coffee produced.

The Storefront

Before labor costs, paying for just the storefront, the Starbucks corporation must pay, on average and for the average storefront, $414 each day.¹ In busy locations, Starbucks stores are open from 6:00 a.m. until 8:00 p.m. This is, of course, different in cities like New York or small towns, but we are looking for a typically average amount. That leaves fourteen hours of productive time when our typical Starbucks can make money. In order to pay that $414 per day bill, Starbucks must make at least $29.57 every hour it is open.

The average Starbucks uses up $50 of raw materials, packaging, and shipping for each hour it is open.²

Labor Costs

The average salary of a barista is $11/hour, and the average pay of a manager is $19/hour. We can estimate that at any given time there are four baristas on shift, supervised by a single manager, meaning the labor costs for a given location are about $63 per hour.³

Covering Costs

Between rent, machinery, furniture, raw materials, and worker pay, each hour the Starbucks corporation must spend $142.57 in total or the storefront would be unable to operate.⁴ Remember, our coffee costs $3 a cup, so the Starbucks storefront must sell forty-seven cups of coffee each hour to cover its costs.⁵

But how many cups of coffee do they actually sell? Recall, first, that we’ve flattened the entire menu; for the purposes of this exercise, we will assume they only sell coffee, so the profit margin on different items doesn’t matter. It won’t give us a precise answer, but it will illustrate the point. The average Starbucks store sells sixty-six coffees an hour at $3/coffee.⁶

Each of the corporation’s expenses is embodied in a fragment of the price of a single one of the sixty-six cups of coffee. $29.57 for rent and machines and $50 in raw materials each hour gives us $79.57 an hour in fixed costs — that is, before Starbucks pays the workers. We can divide this by the number of coffees we calculated are sold in each hour, sixty-six, which leaves us with $1.20. That means $1.20 of each cup of coffee goes to keeping the lights on, the machines working, and the raw materials coming in.⁷ The other $1.80 value of the cup of coffee comes from the labor of the workers in the store.⁸ Without this labor, not a cup would be sold.

Remember that our employees are costing us $63 per hour. That means they are being paid $0.95 for every cup, even though they are adding $1.80 to that cup.⁹

The Cost of Convenience?

Most modern economists will tell you that the difference between these listed costs per cup ($3) and the cost inputs ($2.15) comes from a markup. That is to say, in our example, these economists believe that the Starbucks corporation is cheating the consumer of roughly 85 cents every time you buy a grande drip. This extra 85 cents is therefore the price, they say, that customers are willing to pay for the convenience of not having to brew their own coffee.

This is simply not true. No one buys something for more than its value. We can more clearly see this trickery at work if we investigate what exactly the economist means when they say that the “customer is willing to pay” the price. Why is the customer willing to pay that? Well, they’ll dither and tell you about household expenses and average income, savings, and all that. But the fact of the matter is that the customer — the market  supports a price because it is more or less the value of the thing being sold. Something sold above its value is not sold for long; something sold below its value causes the seller to lose money and eventually stop selling anything. In other words, people do not tell the market how much things are worth, the market tells us.

What is Value?

Use-value is the thing, the commodity; the use-value of a coffee is that it is coffee. You drink it, it’s hot, it caffeinates you. But the exchange value, the value for which you will pay for that coffee, is the cost of producing the coffee. The cost of producing any commodity is simply the total cost of each individual input used to create the commodity. The value of each cup of coffee is therefore the value of the physical store used to prepare it (during the amount of time it takes to prepare and sell the coffee), plus the value of the raw materials that go into the coffee (the beans), plus the value of the labor.

We could represent this as an equation: constant capital (rent, raw material, etc.) + labor cost = value. Notice that this leaves no room for profit! We will return to this question.

Those underlying costs fluctuate. The price of water and power, for instance, changes from day to day.  Some labor is more efficient and some labor is less efficient, depending on the worker. None of this matters; what matters is the socially average cost, that is, the amount of work it takes for the society, on average, not any individual, to produce, of each expense. Value isn’t set at each transaction, but rather overall and on average, as commodities tend to gravitate around the value of their cost. A corporation that pays more than socially average for labor or raw materials loses out on the value. For instance, if Starbucks bought coffee beans that were ten times as expensive but otherwise the same, they would not then be able to charge ten times the price.

We saw above that the workers add $1.80 in value to each cup of coffee. How do we determine that amount? That is, why does the coffee cost $3 rather than $2? Why do the workers not add 80 cents to the $1.20 of constant capital costs? This amount is not arbitrary. The $1.80 figure is determined by the cost of the labor-power, its value. What is the value of labor-power? It is the same as any other value: a total of all the costs in reproducing it. When the value is embodied in labor-power, those costs are the aggregate total of the quality of life of the laboring class in any given society. The cost of housing, of clothing, of food, of existence for the laborer. 

This value — the aggregate total of the quality of life, the value of all the individual objects required by the members of the laboring class: housing, clothes, etc. — is the cost of reproducing the worker’s labor-power. If the laborer were to be paid less than the cost of reproducing their labor-power, they would die or their quality of life would begin to sharply decrease. If the laboring class as a whole were paid less than the minimum cost of reproducing their labor-power, its members would die or become infirm at an unsustainable rate, and the whole economy would fail.

There’s only one input that the employer can pay for at less than cost. Because the employer purchases all the non-living inputs from other merchants, they generally trade on an equivalent level. That is, the employer pays the merchant of raw materials the value of the raw materials. The employer, however, has a great benefit over the laborer for two main reasons. The first is that the laborer cannot live without money earned from the employer. The second is that when we enter the labor market, we confront the entire class of employers — the capitalists — while the entire class of the capitalists confronts only a single laborer at a time. So, although the laborer produces a certain value (which is based on the socially average commodities that members of the laboring class consume), they are paid a value less than this. If a we were allowed to work for only so long as necessary to pay our expenses and buy what we want the employer would never make any money.

The workers are paid collectively ninety-five cents  per cup of coffee, even though they add $1.80 to it. That leaves Starbucks with 85 cents in pure profit that accrues to the corporation. If the Starbucks workers themselves were paid the full value they added to the raw materials and machinery by finishing the coffee and distributing it, they would be paid at a rate of $118.80 each hour, collectively;¹⁰ individually they would make $23.76 an hour. This assumes that the manager is actually providing valuable labor that’s over and above their labor as a barista, and distributing that extra $8 back to the four other employees.

Let’s talk about that extra $8/hour. This $8 is primarily paid to managers to ensure that the person making the schedule, counting the money, doing the deposits, enacting discipline, etc. is loyal to the company. The manager’s salary makes them a labor aristocrat — a bribed worker who has been corrupted to act against their fellows. The extra $8 is actually part of the amount stolen from the other four employees and given to the manager by the manager’s bosses. Let us instead pay the manager at the rate of the other employees, ignoring the fact that their salary is actually $19/hour and we will find that 5 x $11/hr = $55/hr. $55/66 cups of coffee is 83 cents.

Accounting for the current pay scales of the five employees, the rate of exploitation is slightly under 100% — that is, the employees are cheated out of $1 for every $1 they are paid.

But wait! This doesn’t happen only in the Starbucks store, it happens at every stage of production, with every single input that goes into the coffee!

The Raw Materials: Imperialism in Action

We have noticed a curious thing when it comes to the costs associated with making a cup of coffee: the largest cost in raw material comes not from coffee beans, which are what many would consider to be the indispensable element of coffee, but from rent, machinery, and utilities. Why is that? Are coffee beans really worth so little? Do they take so much less labor to produce?

Not at all.

In fact, the roasted coffee bean is actually the pit of a fruit that requires a long, intensive labor process to extract from its plant once it’s actually grown. How can it be that for each cup of coffee sold in a Starbucks, the labor of the five employees there serving it is worth $1.62, but the labor of the coffee bean farmhand is a mere 7.5 cents?¹¹ 

As Brazilian coffee plantations account for most of the coffee production worldwide, we will use the Brazilian growing region of Minas Gerais as our source of data.

Coffee plantation workers in the Minas Gerais region are paid for each sack of coffee-cherries they harvest, and on average earn $6 per day by harvesting 100 to 200 pounds of coffee-cherries. Working roughly fourteen hours a day, the coffee harvester thus earns forty-three cents per hour.

According to the National Coffee Association USA,  these 100 to 200 pounds of coffee-cherries result in roughly twenty  pounds of coffee beans once they are roasted. Making $6 a day for the equivalent of twenty pounds of roasted coffee beans, harvesters receive 30 cents for each pound of final product.

Remember that Starbucks pays the plantation owner $1.20 per pound of coffee, but the plantation owner pays the harvester a mere thirty cents per pound. If we assume the plantation owner has no other costs, this is a rate of exploitation of 4:1 or 400 percent. That means for every $5 worth of value the harvester creates, $4 of it is stolen by the plantation owner. Even if we are generous and say the plantation owner has to pay 15 more cents per pound to bring the coffee beans to market and roast them, that’s still a rate of exploitation of 2.5:1.

Why is this?

The answer is simple: U.S. imperialism.

U.S. foreign policy encourages — nay, demands — reduction in the standard of living of the working class all over the world. The peripheral countries are transformed into places where raw materials are produced. This system permits the capitalist class in the U.S. to shunt the greatest misery onto workers in the third world, while providing goods that would otherwise be much more expensive to the workers in the imperial core.

What if the coffee harvesters had the same standard of living as the Starbucks barista? If the hourly pay of that worker were $11/hour, a pound of coffee would embody $7.80 a pound of harvester labor, not 30 cents  a pound. Now, Starbucks would pay five  times that amount. The value of the coffee beans embodied in each cup would increase from 7.5 cents to 48 cents per cup. Thus, our raw material costs will be $1.78, an overall increase of 40 cents per cup. The grande drip would cost $3.40, not $3. But this still doesn’t show us how much value the imperial core is extracting in even this simple process.

Remember, without the greedy hand of the capitalist, the Starbucks barista is comfortably making $21.38 an hour. If we let our coffee harvester produce the same value — without the interference of the U.S. war machine, puppets like the fascist Bolsonaro, or the plantation owner — then the coffee embodied in the cup would be not forty-eight  cents, but rather:

The harvester, making $23.76 an hour, like our barista, now harvests one pound of coffee at the rate of $16.97 per pound or $1.06 per cup. Our coffee, when we remove imperialist exploitation and equalize our labor markets across the core and periphery, costs not $3, but $4.

The benefit — $3:$4, or 1:2 again — is the rate of imperialist exploitation of the peripheral Brazilian coffee economy. Thus the peripheral worker is doubly exploited, first by his own capitalist employer and then by the capitalists of the United States.

We can estimate the overall rate of exploitation in the Brazilian peripheral coffee economy by comparing the price-per-pound of coffee currently made by the harvesters (30 cents) to the price-per-pound if their economic position were equalized with that of the workers in the imperial core ($16.97). That is 47:1. The imperial worker is exploited at a rate of 100%; the peripheral worker is exploited at a rate of 4700%. For every $4,700 distributed to the comprador plantation owner, imperial workers, and the U.S. capitalist, one dollar is distributed to the harvester.

The difference between the thirty  cents and the $16.97 is realized as surplus value for, first, the plantation owner; then, Starbucks corporation; and finally, the American consumer. We pay $3 per grande drip instead of essentially $4 at the expense of the Starbucks barista and the coffee harvesters. This isn’t limited to coffee, and the more laborious the final product, generally the more hidden value is shifted onto the peripheral workers. This one dollar may seem like nothing in a cup of coffee — but now consider the amount hidden in the blood-soaked coltan in our phones, in the agony-filled rosewood of a desk, in the gunpowder-scented gasoline of our cars…

Without the Capitalists, Everyone Benefits

The wages of every other non-productive or semi-productive position in the Starbucks corporation, from advertisement positions to H.R. to hired lawyers to the CEO, is paid for by the unrealized wages of the baristas and the coffee harvesters. It is true that managers may help increase efficiency of laborers, and that the petit-bourgeois ranks of the Starbucks corporation might maximize those same efficiencies and create extra sales; to the extent that they do this, they do add value. The vast strata of labor aristocrats and petit-bourgeois “knowledge workers” supported by the stolen superprofits of the peripheral economy can only be employed in such marginally productive labor so long as the U.S. continues to dominate and destroy the economies of peripheral countries.

Although there are clearly tiers of exploitation, with the imperialized periphery suffering the most, there is one truth that is emblazoned above all others: without the interference of the parasitic capitalists, the workers of both the core and the periphery will live markedly better lives.

We must march together with our imperialized siblings, stand in solidarity with international labor, and oppose the entire system — we must inoculate ourselves against the blandishments and bribes of the capitalists, reject their crumbs, and unite together. The barista and the coffee harvester are linked by common interest and common need. All that remains is a common creed to bind them together and coordinate them against their common foes; capitalism and imperialism!

1. According to the Starbucks 2022 10-K report, Starbucks spent $2.7 billion on machinery and furniture and a further $2.7 billion dollars on rent for their stores. There are presently 35,711 Starbucks stores worldwide. That means each location costs, on average, $75,606 each year in rent, or $207 each day. Starbucks spends almost the same amount on furniture, machinery, and utilities each year — this includes replacing old, worn-out machines that get used up. That all means it costs $414 per day to keep the Starbucks storefront open, before any raw material costs or labor. ↩︎
2. That same 10-K report gives us the figures of $1.2 billion for coffee beans and $9.1 billion for all other raw materials (milk, syrups, packaging, shipping). We will set aside those other raw materials, because we are assuming they make only coffee. Divide this total of $10.3 billion by the number of stores (35,711) and we have a per-store per-year expense of $254,823. That’s $698/day and $50 an hour. ↩︎
3. $11/hour x 4 baristas + $19/hour x 1 manager. ↩︎
4. $29.57 (store costs) + $63 (labor costs) + $50 (raw material cost). ↩︎
5. ($142.57/hour)/($3/cup). ↩︎
6. According to their latest financial reports, the gross revenue of Starbucks is currently $35.97 billion per year. That’s $1,007,253 a year from each store — $2,759.60 each day, or $197.11 for each working hour. Divide $197.11 by $3 and you get 66 cups. ↩︎
7. Divide the $79.57 in fixed costs by the number of coffees sold each hour, 66, and you arrive at $1.20. ↩︎
8. Coffee price of $3 – $1.20 for maintenance. ↩︎
9. $63/66. ↩︎
10. 66 x ($3-$1.20). ↩︎
11. How do we arrive at 7.5 cents as the cost of the roasted coffee beans used in each cup? Starbucks reportedly pays $1.20 per pound of coffee, and one pound of beans can make 16 cups. ↩︎