Seattle passed a $ 15 minimum wage law in 2014. Here’s how it’s been so far

When Seattle started raising its minimum wage five years ago, local hamburger restaurant Dick’s Drive-In had an unexpected effect.

Its employees chose to work fewer hours as their wages increased, a daunting challenge in a tight labor market.

“We thought that with higher wages it would be easier to get people to take more hours, but it’s the opposite,” said Jasmine Donovan, president of Dick’s. She added that the company had to raise prices for the first time in its history because of the cost of labor alone, whereas in the past food prices were the cause of such increases. .

Seattle’s law, which gradually increases its minimum wage to $ 15 an hour by 2021, from just over $ 9 an hour in 2014, is now at the forefront of a national debate on the impacts progressive salary increases. It comes at a time when top Democratic presidential candidates like Bernie Sanders and Joe Biden demand a federal minimum wage of $ 15 an hour as they attempt to appeal to working class voters. The federal minimum wage is currently $ 7.25 an hour and has not been increased for over a decade.

“Seattle was a catalyst for the whole national movement because what the Seattle city council did in passing the law was show the whole nation that $ 15 was not a ridiculous request that people were asking. laughed at in 2012, but a key part of the policy that allowed workers across town to have more money in their pockets than they were spending in their local neighborhood, which has resulted in the growth of economy and local affairs, ”said Mary Kay Henry, president of the Service Employees International Union, which launched the Fight for $ 15 and union campaign.

Seattle Mayor Ed Murray (C) signs a bill that increases the city’s minimum wage to $ 15 an hour on June 3, 2014 in Seattle, Washington.

David Ryder | Getty Images

Companies like Dick’s have seen their costs go up. Dick’s pays above minimum wage, with some locations starting at $ 17 and $ 18 an hour, and most of the workers are students in their twenties. Benefits such as 401 (k) plans and health insurance are also available to workers, regardless of the number of hours worked. But higher minimum wages across the city are pressuring employers to raise wages even if they are already above that threshold, in order to compete for talent.

Meanwhile, Seattle’s law changed the lives of workers like Martin Johnson, who lobbied for wage increases with the Working Washington advocacy group. He has three minimum-wage jobs – as a temporary cook on game days in city stadiums, as a concierge at Costco overnight, and as a handyman in his own small business. The increase brought more dignity to workers and boosted morale, he said.

“Instead of getting paid $ 9 an hour, you get $ 15 an hour to do the same job. You feel better about yourself, you feel appreciated,” said Johnson, 54.

Martin Johnson has three minimum wage jobs and has advocated for higher wages in the city. He says the wage increases have made workers more dignified and boosted morale.

Geoff Nelson | CNBC

Overall, the implications for businesses and workers have been nuanced. While there are benefits for workers who saw higher pay, others may have seen fewer hours. Some businesses have thrived, while others have faced tighter regulations and intense competition in the city’s vibrant economy.

No consensus among economists

Studies of the effects of rising wages in Seattle came to different conclusions: A 2017 University of Washington study found that while wages increased, hours worked decreased, leading to lower wages for workers. low-wage workers. But in a follow-up released last year, the authors noted that this is not the case for everyone, and experienced workers in low-paying jobs have seen their incomes rise.

Another researcher from the University of California, Berkeley, published in 2018, found that the wage increases had raised wages and had not resulted in job losses. The Berkeley and Washington studies measured different groups of workers, with varying results.

The conflicting studies highlight a broader debate over what a federal minimum wage of $ 15 could do for businesses and workers nationwide. Federal Reserve Chairman Jerome Powell even addressed the issue during his testimony before the House of Representatives this summer. “There is no consensus among economists … economists are everywhere on this.”

One of the challenges of measuring Seattle’s experience with the minimum wage hike is that the city’s economy is in a period of robust growth. Since the start of the wage hike in 2015, job growth in Seattle / Tacoma has slightly outpaced Washington state as a whole, at 12.9%. The city’s population is up about 13% from 2015, according to the Washington State Office of Financial Management. The average hourly wage was $ 39.38 in October, a 14.5% increase from the same month in 2015.

This raises a question: are higher wages necessary due to economic growth or has the economy continued to grow due to higher wages?

Mixed results for companies

When the Seattle minimum wage hike passed, Chad Mackay, CEO of Fire & Vine Hospitality, a hotel group in the Pacific Northwest, decided to reassess his business model.

“When we projected the minimum wage increases and the loss of a tip credit [which allows employers to count tips toward minimum wage], we realized that we would be functionally bankrupt if you were to move quickly in seven years. We decided the business model was broken and it was time for us to change, ”Mackay said.

Fire & Vine has long paid above minimum wage in the front and back of the house due to the demand for talent in the market and the company’s beliefs in professional compensation. The company has moved to a commission-based model, with a 20% service charge for diners. Servers are paid an hourly wage and a 15% commission and can make $ 70 or more an hour in the Seattle market, up from $ 45 an hour previously. Customers can also leave additional tips for the waiters if desired. Those in the back of the house like dishwashers start between $ 17 and $ 20 an hour, about 40% more than before.

Salary increases haven’t hurt his business: it has nearly doubled in size, with some 600 workers today and 12 locations under management, at a time when other restaurants have closed.

“Once we switched to this model, I never worried about minimum wage. And I’m not sure there’s a restaurateur in Washington, California, or New York who can say, “We’ve left minimum wage out as a problem for our businesses,” said Mackay.

But while some businesses have thrived, others have faced challenges in the face of Seattle’s changing economy.

Dick Drive-In, Seattle

Source: Dick Drive-In

Matthew Dillon, owner of Sitka & Spruce, says he thinks the minimum wage should be much higher than $ 15 an hour, which is why he also pays workers above that threshold. But when his lease ended, award-winning chef James Beard decided it was time to close his doors after more than a decade of activity, serving the last New Year’s Eve dinner. Passing the costs on to consumers in an environment where her rent was $ 16,000 per month, including taxes and fees, and where food and labor costs are also on the rise, seemed unsustainable. There are other businesses that are still operating in the area.

“Wages go up, the price of food goes up, [and] my property taxes that I have to pay to the owner go up. My rent is going up for my staff, or the staff who were here are like, “Well, I can’t be in town anymore, so you have to find someone to replace me,” he said. “It’s really difficult. The cost of that, just by working as a business owner, is increasing. “

This is a problem that Eric Tanaka faces as well. Tom Douglas partner Seattle Kitchen said the group also decided not to renew the lease for a building that houses three of its restaurants – TanakaSan, Assembly Hall and Home Remedy. Going forward, Tanaka says he might consider less labor-intensive models, as well as concept and menu adjustments, across the group’s various businesses as costs have increased and talent may increase. be hard to find in the city. The company pays above the minimum wage and provides benefits to those who work more than 25 hours per week. He recently settled a class action lawsuit with his employees over service charges.

“I think when we start to look at future planning, we’re definitely looking for restaurant models that require less work,” Tanaka said.

It could be difficult given that its restaurants are making things from scratch. “It’s hard to be done by hand without the hands. But we’re looking for different ways to take advantage of these hands,” Tanaka said. “It’s a daily challenge because there are fewer and fewer people who want to get into our industry.

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