Minimum Wage, Maximum Debate

Minimum Wage, Maximum Debate
Initiative 1433 faces Washington voters this fall and if approved would mandate an increase in the minimum wage statewide to $13.50 by 2020. Fewer hours and reduced levels of employment for lower wage workers could result, particularly in rural communities or cities away from Central Puget Sound's strong economy. Photo: Alper Cugun.

If approved by voters November 8, Washington Initiative 1433 (I-1433) would just two months later require employers statewide to pay $11 an hour minimum wage and provide employees with paid sick leave. This is an increase from the current $9.47 statewide minimum, and would require businesses to boost base pay to $13.50 by 2020.

“Minimum wage laws cause reduced job creation… and do nothing to alleviate poverty or income inequality,” State Rep. Matt Manweller (R-13) told Lens. He is the Ranking Minority Member of the House Labor and Workplace Standards Committee.

‘Raise Prices, Or Cut Staff’

Manweller said small businesses will have two choices when complying with increased operating costs. “Raise prices or cut staff. Since small businesses are usually in a competitive market, the only real option is to cut staff,” Manweller told Lens.

Seattle, SeaTac and Tacoma have already implemented similar city-wide minimum wage mandates. Seattle currently requires employers to pay a minimum of between $10.00 and $13.00 an hour, depending on business size and healthcare benefits.

Seattle rules also require that employers pay a minimum wage of at least $15 an hour by 2017 to 2021, depending on classification. Others in the city are hit harder still, and must pay no less than $17.25 by 2024.

A Change Of Heart For Seattle Restaurant Owner

Felix Ngoussou, owner of the Lake Chad Café in Seattle’s Central District, previously supported I-1433. That was until he had to cut staff due to Seattle’s wage increase, King 5 News reported.

“[Seattle’s law] created more problems than resolved the problems we face as a business owner,” Ngoussou said.

Ngoussou added he supported the measure because it helps get people out of poverty but the initiative “isn’t complete” and “is supposed to be followed by an incentive to the employer.”

Unhappy Developments In D.C.

In Washington D.C., restaurant employment in the city has stalled since the minimum wage was increased in July 2015 to $10.50 an hour. In the first six months of 2016, the number of restaurant jobs in the District decreased by 1,400.

A so-called “Seattle Minimum Wage Study Team” at the University of Washington (UW) found that 62 percent of surveyed Seattle employers either have raised prices on their goods or services as a result of the city law, or would consider doing so. Nearly one-third said they have reduced or will reduce their number of employees.

Fewer Hours, Lower Employment

Last month, a larger version of the same UW team released a more detailed economic analysis impact of the wage hike, from April through December of 2015. They reported that for low-wage workers, hours declined by an average of four per quarter, and employment by an estimated 1.2 percent.

Similar losses could be greater elsewhere. “Seattle’s strong economy may make it capable of absorbing higher wages for low-wage workers” but “this capacity may not be present in other regions,” wrote the authors.

Stephanie Davenport, Communications Advocacy Manager for the Washington Restaurant Association, told Lens that a “one-size-fits-all” approach puts rural and economically depressed areas at risk.

A Different Approach In Oregon

In contrast, Oregon’s new minimum wage law, enacted by the Legislature earlier this year, takes into account urban and rural differences. Davenport told Lens that is an example of increasing the minimum wage “the right way.”

“As a ballot initiative, Washington citizens now can only say ‘yea’ or ‘nay’ to what is offered instead of finding solutions that work for everyone,” said Davenport.

In a news release earlier this summer, a coalition including the Association of Washington Business (AWB) and other organizations raised concerns about the effects of I-1433 on younger workers and rural communities. They also said that legislators should have been given a chance to find “a thoughtful middle ground” to raise the state minimum wage.

Farm Bureau Concerns

“A law to increase the minimum wage without providing support for starting jobs, or those that get young adults their first work experience will hit farming operations, particularly smaller ones, and their employees hard,” said John Stuhlmiller, CEO for the Washington Farm Bureau. “Agriculture is one of the largest economic drivers in the state and the top job-creation engine in rural parts that need the employment opportunities the most. This initiative puts those job opportunities at risk.”

A differing view comes from State Rep. Jim Moeller (D-49). He is a member of the House Labor and Workplace Standards Committee. He told Lens that an increased minimum wage will reduce the number of people receiving federal aid and raise all other wages over the long-term.

“Most people plow that money right back into…their rent and then their food…this money goes directly into the community,” Moeller told Lens.

Erin Shannon, Small Business Director at the Washington Policy Center, said another worrisome aspect of I-1433 is the paid sick leave mandate, which could be “a double whammy” for smaller businesses.

“[Employers] can be in a situation where they have a worker that is using two weeks of sick leave and paying those wages, as well as another to take their place,” said Shannon.

Public Sector Costs

Costs to public sector employers are also considerable. According to a Washington Office of Financial Management estimate, the increased minimum wage and paid sick leave requirements within I-1433 are projected to cost state agencies and higher education institutions $363 million.

Proponents of I-1433 are calling themselves Raise Up Washington and have raised $2,653,580.14 as of August 31. Top contributors include Seattle venture capitalist Nick Hanauer ($500,000) and United Food and Commercial Workers Local 21 ($305,000). Another major donor is the Fairness Project ($300,000), which promotes minimum wage measures across the country.

Opponents of the ballot measure have raised $35,000, with a $25,000 contribution from the Washington Restaurant Association and  $10,000 from the Washington Food Industry Association.

An Elway poll found this month that 57 percent of surveyed voters would vote “yes” on I-1433, 31 percent “no” and 12 percent were undecided. The Spokane Spokesman-Review noted, “In the past, when surveys in the summer showed an initiative had support from more than 60 percent of voters, they usually passed in November, Pollster H. Stuart Elway said. About half the initiatives that polled below 60 percent in previous summer surveys have managed to pass.”

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