Seattle’s $15 Minimum Wage: A Wolf in Sheep’s Clothing

By Erin Shannon

On June 2 the Seattle City Council made Seattle the first city in the nation to mandate a $15 minimum wage for all workers. But far from being a victory for workers, a super-high minimum wage is likely to cause more harm than good by destroying businesses and reducing workers’ options.

Effective April 1, 2015, all businesses must pay $10-$11 per hour, with the remainder of the $15 wage phased in over seven years for small businesses (those with less than 500 employees), and three years for large businesses (those with 500 or more employees).

While supporters of the $15 wage say it will have no negative impact on the city’s employment or economy, the reality is it is already killing jobs. Some business owners in Seattle say they are holding off on opening new business or expanding their current business, delaying plans to hire new workers and even moving into neighboring cities. In SeaTac, where some employers have been paying a mandated $15 minimum wage for six months, the benefits workers used to receive have been reduced or eliminated and prices have increased for consumers.

Restaurants, in particular, will be hit hard by Seattle’s new wage. The Puget Sound Business Journal reports that one restaurant owner calls the $15 wage a “mortal threat” and has halted plans to open another location. The CEO of a restaurant chain says his company is also holding off opening new locations in Seattle, and will likely be forced to reduce employees’ health benefits. The company currently offers health care coverage to employees who work at least 25 hours per week, but that may now be increased to 30 hours per week. That company will also likely eliminate tips for servers, and instead automatically charge customers a service charge or gratuity that would be split between servers and other restaurant staff, such as kitchen workers.

And it is not just Seattle workers who are losing potential jobs and reduced benefits. In a twist, the $15 wage is impacting job creation and worker benefits in other cities.

A pizza franchise with 11 locations, six of which are in Seattle, that employs 430 workers has tabled plans to open another location in Lynnwood over concerns the new location and its new jobs would bump the company into the “big business” category. Under the new law, “big businesses” have a shorter phase-in of the high wage; they must begin paying all workers $15 over the course of three years. By

staying under the 500-employee threshold, the company remains a “small business” and has up to seven years to phase in and adjust to the new wage for its six Seattle stores. That is 70-plus jobs workers in the city of Lynnwood just lost.

The company that says it may reduce health benefits in response to the $15 wage would have to do so for all of its workers, even those outside Seattle. Federal law requires companies to offer the same health benefits to all employees. So if the company is forced to increase the threshold to qualify for health benefits in order to offset the new high wage of employees in Seattle, it must increase the benefit threshold for all employees, including those earning a lower minimum wage in other cities.

The CEO of the chain restaurant warns that many small, mom-and-pop businesses will go out of business as a result of the increased labor costs: “Successful downtown restaurants will find a way to make it work, but smaller restaurants will die.”

This sentiment is echoed by the CEO of CKE Restaurants, which owns Carl’s Jr. and Hardee’s. Andy Puzder, author of the book Job Creation, says the push for a higher minimum wage is the one of the greatest threats facing restaurants: “I think you’ll see a lot of restaurants closing. I don’t think that restaurants can operate profitably if they’re paying a $15-an-hour minimum wage.”

Some of Portland’s leaders want to imitate Seattle, but they should think again. Those who support higher minimum wages may not have bad motives, but good motives in support of bad policy still result in driving job creators out of our communities and hurting the very people they want to help.


 

Erin Shannon is Director of the Center for Small Business at Washington Policy Center in Olympia, Washington. She is a guest contributor at Cascade Policy Institute, Oregon’s free market public policy research organization.

Small Business Owners Say: $15 Minimum Wage Is a “Mortal Threat”

This week Seattle became the first city in the nation to mandate a $15 minimum wage. But far from being a victory for workers, a super-high minimum wage is likely to cause more harm than good by destroying businesses and reducing workers’ options.

Washington Policy Center’s Erin Shannon writes: “Some business owners in Seattle say they are holding off on opening new business or expanding their current business, delaying plans to hire new workers and even moving into neighboring cities. In SeaTac, where some employers have been paying a mandated $15 minimum wage for six months, the benefits workers used to receive have been reduced or eliminated and prices have increased for consumers.” A restaurant CEO (whose employees already make $18-22 per hour) told The Puget Sound Business Journal that the increased labor costs will be “a mortal threat” to Seattle businesses.

Some of Portland’s leaders think we should imitate Seattle. We should not. Cutting off the lower rungs of the economic ladder with a super-high minimum wage makes it that much more difficult for young people and those with less education to even reach the first rung on the ladder―and then move on to higher skilled, better paying jobs. Those who support higher minimum wages may not have bad motives, but good motives in support of bad policy still result in driving job creators out of our communities and hurting the very people they want to help.

Kathryn Hickok is Publications Director and Director of the Children’s Scholarship Fund-Portland program at Cascade Policy Institute.

More than thirty percent of Oregon union households want out

Right to Work policies in 24 states allow workers the freedom to join or not join a union. Oregon, however, is one of the 26 states without such employee freedom. Here, if a workplace is organized by a union, workers must either join the union and pay dues, or opt out of membership but still pay what are called “fair share” dues, supposedly to cover the cost of negotiating and upholding their employment contracts.

Why might workers like the opportunity to opt out of union membership? Some believe they can make better use of their own money rather than giving it to a union. Others “vote with their feet” against what they perceive to be poor union service or negotiating results. Still others leave because they oppose their unions’ political positions. They simply don’t want to support any organization that doesn’t share their political beliefs, whatever those might be.

Last year, Cascade Policy Institute conducted ground-breaking research on the economic benefits of allowing Oregon workers to opt out of union membership and “fair share” dues. Our February 2012 report concluded that, upon enactment of a full Right to Work policy, Oregon would have:

  • 50,000 more people working in five years; 110,000 more working in ten years.
  • $2.7 billion more in wage and salary income in five years; $7.0 billion more in ten years.
  • 14 percent more taxpaying families per year moving here from non-right-to-work states.

All these economic benefits would occur without spending one dime of taxpayer money.

So, how many workers might completely opt out of their union if they could? To answer that question, beginning in mid-May 2013 a coalition of non-profit groups across the country conducted a series of union household Google Consumer Surveys, including some 500 valid respondents throughout Oregon. Survey results were released at the beginning of National Employee Freedom Week (June 23-29).

All survey respondents were asked:

If it were possible to opt out of membership in a labor union
without losing your job or any other penalty, would you do it?”

Nationally, 33.4% of respondents answered Yes.

In Oregon, 31.2% of respondents answered Yes.

These results are bolstered by the fact that last year only 70% of workers in bargaining units represented by Oregon’s largest public employee union chose to be union members. According to SEIU’s Local 503 annual report submitted to the federal Department of Labor, the other 30% had opted out of membership but were still required to pay “fair share” dues. If Oregon were a Right to Work state, these workers could opt out entirely. Soon, they may be able to do just that.

A citizens’ initiative known as IP9 is awaiting final ballot title approval from the Oregon Supreme Court before collecting signatures for placement on the November 2014 ballot. It would allow Oregon public employees to opt out of membership and any dues payments to a union they don’t wish to support.

The Right to Work without third-party interference is more than an economic issue; it is a profoundly moral one as well. In America, no one should be compelled to join a union or to pay union dues in order to hold a job. Hopefully, before long Oregon will grant true employee freedom to every public and private worker in the state.

Steve Buckstein is the founder of Cascade Policy Institute, a free-market think tank based in Portland.