How Will Seattle’s $15 Minimum Wage Affect Your Business?

Jun 04, 2014 11:53 AM  By

The Seattle City Council just voted to put low-wage workers on a path over the next several years to earning a $15-per-hour minimum wage.

Put aside what your brand of politics is or how you feel about progressive agendas and social engineering. Seattle’s increase in minimum wage is worth thinking about how in the longer term it may affect your business.

At the recent Operations Summit in several of my Executive Forum panels, we talked about how major increases to a minimum wage of $10.50 or $11.00 might affect businesses. Most people at the Summit said it would not affect them, because they were already paying in that range. But what about an increase to $15.00 per hour?

It’s estimated that around 100,000 people — around 25% — of the Seattle workforce would be affected by the pay raise. Supporters of the bill say that raising the bar on minimum wage will allow them to make ends meet and avoid debt.

CNN interviewed and printed online material written by Sally J. Clark, who serves on the Seattle City Council and was part of the unanimous vote Monday to raise the city’s minimum wage to $15 per hour. She chaired the Council’s Select Committee on Minimum Wage and Income Inequality. And in a few short hours hundreds of online postings pro and con hit the web.

Wage Inequality or Skill Inequality?

Clark:  “The $15 per hour figure is a bit art and a bit science, but it’s close to what experts say it costs in our area for a full-time worker to meet basic needs (housing, food, utilities, transportation, etc.).”

“At Washington state’s current minimum wage of $9.32 per hour, the highest state wage in the country, a worker still takes home far less than needed to make rent and pay the bills.”

“A higher minimum wage means more stable individuals, families, neighborhoods and towns. A higher minimum wage means being able to buy your child a pair of shoes. A higher minimum wage means more consumer spending and, I hope, a little more consumer saving. And, no, minimum wage earners aren’t going to suddenly become complacent and sit for years in minimum wage jobs. Minimum wage workers have dreams of advancement and accomplishment just like anyone else.”

I fully agree that the minimum wage is not sufficient to live on. But what never gets addressed is that people that earn minimum wage most often do not have skills that allow them to earn higher paying jobs. They have a Skill Inequity.

Where does this woman eat?

City Council woman Clark says, “A higher minimum wage might mean presenting a truer cost to consumers. If you think it’s odd that a burger, fries and a shake can cost just $4, that’s because that price is subsidized in part by the low wages paid to the people who cook, serve, and clean up after your meal.” A minimal meal at the Golden Arches is $6 or $7. Clark’s $4 burger might have just become $6 or more which the person earning minimum can’t afford any longer. This kind of distortion does not help understand the problem or the debate.

What business will want to move there?

F. Curtis Barry & Company recently did a major warehouse relocation project for a client that was looking to move their 400,000 square foot distribution center. We looked at all the possible cities and metropolitan areas in the United States that had more than 100,000 people in the civilian workforce and an unemployment rate of 7% or more. We used the latest Bureau of Labor Statistics survey for all 391 major metropolitan areas in the United States. According to the BLS survey, out of the 391 metropolitan areas, there are 384 metropolitan areas that showed hourly mean base pay rates of less than $15.00 per hour for warehouse workers.

From online articles on minimum wage, cities and states that have raised their minimum wages, include California, Connecticut, Delaware, West Virginia, New York, Hawaii, Maryland, Minnesota and Washington, D.C. None has increased wages as high as $15. California’s $8 minimum will rise to $9 on July 1. Washington state has the highest state minimum in the country, at $9.37 an hour. The federal minimum wage is $7.25.

San Francisco’s minimum wage stands at $10.74. The Los Angeles City Council is debating a $15.37 minimum wage for hotel workers. The Bay Area city of Richmond, CA at next week’s City Council meeting will consider gradually raising its $9 municipal minimum wage to $12.30. Voters in the tiny city of SeaTac, Wash., recently approved a $15 minimum for certain workers in the Seattle-Tacoma International Airport area.

In our experience, no business owner is going to put their head in this noose and move to the west coast if they don’t have to. In our experience, cities like Sparks, NV; Reno, NV; and Salt Lake City, UT have had huge direct-to-customer business growth because it puts them within one-day ground delivery to California and the Pacific Northwest.

$15 per hour is more a headline grabber than a reality

The ordinance adopted by Seattle would require all businesses in the city to increase their pay levels up to $15/hour over the course of three-to-seven years.

How quickly a business must raise wages depends on its size. Some “Schedule 1″ businesses — those with more than 500 employees in the U.S., or franchisees associated with a company that employs more than 500 people — must raise their lowest level of wages to $11/hour by April 1, 2015. The wages then increase to $13/hour in 2016 and $15/hour in 2017.

If those “Schedule 1″ businesses contribute to employees’ healthcare benefits, they would have a longer period of time to raise their wages. In 2016, they would pay $12.50/hour. That increases to $13.50 in 2017, and finally to $15/hour in 2018.

“Schedule 2″ employers — those with 500 or fewer employees (does not include franchisees who are part of a large network) — would have several more years to phase in the pay raise. Starting in 2016, the minimum hourly wage increases to $10.50 and increases in $.50 increments each year until 2020, when it reaches $13.50. The next year, 2021, it finally reaches the $15 amount.

The ordinance does allow for the city to eventually create exceptions for trainee and minor employees that would allow employers to pay these workers lower wages. Kshama Sawant, Seattle’s first socialist council member in about a century, proposed striking this portion of the law, but the council voted to keep it.

Where to Go From Here?

Characteristic of our national debate on most topics, I don’t think anything has been accomplished in Seattle.

  1. As a nation we need to help people get the training and education, which will make them more valuable in the marketplace.
  2. I would encourage you to take the time to debate this within your company, “What happens if $15.00 per hour minimum wage becomes a reality that you have to deal with?”
  3. Find the “win-win.” Why can’t we adopt methods and find ways to improve productivity and in turn reward workers for saving our businesses money or being more productive.  That’s the real “win-win” for owner and employee.

Curt Barry (cbarry@fcbco.com) is president of F. Curtis Barry & Co., a multichannel operations and fulfillment consulting firm.