The ink is not yet dry on a law in Seattle raising the minimum wage to $15 an hour and the problems are beginning. Granted, considering the source of the information, there may very well be some cherry-picking going on, but it’s not in the least bit surprising or counter-intuitive:
But 15 minutes south near the Seattle-Tacoma International Airport, employees are already seeing the negative effects of such a hike. A February report from the Seattle Times revealed:
At the Clarion Hotel off International Boulevard, a sit-down restaurant has been shuttered, though it might soon be replaced by a less-labor-intensive cafe…
Other businesses have adjusted in ways that run the gamut from putting more work in the hands of managers, to instituting a small “living-wage surcharge” for a daily parking space near the airport.
That’s not all. According to Assunta Ng, publisher of the Northwest Asian Weekly, some employees are feeling the pinch as employers cut benefits. She recalls a conversation she had with two hotel employees who have been affected by the wage hike:
“Are you happy with the $15 wage?” I asked the full-time cleaning lady.
“It sounds good, but it’s not good,” the woman said.
“Why?” I asked.
“I lost my 401k, health insurance, paid holiday, and vacation,” she responded. “No more free food,” she added.
The hotel used to feed her. Now, she has to bring her own food. Also, no overtime, she said. She used to work extra hours and received overtime pay.
What else? I asked.
“I have to pay for parking,” she said.
I then asked the part-time waitress, who was part of the catering staff.
“Yes, I’ve got $15 an hour, but all my tips are now much less,” she said. Before the new wage law was implemented, her hourly wage was $7. But her tips added to more than $15 an hour. Yes, she used to receive free food and parking. Now, she has to bring her own food and pay for parking.
You can’t double payroll while leaving income unchanged and expect business as usual to continue. Contrary to popular belief business owners are not sleeping on five mattresses stuffed with cash and considering a sixth to hold all the loot. And businesses can’t just print more money like the government does whenever its expenses exceed its income. Something has to give somewhere.
In most cases a business has few options. In Seattle they can relocate to a part of the city that is not subject to the law. Or they can cut employees or employee benefits. Or they can increase prices. Or they can go out of business. None of these are particularly desirable outcomes. What good is a job paying a living wage if you can’t get one?
I’m a business owner. Our business is on the verge of hiring employees so that our partners working the store can actually get away from the store. Yes, that is the reality of being a business owner–you’re just barely getting by and your quality of life is practically non-existent. You think we should increase vacation time to be more like Europe? My partners would do cartwheels if they could get even half the vacation time you get. They work six days a week (and that’s only because we close one day a week), every week, all year round.
But if we suddenly had to consider paying double the current minimum wage you can bet we would think twice about hiring anyone. Paying our managing partners is our single largest line item, and even at that they often must rely on what profits we make to maintain a livable standard. They could use some help in the store, but if they hire enough employee hours at $15 to do what needs to be done we’re looking at close to a 50% increase in payroll. Boom. There go any profits.
So it’s not surprising that Seattle is beginning to experience some fallout from their well-intentioned but highly uneducated economics nose-thumbing. They’re trying to push the model out into what my economics professor called “The Gretzky Zone”: You can’t go there. It just can’t work. Gradual increases in minimum wage slows the process down, but to double it overnight is going to cause some serious repercussions. Sea-Tac and Seattle are in for an economics lesson.