Specs in the City: Minimum Wage Increase Too Quick for Comfort

This week, in economic warfare, the debate of fair and honest income wages on.

In this year’s election, SeaTac became the city to offer the highest minimum wage in the country with a whopping $15 an hour standard for businesses with more than 25 employees.

But the 63 percent leap from the previous minimum wage is too much, too fast. If we want this to work for small business owners and the unemployed, we have to take it slow.

It is true that the public is right to demand a higher minimum wage—the current hourly wage in Washington state is $9.32 an as of January, but research shows that families are not able to live above the poverty line at such an income, according to CNN. At that wage rate, a family of four would earn about $18,000 a year—the poverty line is $19,530.

According to the Atlantic, the federal minimum wage has never been paced with inflation or productivity. So, while a family of three in the 60s could have sustained themselves above the poverty line on minimum wage, today’s family of three cannot.
If the numbers of wage and productivity and inflation had been congruent since 1968, minimum wage would have risen to $21.72 an hour by now, reported Bloomberg last year.

But we messed up.

We missed our chance and today, though we should easily have a $15 minimum wage, we don’t—not even close. Now, as communities push to raise the wage rate, we are forgetting about the pieces of the puzzle. We are forgetting about the economic viability of such actions. Wages must not only be increased, but they must also be sustained.

Therein lies the challenge of the small business owner.

With all eyes on SeaTac as an example of the struggles and successes of this wage change, local businesses are vocal about the coming budget and employee cuts. While workers are celebrating, employers are eliminating jobs.

According to Fox News, one SeaTac organization said it plans on closing an entire restaurant—leaving 200 people unemployed. The general manager of Cedarbrook Lodge, a hotel in SeaTac, was quoted in the same article saying he too will have to make cutbacks.
“We’re going to be looking at reducing employee hours, reducing benefits and eliminating some positions,” he said.
Not only will the stark increase in minimum wage cause lay-offs, but also the pool of applicants for those limited jobs will become more and more competitive as more people fight for a smaller number of available positions. In such an environment, skill and experience will win out over inexperience every time—as an employer, if you can only have one person, you will want someone good.

And if your workers are skilled, you won’t need as many.

The Washington Research Council reported the wage hike would eliminate 5 percent of jobs, replacing an addition 5 to 10 percent with more-skilled workers. According to the Seattle Times, that is nearly 1,000 jobs lost in SeaTac alone under this wage increase.

If the increase spreads to other cities, we are likely to see a similar pattern of job loss.

Even businesses that do not have to comply with the rate increase because of their small size will be competing for skilled workers. Employees are going to want the highest wage possible—even if that means leaving the smaller business.

Mike Condon owns a coffee shop in SeaTac and was interviewed in a recent article in the Wall Street Journal. Because he has fewer than 25 employees, he does not have to comply with the standard of $15 an hour. But his business will suffer anyway, he says. Condon predicts the minimum wage increase will make it more difficult to hold on to his employees when they can apply for jobs elsewhere for the higher wage.

In addition, with all this competition, there is one group in particular that is not benefitting from the wage increase—the unemployed. People with jobs, as long as they can keep them, are golden.

But not everyone is so lucky.

Though an increased minimum wage will help the employed, the jobless are left competing with more skilled workers for less work.
According to the Bureau of Labor Statistics, Seattle has an unemployment rate of 5.4 percent after a jump up from 4.8 percent in one month late last year. According to The Seattle Times, such a quick leap in unemployment hasn’t happened since the recession.
If we want to keep people employed while also keeping them well paid, a wage hike to $15 won’t accomplish that—at least not yet.
We have our eyes in the right direction, but our sights are set too high.

For a minimum wage that is fair and sustainable, we need to be willing to move slowly and intentionally in a way that allows our local and small business owners to keep up with the pace.

Otherwise, we’ll be sending soldiers into a wage war without any backup. And they probably won’t get very far.