What the Seattle Minimum Wage Tells Us about I-1433
Unless you live under a rock, it’s been next to impossible to ignore news coverage this election season. But national politics aside, Washington ballots contain a number of state initiatives worth a second glance. Arguably the most notable for the small business community is I-1433, which aims to raise the statewide minimum wage from $9.47 to $13.50 per hour by 2020, when it would be $1.50 below the Seattle minimum wage. The initiative will also mandate employers to provide paid sick leave starting in 2018.
As local business owners are well aware, Seattle itself is already on its way toward reaching a $15 minimum wage set by city council in 2015. The city also has a paid sick leave mandate similar to the one proposed in I-1433. Seattle is part of a growing trend toward higher minimum wages throughout the country. According to the UC Berkeley Labor Center, before 2012 only five localities nationwide had minimum wage laws. Currently, forty counties and cities in the US have such laws in place. In the Pacific Northwest, this includes Tacoma and, to a limited degree, SeaTac.
Voters on both sides of the issue are turning to lessons learned from Seattle when they cast their ballots. Likewise, small businesses in Seattle are taking stock of what this initiative will mean for their statewide counterparts, as well as the overall effect on the region’s small business climate.
The Nitty Gritty of Minimum Wage and Paid Sick Leave
If passed, Washington will join 13 other states that are in the process of implementing minimum wage increases. Washington’s minimum wage is currently the eighth highest in the country. Since 1999, it has adjusted annually for inflation, thanks to an earlier voter-approved initiative. Initiative 1433 aims to increase the state’s minimum wage on an annual schedule until it reaches a final goal of $13.50 on January 1, 2020. Once this is reached, minimum wage increases will again be connected to inflation.
Under the new law, employers would also be required to pay employees sick leave starting in 2018. At a minimum, employees would accrue one hour of sick leave for every forty hours worked. Statewide, employers are currently not required to grant workers paid leave of any kind, including holiday, vacation, sick or bereavement leave. Under federal and state law, businesses with more than 50 employees must grant unpaid medical leave of up to twelve weeks, with additional leave given following a pregnancy.
The proposed initiative will not directly affect minimum wage for Seattle-based businesses. However, the paid sick leave component of the initiative will mean a change for Seattle businesses with four or fewer employees. Businesses in Seattle with fewer than 500 employees already saw their first scheduled wage increase, to $12 per hour, on January 1, 2016. This coming January, they will be required to make the next increase to $13. An additional dollar-per-hour increase will occur in 2019 and again in 2020. Currently, businesses in Seattle with five or more employees are required to pay sick leave at levels comparable to what I-1433 proposes. But the statewide initiative will extend this requirement to all small businesses, regardless of the number of employees or their FTE status.
Mixed Reaction from Business Groups
A wide variety of business and civic groups have come out both for and against the initiative. The Greater Seattle Business Association, an LGBT and allied business chamber whose membership consists predominantly of small business owners and sole-proprietors, voted by super majority to back the measure. President and CEO Louise Chernin noted that a higher minimum wage will make Washington more attractive to employees and also keep them from moving around within the state in search of a living wage. Chernin said via press release, “To be competitive in this economy, we need to attract and retain talent, which is a huge challenge.”
The Main Street Alliance of Washington is also backing the initiative. In its 2015 push for similar legislation, the coalition of small business owners cited customers as their biggest concern. “When customers have more money in their pockets, they can spend more in local businesses,” the group said.
Other business groups say that although they support higher wages for workers, they are seeking a more tempered approach than the one presented through I-1433. A coalition of business associations across the state, including Washington Retail Association, issued a joint statement against the initiative, fearing a one-size-fits-all approach is not right given the state’s wide variety of urban and rural economies. The coalition said that, “Voters should reject Initiative 1433 to allow the legislature to develop minimum wage and paid leave policies that work for the entire state.”
Patrick Connor, Director of Washington Small Business Association says the business owners he’s spoken with are concerned about their ability to survive a 40 percent minimum wage increase over a relatively short four-year period. “I don’t know of any small business owner who expects to see their sales or revenues increase 40 percent or more between now and 2020,” says Connor. “This puts them and their employees in a very, very difficult situation.”
Lessons from the Seattle minimum wage increase
One year into what some call Seattle’s “minimum wage experiment,” the dust is beginning to settle, and business owners and researchers alike are taking stock. In July, University of Washington’s Evans School released an impact study outlining the effect of the increases thus far. Researchers concluded that the overall effect has been more mild than originally expected. Some businesses have cut hours and jobs to offset increased costs, but the cuts have not been as deep or as widespread as many feared. Conversely, wages for workers have increased, but overall, these wage gains have been tempered by reductions in hours and jobs. The study estimates that a higher minimum wage is responsible for increasing pay for low-wage workers by an average of 73 cents per hour. That being said, employees are working an average of four fewer hours per quarter. Low-wage workers are also transitioning to jobs outside Seattle at a higher rate than in the past, ostensibly due to less available work inside the city.
While some businesses have reduced hours and jobs as a result of the increased minimum wage, others, like Seattle staple Molly Moon’s Homemade Ice Cream, are touting the change as a boon to business. Owner Molly Moon Neitzel, a longtime advocate of higher minimum wages, told the Seattle Post-Intelligencer that citywide wage hikes have increased business at her shops. “Since the minimum wage was raised in Seattle last year, my business has never been better,” said Neitzel. “I think it’s been pretty clear that when people in our communities earn more money, they spend more money locally on things like ice cream cones.”
As the city’s minimum wage makes its way toward $15, it is important to remember that in many ways, it is still too early to tell how local businesses will fare. Washington Restaurant Association President, Anthony Anton, told The Seattle Times, “This last jump wasn’t that far out of market, so it didn’t require a lot of reworking of the financials.” Says Anton, “Those second and third jumps will be much bigger jumps.”
There is much talk about what I-1433 will mean for businesses throughout the state. Although no one can be sure about the longterm effects of the initiative, one thing is clear: business owners and employees alike have a difficult decision to make at the polls next week.