Seattle will become a testing ground for minimum-wage ordinances, as employers gauge how business models might change, workers assess whether the pay bump makes things better, and researchers study the impact on workers’ families, businesses and the overall regional economy.
When Seattle passed its $15 minimum-wage law last year, it got plenty of attention for being the first large city in the country to set a minimum pay goal that high.
Now, even as other cities have since approved laws setting similarly high pay, Seattle is drawing attention again as the city’s minimum-wage law comes into effect Wednesday.
Seattle will become a testing ground for these municipal minimum-wage ordinances, as employers gauge how business models might change, workers assess whether the pay bump indeed makes things better, the city works to publicize and enforce the law, and researchers study what the effect will be on workers’ families, businesses and the overall regional economy.
“There’s going to be lots of eyes on Seattle,” said Ken Jacobs, chair of the University of California-Berkeley Labor Center. “Seattle clearly set the bar higher and helped to inspire people around the country on the issue of municipal minimum wages.”
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San Francisco passed an ordinance, for instance, raising the minimum wage to $15 by 2018; its current minimum is $11.05, with a bump up to $12.25 in May. Oakland’s minimum-wage ordinance raised wages to $12.25, while Chicago went to $10 and Mountain View, Calif., went to $10.30.
How Seattle’s law now plays out will “definitely be something people pay attention to,” Jacobs said.
Starting Wednesday, large organizations with more than 500 employees in the U.S. must pay their minimum-wage workers $11.
Smaller businesses with 500 or fewer employees will pay either a flat $11, or $10 with the $1 difference made up in tips or payments to a qualifying medical-benefits plan.
One area already drawing a lot of attention: how businesses plan to implement the minimum-wage law.
The restaurant industry, in particular, which employs many minimum-wage workers and generally operates with thin margins, has been grappling with the higher wage requirements.
“Operators are trying to figure out what the new world will look like,” said Anthony Anton, CEO of the Washington Restaurant Association, said in a statement. “Nobody knows what the ultimate result will be, but there will be restaurants in Seattle.”
Local franchisees and the International Franchise Association have sued, saying the city discriminated against them when it lumped in the local franchisees with larger employers on a fast track toward reaching the $15-an-hour minimum.
And this week, iconic local restaurant Ivar’s caused a stir when it said it was raising its minimum pay for customers at its sit-down restaurants to $15 an hour, getting rid of tipping, and making up for the lack of tips by having servers and other restaurant staffers share in revenue from menu-price increases. Ivar’s said that, under the new models, hourly employees should be making as much as, or more, than they did the year before.
Other restaurants are trying, or considering, different things.
Taylor Hoang, owner of the Pho Cyclo Cafe restaurants, said staffers making less than $11 will be getting a raise to $10, plus a share of the tip pool, which will bring them to the $11 minimum required by the city.
She also anticipates giving raises six to eight months down the line, so that workers who’ve been with the restaurant longer still make more than new employees.
To offset those increases in labor costs, though, she is cutting hours. Most of her restaurants used to open at 10 a.m. Now they’ll open at 11 a.m. In addition, they will close a half-hour earlier.
And whereas before, workers could come in, clock in and get a meal at the restaurant before starting their shift, now they can come in and eat but will need to do so before clocking in for the start of their shift.
Hoang is also looking to cut operating costs by automating more, bringing in more machinery to produce food, and implementing pay-at-your-table technology.
Pho Cyclo Cafe’s customers are very price sensitive so she is loathe to raise menu prices.
“We really don’t know what cutting hours will do,” Hoang said. “Some of the staff have already complained about the reduced hours. We’re trying to find different angles and methods to see how we can make this work.”
Chad Mackay, president and chief operating officer of El Gaucho Hospitality, which owns the El Gaucho and Aqua restaurants, said his only employees not making $10 or $11 base wage are the tipped employees such as servers and those who bus tables. And those servers already make $40 an hour on top of the minimum wage, once tips are included. Workers who bus tables typically make $25 an hour on top of the minimum wage.
But come Wednesday, he’ll be increasing their minimum wage to $10, and leaving the tipping system in place — for this year, at least.
But for 2016, he’s considering putting into place a salary-plus-commission model for servers and other hourly employees, coupled with a service charge — perhaps 20 percent — in lieu of tipping.
“My job is to make sure my service team doesn’t take a hit on this,” said Mackay, who added that he’ll be discussing various business structures he’s considering with his employees throughout the year.
“It’s going to be somewhat of a change for our team,” he said. “It’s going to be a change for the public.”
Tom Douglas, owner of restaurants including Dahlia Lounge, Etta’s and Lola, put up a blog post Tuesday saying that his eateries are including a 2 percent surcharge.
All of the surcharge “will be distributed to our staff in either wages or benefits, with any surplus distributed to hourly staff at the end of the calendar year,” he added. For some workers, the approximately $1.50-an- hour difference in wages will make a difference.
Jason Harvey, who works at the Burger King in Ballard, said he’s already not renewed his food-stamp participation in anticipation of the pay bump.
“It will be good to go to the grocery store and not use food stamps,” he said. “I know there’s no shame in it but if you’re working 40 hours a week, you shouldn’t need it. I like paying my own way.”
Martina Phelps, who works at McDonald’s on First Hill, says she struggles to pay her bills, so “the increase to $11 will help pay some bills off.”
How workers and their families will fare under the new minimum wage is among the topics that a team at the University of Washington will be studying over the next five years.
They’ll also study whether the law causes job reductions, actual gains in people’s incomes, increased prices, businesses and people moving in or out of Seattle.
Although Seattle wasn’t the first city to raise its minimum wage to $15 — SeaTac, for example, did so first — “Seattle captured the imagination of a lot of other cities by being a large city going to a level higher than any large city or state had attempted before,” said Jacob Vigdor, professor of public affairs at the University of Washington’s Evans School of Public Affairs who is leading the research team.
Seattle, he said, took the talk about going to $15 “out of the realm of the hypothetical.”