by Tyler Mangrum
- The Capitol Hill Times -
Following the slim victory of a SeaTac measure raising the minimum wage to $15 per hour, the labor organizations that helped push forward the initiative took aim at northern King County and the City of Seattle in a march from SeaTac to Seattle City Hall on Dec. 5. Participants in the protest said that the win in SeaTac was a call to action for all of King County to take up similar measures, meaning that Puget Sound’s crusade for a living wage may be a bellwether for the rest of the nation. But opponents say the price of implementing such a change could be too high for local businesses to bear and that the cost of living should be lowered rather than attempting to have the minimum wage catch up to it.
One protestor, Jason Harvey, is a minimum wage-earning Burger King employee who believes that the narrowly achieved $15 per hour minimum wage in SeaTac was a harbinger of change for the entire region.
“Before our first strike six months ago, lots of people didn’t think a $15 minimum wage was possible,” Harvey said, “but SeaTac shows that it’s not just possible, $15 is necessary in order for us to survive. If SeaTac can do it, so can Seattle.”
The movement for raising the minimum wage to match the cost of living has gained ground nationwide, with President Obama saying that it was “well past the time” to implement the change given the widening gap between the rich and the poor. Inflation has caused the current $7.25 federal minimum wage to have less buying power than any point in modern history. Today, the current minimum wage is equal in value to $3.09 30 years ago.
In Seattle, the income gap has become one of the starkest in the country, as the cost of living has skyrocketed in recent years. Despite having one of the nation’s highest minimum wages at $9.19, inflation alone has caused Seattle minimum wage workers to have their wages equal $3.92 in 1983’s currency. Estimates show that there are only 14,400 minimum wage jobs currently in King County, but that number has almost doubled over the last two years.
The Massachusetts Institute of Technology’s living wage calculator estimates that the living wage in Seattle – the amount an individual must earn to support their family if they are the sole provider and are working full-time – is $9.64, or $0.45 higher than the current minimum wage. But MIT’s calculator estimated that number using $770 as the average cost of rent in the city, well below the current average of $1,150 as calculated by Reis, a New York-based real-estate monitoring firm. Reis also reported that Seattle now leads the nation in annual rent increases.
With this information in mind, the cost of living in Seattle jumps to $24,614 per year, which in turn means that a living wage for a single adult living in Seattle jumps to $12.82 per hour.
Mayor-elect Ed Murray voiced support for the $15 minimum wage during his campaign this year. Murray’s press secretary, Jeff Reading, issued a statement saying that his administration intends to address the issue early on, but will not necessarily be the driving force behind crafting any legislation in setting a new minimum wage.
“Mayor-elect Murray does view the minimum wage issue as a key priority and an early priority for his administration,” Reading said. “I will point out that the mayor-elect doesn’t see his role as inventing a solution or ramming through his pet solution. He really does see his role as listening, bringing stakeholders together on all sides of the issue, providing a forum for discussion, and being an incubator for the kind of constructive solution that the stakeholders can galvanize around and commit to.”
Those opposed to the increase in the minimum wage say that the measure could harm small businesses that operate on slim profit margins. Numerous business owners across the city, including many on Capitol Hill, have said that any increase to the minimum wage would inevitably lead to an increase in prices.
“Businesses would find many different ways to adjust,” said Katie Fitzpatrick, associate professor of economics at the University of Washington. “The worst case would be that they would close, but my expectation would be that they would pass the difference on to their customers with higher prices. They may be less likely to hire additional employees, they may lay off employees, or they may not offer as many hours.”
But Kshama Sawant, the recently-elected socialist city councilmember who has been one of the fiercest supporters of putting a $15 minimum wage initiative on the 2014 ballot, wrote in an article for the Stranger’s Slog published in July that the danger to small businesses could be countered through legislative efforts through taxation of wealthier, big businesses and “eliminating corporate welfare to subsidize small businesses, along with cutting B&O and property tax burden on small businesses.”
Sawant and other supporters of the new minimum wage have suggested that exemptions could be put in place for small businesses, while Murray has suggested a phased method of implementing the minimum wage that would see “big box” chains like McDonalds and Burger King paying out the new wage before small business would be required to.
However, those calling for raising the minimum wage in Seattle also have another reason as to why an increase in the minimum wage could lead to a more vibrant economy and a better functioning local government: Washington State’s tax structure, which the Institute on Taxation and Economic Policy deemed to be the most regressive in the country at the beginning of this year.
In Washington State, the poorest 20 percent of residents give 17 percent of their income to state taxes, 7 percent higher than the national average. The middle 20 percent pay 10 percent of their earnings, and the top 1 percent of earners only gives 2.8 percent of their income to the state government. With the poorest residents responsible for the largest share of the state’s governmental funding, particularly through local sales taxes, lack of economic activity from that demographic means that cuts to goods and services become all but inevitable.
But Fitzpatrick counters that while increasing the spending power of the lowest 20 percent by adding to their monthly expendable income, local businesses may see a rise in sales, but those people would likely not be making large enough purchases for the effect to be noticeable.
“It could be helpful [to the local economy] because low-wage earners are more likely to spend most of their income,” Fitzpatrick said, “but those families are more likely to buy necessities and not necessarily going out and buying a new computer unless that’s something they need.”
Fitzpatrick does agree that tying the minimum wage to the cost of living would have no appreciable effect on rent in the region as rental prices are more closely tied to demand and inflation than the minimum wage. But given the potential ramifications of such a massive increase in the minimum wage on local businesses, would the problems of high cost of living and low tax receipts be better solved by instead tackling those problems head-on?
“It’s important to remember that there are other ways to help people of lower income levels,” Fitzpatrick said. “For example, funding the Washington State Income Tax Credit, which has not yet been funded, might be more helpful than increasing the minimum wage.” It’s a sentiment echoed by Murray’s office.
“[Murray] also views this issue within the larger context of Seattle’s general affordability as a city, which includes affordable housing and other pocket-book issues that are critical to address if Seattle is to be a place where the working class, young people, students and artists can continue to live,” Reading said.
Fitzpatrick suggests that the problem of rental increases could instead be countered through levies that subsidize the cost of rent in the city and require developers to create more low-cost housing throughout the area. Efforts to build low-rent apartments on Capitol Hill near the new light rail terminal are already underway, and during his campaign, the mayor-elect voiced support for a possible extension of the current housing levy to create more subsidized housing.
“Making sure that there is rental housing available for people of lower income, increasing the supply of housing through building new structures, and changing the laws so people can rent out an extra mother-in-law unit would probably be more helpful,” Fitzpatrick said.
While Murray’s request to counter the rising cost of living directly may help lessen the need for the drastic 63 percent increase in the minimum wage to the proposed $15 per hour rate, the rapid growth of minimum wage movement shows that some level of increase is all but inevitable, such as with President Obama’s plan that would see the federal minimum wage rise from $7.25 to $10.10 over a two year period while permanently tying it to inflation. But Fitzpatrick says that ultimately, the figure suggested by labor groups may be too large to be feasible, and that a smaller increase would be a safer bet.
“Let’s say the minimum wage goes through, and there’s no employment effect, then you still have low-income workers who are still kind of struggling but aren’t eligible for federal aid and smaller subsides,” Fitzpatrick said. “Small increases to the minimum wage would be more desirable, but the best way to help lower wage earners in this state would be to make sure that income tax credits pass and rely on state and federal programs to help them. When we look at the labor market now, unemployment is still too high and the best way to combat increased need is for state and federal programs to kick in so we can get to a better labor market situation in the future and see wages rise on their own.”