Category: Blog

Voters in the City of SeaTac this week appear to have approved a precedent-setting Living Wage ballot initiative, although ballots are still being counted.  The pending victory comes after a nearly year-long campaign by a strong community-labor partnership.

Even if Prop 1 wins, the campaign is not over, as Alaska Airlines and many of the funders backing the opposition campaign are likely pursuing legal measures to prevent the implementation of the voter approved law.

SeaTac’s Proposition 1 is not the first living wage at airports, but it has become the bellwether in the movement for a living wage.  The true benefit of Prop 1 lies not only in the living wage, but the comprehensive benefits and protections included in the language:

• $15 dollar minimum wage indexed to inflation – for covered hotel, car rental, parking and airport service workers.
• Paid Sick Days – workers accruing an hour of paid sick time for every 40 hours worked. For a full time employee, this is 6.5 days per year.
• Worker Retention – replacement sub-contracting companies retaining the current workforce for 60 days.
• Tips Theft Protection – ensuring that hotel service charges (tips) are paid entirely to workers, not kept by management.
• Full Time Work – offering part-time employees the ability to work more hours before hiring new part-time employees.

The initiative covers large hotels, car rental firms, and airport parking in a zone surrounding the airport, and airport service workers, including retail and food service, plane cleaning and fueling, baggage loading, and wheelchair service. These interlocking, comprehensive benefits mean that not only will thousands of workers be lifted out of poverty, but they will also have more job security and better working conditions.

These policies will mean a win-win-win scenario for workers, businesses and the local economy.   Workers will see better standards, employers will see reduced turnover and improved performance, local businesses will have more customers, and the local economy will see a $54 million dollar wage boost.

Ed Murray appears poised for victory in Seattle’s mayoral election. As KPLU reporter Ashley Gross asserted in a recent story, Seattle’s new mayor will be challenged to address an affordable housing crisis in the city.

The challenge is a big one: Seattle is one of the top ten metro areas in the nation with the most dramatic increases in rental costs in 2012, and homelessness in the city is also on the rise.

At the same time Seattle is a city segregated by both race and income. In order to effectively address the segregation of opportunity that lies within Seattle’s housing crisis, inclusionary zoning is an important tool that must be on the table.

Inclusionary zoning arose out of the civil rights movement. Civil rights leaders advocated for inclusionary zoning as a housing policy to fight racial segregation and the economic attack on communities of color in the United States. But they weren’t just concerned about housing. They sought to ensure that people of color had the opportunity to share in the benefits of living in high opportunity neighborhoods, like strong schools, access to good jobs and safe streets and sidewalks.

Communities fought a long and uphill battle to win inclusionary zoning. One suburb Mt. Laurel in New Jersey fought particularly long and in the face of racism and marginalization by local government. But today, the fruits of their organizing have resulted in measurable outcomes for the families that eventually were able to live in this high opportunity suburb. A recent NY Times article profiled their experience and the work of Princeton sociologist Douglas S. Massey to compare the outcomes of families that were able to live in Mt. Laurel versus families that were constricted to low-income redlined neighborhoods.

Their recent book found that Mt. Laurel families have more economic success and their kids are doing better in school than families not able to afford the neighborhood. “Two-thirds are working, compared with just over half of the nonresidents, and a third as many, 4 percent, are on welfare. The sizable earnings gap, $19,687 versus $12,912 from wages, helps push the tenants living in the new housing out of poverty. The longer they stay in Mount Laurel, the better jobs they get and the more economically independent they become.”

The children of families living in Mt. Laurel, “study twice as many hours and spend more time reading.”

Inclusionary zoning creates these types of outcomes because it begins to dismantle barriers to affordable housing and then shares the benefits of high investment neighborhoods with families and households that have been historically shut out from opportunity. “I would go as far as to argue that what is truly American is not so much the individual but neighborhood inequality,” concludes the Harvard sociologist Robert J. Sampson in his landmark 2012 book, “Great American City.”

It is time for Seattle to address the segregation of opportunity in our city and our elected leaders will need this valuable policy tool.

Earlier this fall, we released a report showing how SeaTac’s Proposition 1 will inject $54 million into the local economy and create over 400 new jobs.  We also showed how local businesses, particularly in SeaTac, will benefit.  Before the elections close on November 5^th,  we wanted to show how this new economic activity will affect government budgets.  We found that local government (city, county, transportation, etc) and school district budgets will increase by nearly $1.2 million from Proposition 1.   SeaTac itself could receive up to $50,000 a year directly to its general fund.

It’s pretty intuitive how local budgets will benefit.  More money in the pockets of thousands of workers will result in spending at local businesses for goods and services.  Increased spending at local businesses means more sales and use tax revenues for local government.

The bottom line for both state and local government? Nearly $2.8  million in total sales tax collected.

How?  For every dollar that a worker spends of his or her new earnings, we estimate that 59.5 cents will be spent in the regional economy – or about 60%.  (The estimate is based on figures from the Federal Bureau of Economic Analysis.  See Martin Associates, 2007 Economic Impact of the Port of Seattle, page 62.)  This represents spending after taxes, purchase of goods from outside the region and savings.

Applying 60% to the $54 million additional earnings generated by Proposition 1, we arrive at a $32 million increase in purchase of local goods and services.  Because groceries are largely exempt from sales tax, we remove another 9% (according to the Bureau of Labor Statistics, households earning between $20,000 and $29,999 spend 9% of their budget on food at home), leaving a total of $29 million.

Now, we apply tax rates. Assuming the remaining income is spent on items that are taxed, local governments will receive an additional $877,000 and State government an additional $1.9 million.

How will this money be spent?  The three percent of the every dollar spent that goes to local government typically includes:

• .85% for cities
• .15% for general county purposes
• .2%  for county mental health and criminal justice
• .9%  for Metro
• .9%  for Sound Transit.

SeaTac and other nearby communities benefit from all of these governments.  In particular, SeaTac benefits from Sound Transit’s new light rail stations.  In addition, a portion of the state sales tax comes back to local schools. (Here’s the math – about half of the state’s general fund comes from sales tax and 44% of the state’s general fund goes back to school districts.  So, of the $1.9 million, about $400,000 will support schools around the state.)

The City of SeaTac’s budget will see direct benefit as well.  In our report, we estimate that between 15% and 20% of covered jobs are held by workers who live in the SeaTac and are even more likely to spend locally as well.  Although many SeaTac residents do not spend all of their money in the city, we also point out that dozens of small businesses in and around Sea-Tac Airport cater directly to people who work at the airport.  Workers commuting to their jobs in SeaTac also spend money there, making up for loss in sales by residents shopping in other cities.  Hence, we estimate that 15-20% of those new expenditures will be at SeaTac businesses.  Applying the rate for the city’s proportion of the sales tax (0.85%), we estimate that the city will see an increase of $37,000 to $50,000 a year in revenues.

Income inequality is a growing problem in Seattle. Many of us don’t need statistics to tell us that, because we can feel it and see it happening. However, it helps to quantify a problem in order to address it.

Just over a week ago, I attended the annual Regional Leadership Conference sponsored by the Seattle Metro Chamber of Commerce, courtesy of the Bullitt Foundation. The conference featured a report by the Boston Consulting Group (BCG) on Seattle’s global competitiveness. Their report highlighted growing income inequality as a key issue affecting the region.

BCG compared Seattle to eight global competitors, including San Francisco, Boston, Singapore, Amsterdam, and Hamburg, using almost 50 different economic and social indicators. Overall, Seattle was right in the middle of the rankings.

They also pointed out Seattle’s growing economic inequality as measured by the Gini Index (a measure of income distribution). BCG predicted that in the next 20 years Seattle will pass New York City in inequality. Why? Middle class jobs have been disappearing in our region, leaving a big gap between top income earners and low-wage jobs.

But something important was missing from the discussion: BCG did not suggest raising the standards for low-wage industries to create more middle income jobs, but focused instead on bringing employers that offer middle class jobs to the Seattle area.

Workforce standards play a vital role in creating living wage jobs. This is an especially prescient issue given the near strike of grocery workers in Seattle this week, the uprising of food service workers throughout the city and the presence on the ballot of Proposition 1 – the Good Jobs Initiative – in SeaTac.

It is short-sighted to neglect workforce standards. Washington’s Employment Security Department projects that the fastest growing industry in the Seattle area from 2011 to 2021 will be the Employment Services sector, which is principally temporary and contract jobs. Half of all projected jobs by 2021 will be in low-wage occupations like retail sales, food preparation, and janitorial services.

According to BCG, transportation infrastructure and the education system are Seattle’s biggest competitive disadvantages, with the worst scores for traffic congestion, transit utilization, and some education measures. BCG’s John Wenstrup noted that South Lake Union already is suffering from heavy traffic congestion, with three million square feet of additional office space still to come, (not to mention the Hedreen mega-hotel development right down the street at 9th and Stewart). Several conference speakers also noted that Washington’s education system is struggling to train workers for the good jobs of the future and reduce high school drop-out rates.

Let’s juxtapose those facts against this: BCG concludes the costs of doing business in Seattle are among the lowest of the global cities—Seattle’s average wages are third lowest out of the nine cities, at a average of $21.00 an hour, and office and industrial rents are lower than average.

Of interest to the debate over living wages at SeaTac: Delta Airlines Vice President Mike Medeiros told the conference that Delta is expanding in Seattle, in part because international routes from Sea-Tac Airport to Asia are shorter than flying from San Francisco or Los Angeles, meaning Sea-Tac will continue to grow as an international airline hub.

What we need to remember is this: Living wage jobs and higher workforce standards need to be at the center of our attempts to address economic inequality in the region if we are to make a significant impact on our regional competitiveness.

What would it cost the City of SeaTac to implement Proposition 1? The debate over this question to date has been based on speculation, not the specifics of this initiative and the city of SeaTac. The real answer is as much or as little as the city chooses. It all comes down to their elected City Council.

Here’s why. Proposition 1 clearly states:

Complaints that any provision of this Chapter has been violated may also be presented to the City Attorney, who is hereby authorized to investigate and, if it deems appropriate, initiative legal or other action to remedy any violation of this chapter; however, the City Attorney is not obligated to expend any funds or resources in the pursuit of such a remedy. (7.45.100 A)

And in SeaTac, the City Attorney works for City Council.

Why would SeaTac choose not to “expend any funds or resources” on enforcement? First, Proposition 1 provides a clear and powerful route for workers who stand up for their rights – in county court. This is also known as “private right of action.” Proposition 1 states:

Any person claiming violation of this chapter may bring an action against an employer in King County Superior Court to enforce the provisions of this Chapter… (7.45.100 A)

Second, as a small city of 27,000 people, with a modest budget, it would be reasonable for City Council to protect taxpayer dollars by allowing court enforcement to be the primary route for enforcement. If Proposition 1 passes, it is likely that Council will take this issue up quickly and, with considerable input from voters, decide what their role will be in implementation.

In contrast, large cities with big budgets have taken a more active role. Seattle, with a population of over 600,000 and a massive budget, has adopted several workplace standards, including anti-discrimination laws, paid sick leave, and protection from wage theft provisions. With public support, City Council created an Office of Civil Rights, which is currently responsible for monitoring and compliance with many of Seattle’s workplace standards. This makes sense for a city with an estimated 540,000 jobs.

So what does Prop 1 require the city spend to implement Prop 1? Very little, as far as we can see. The City has to send out a letter every year to covered employers – which we estimate to be 72 – with a new wage, adjusted for inflation. (We do inflation adjusted calculations all the time – it takes about five minutes.)

The City also must prepare “auditing procedures,” in the event SeaTac officials decide to take a more active role in monitoring and enforcement. This could amount to a written memo from the City Attorney to Council. A few more provisions in the proposed law also spell out the powers the City has to monitor and ensure compliance. But, these are, again, conditioned by the discretionary power of the City to expend funds or not.

In the end, whether enforcement of Proposition 1 will cost SeaTac money depends entirely on City Council’s decision of what to do and when. Like Proposition 1 itself, this will, in turn, depend on the people that put Councilmembers into office – the voters.

Recently I was invited to sit down with the Seattle times Editorial Board to talk about how SeaTac’s Proposition 1 would boost the local economy, create new jobs and why it’s the right thing to do.  Coming along with me was a UW Professor of Labor Economics and an airport worker to share her personal experience.

Although we were able to point to credible information and analysis that shows Proposition 1 would boost the economy by $54 million, create over 400 jobs and put more money into the pockets of workers, they were not persuaded.

The editorial rested its case on a recent story by one of their journalists on a similar living wage initiative that passed last year in Long Beach, CA.

Amy Martinez, who has been covering Proposition 1 for several months, did the hard work of finding workers, employers and other observers in Long Beach to put together a balanced and fair front page story.

Funny thing about the editorial is that it lifted only some of the findings from Martinez’s story. So, in fairness, I’d like to point out some others.

First, some context. Measure N won at the ballot in November 2010 by 64% of the vote.  The measure is not apples to apples with Proposition 1 – it covers only large hotels, whereas Proposition 1 covers large hotels, in addition to ground transportation and airport workers in SeaTac. The new wage floor is $13 an hour there (while Proposition 1 would set a floor of $15 an hour). About 2,000 workers at over a dozen hotels were expected to be covered. It went into effect on January 1st, less than 10 months ago.

It’s really a bit early to tell the full effect of Measure N on workers, the hotel market and the broader community. As employers find ways to adjust for the new requirements, the dust needs to settle a bit to see the big picture.

But, here is what we know for now. According to Martinez,

• • • Unemployment dropped from 12.4% to 11.2% since 2012. (That’s no small drop.)
    • Revenues per hotel room, a standard industry measure for profitability, went up by 2.9%.  And occupancy rates went up faster than the rest of the county.
    • Two workers interviewed had their hours reduced, one did not. But it’s not clear whether Measure N was the cause. Regardless, even at a 25% loss in hours, the 33% gain in wages meant their paycheck did not go down. If the reduced hours were seasonal, as suggested in the article, Measure N preserved their income.
    • Two hotels downsized to 99 rooms, avoiding Measure N coverage. However, Martinez also found that at least one of these hotels was planning this downsize before Measure N was even introduced.

If we add to this preliminary look at Long Beach to evidence from other cities and airports with living wage standards, a better and stronger picture appears.

In our report, Below the Radar, Puget Sound Sage showed how four airports have all seen growth and prosperity since living wage policies were adopted.  In Los Angeles, which has a living wage standard for hotels just outside the LAX, the overall market is doing well (occupancy rates and revenue per room both up 3%, according to hotel analysts PKF Consulting).

So, before we reach a conclusion about the outcomes of Long Beach’s very popular Measure N, let’s take initial findings with a grain of salt and take the longer view where we have years of data.